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<1. Major Developments in 2008> On December 17, 2008, Cuban President Ra l Castro offered to exchange some imprisoned Cuban political dissidents for five Cubans imprisoned for espionage in the United States since 2001. The State Department responded that the jailed dissidents in Cuba should be released immediately without any conditions. On December 10, 2008, the House Appropriations Committee reported its version of the FY2009 Financial Services and General Government Appropriations bill, H.R. 7323 , with several provisions that would have eased restrictions on the sale of U.S. agricultural exports to Cuba and on family travel to Cuba. A draft version of the bill had been approved by the committee on June 25, 2008. No final action was taken on the measure. On November 26, 2008, Cuban President Ra l Castro stated in an interview that he would be willing to meet with President-elect Barack Obama, and suggested the U.S. Naval Base at Guantanamo Bay, Cuba, as a location. On November 24, 2008, the Government Accountability Office (GAO) issued a second report examining USAID's Cuba democracy program. While GAO lauded the efforts taken by USAID to improve oversight and address problems with the program, it also maintained that USAID needed to hire more staff to implement monitoring activities, and that it needed to periodically assess the program's efforts regarding grantees' adherence to internal controls, procurement practices, and compliance with laws and regulations. (U.S. GAO, Foreign Assistance: Continued Efforts Needed to Strengthen USAID's Oversight of U.S. Democracy Assistance for Cuba , GAO-09-165, November 2008.) On November 8, 2008, Hurricane Paloma struck Cuba devastating the town of Santa Cruz el Sur. Ra l Castro stated that overall damages from the series of hurricanes and tropical storm since August amounted to some $10 billion. On September 18, 2008, the House Foreign Affairs Committee's Subcommittee on International Organizations, Human Rights, and Oversight held a hearing on U.S. restrictions on Cuban-American travel to Cuba. From mid-August through September 10, 2008, four major storms (Hurricanes Gustav and Ike, and Tropical Storms Hanna and Fay) caused widespread damage throughout Cuba. The two hurricanes caused most of the damage. Overall, just 7 people were killed, but the hurricanes severely affected the housing sector (with almost 500,000 homes damaged and over 63,000 destroyed), the power grid, and the agricultural sector. The United States provided assistance through non-governmental organizations. U.S. offers of direct assistance to the Cuban government were rejected. Instead, Cuba called on the United States to allow U.S. companies to sell relief supplies to Cuba. In the aftermath of the hurricanes, several legislative initiatives were introduced S.Amdt. 5581 (Dodd) to S. 3001 , H.R. 6913 (Flake), and H.R. 6962 (Delahunt) that would have temporarily eased U.S. embargo restrictions in several areas. No action was taken on these initiatives. (See " Aftermath of 2008 Hurricanes and Tropical Storms " below.) On July 21, 2008, the Senate Appropriations Committee reported its version of the FY2009 Agriculture Appropriations bill, S. 3289 ( S.Rept. 110 - 426 ), with a provision (section 737) that would have eased restrictions on travel to Cuba for the sale of agricultural and medical goods. No action was taken on the measure. On July 18, 2008, the Senate Appropriations Committee reported its version of the FY2009 Department of State, Foreign Operations, and Related Programs Appropriations Act, S. 3288 ( S.Rept. 110 - 425 ). Among its Cuba provisions, the bill would have provided $1 million for preliminary work by the Department of State, or other entity designated by the Secretary of State, to establish cooperation with appropriate Cuban agencies on counternarcotics matters. The report to the bill recommended full funding for the Administration's requests of $34.392 million for Cuba broadcasting and $20 million in ESF for Cuba democracy programs, and called for the State Department and USAID to conduct regular evaluations to ensure the cost effectiveness of the programs. No action was taken on the measure. On July 14, 2008, the Senate Appropriations Committee reported its version of the FY2009 Financial Services and General Government Appropriations bill, S. 3260 ( S.Rept. 110 - 417 ), which included provisions that would have eased restrictions on payment terms for the sale of agricultural goods to Cuba (section 618), travel relating to the sale of commercial and agricultural goods (section 619), and family travel (section 620). No action was taken on the measure. On July 11, 2008, the GAO issued a report that criticized the practices of the International Broadcasting Bureau and the Office of Cuba Broadcasting for their practices in awarding noncompetitive contracts in December 2006 to two private U.S. commercial stations to transit Radio and TV Mart . According to GAO, the approach for awarding the two contracts did not reflect sound business practices. (U.S. Government Accountability Office, "Broadcasting to Cuba, Weaknesses in Contracting Practices Reduced Visibility into Selected Award Decisions," GAO-08-764, July 2008.) On June 25, 2008, the House Appropriations Committee approved a draft version of the FY2009 Financial Services and General Government Appropriations bill that included provisions that would have eased restrictions on family travel and U.S. agricultural exports to Cuba. The House Appropriations Subcommittee on Financial Services and General Government had approved the measure on June 17. No action was taken on the measure. (Also see " Restrictions on Travel and Remittances " and " Agricultural Exports and Sanctions " below.) On June 19, 2008, the European Union approved the permanent lifting of diplomatic sanctions that it had imposed on Cuba in 2003. The action was largely symbolic, because the sanctions had been temporarily suspended since 2005. Cuban Foreign Minister Felipe Perez Roque welcomed the EU's decision, which will be reviewed in 12 months. U.S. State Department officials looked positively at the benchmarks that will be used in the EU's dialogue with Cuba, including Cuba's release of political prisoners, implementation of the International Covenant on Civil and Political Rights, access to the Internet, and allowing all EU delegations to meet with members of the opposition as well as the Cuban government. On June 13, 2008, Cuba's Ministry of Foreign Affairs announced that it deported a U.S. citizen wanted in the United States for sexual exploitation of a minor and for child pornography who had entered Cuba from Mexico in April. On June 4, 2008, the State Department issued its 2008 Trafficking in Persons Report, with Cuba again placed on the Tier 3 list of countries that do not cooperate in the fight against trafficking. According to the report, Cuba is principally a source country for women and children trafficked within the country for the purpose of commercial sexual exploitation. Cuba rejected the report as distorting Cuban reality in an attempt to justify the U.S. embargo. Although countries on the list are subject to U.S. foreign aid sanctions, Cuba is already ineligible for most U.S. assistance because of other aid sanctions. On May 21, 2008, the Senate passed S.Res. 573 (Martinez) by unanimous consent, which recognized Cuba Solidarity Day and the struggle of the Cuban people. On the same day, President Bush called for the Cuban government to take steps to improve life for the Cuban people, including opening up access to the Internet. He also announced that the United States would change U.S. regulations to allow Americans to send mobile phones to family members in Cuba. On May 19, 2008, Cuba accused the chief of the U.S. Interests Section in Havana, Michael Parmly, of carrying mail to dissidents that contained private funds from Santiago Alvarez, a Cuban American currently jailed in Miami on weapons charges. In April 2008, the Cuban government announced that it would be revamping the state's wage system by removing the limit that a state worker can earn. (See " Economic Changes Under Ra l " below.) In March 2008, the Cuban government announced the lifting of restrictions on the sale of such electronic consumer products as microwaves, DVD and video players, and on the sale and use of cell phones. It also began rolling out a reform of the agricultural sector focusing on decentralization in order to boost production. The government also lifted a ban on Cubans staying at tourist hotels. On March 11, 2008, the State Department issued its 2007 report on human rights practices in Cuba, maintaining that the Cuban "government continued to deny its citizens their basic human rights and committed numerous, serious abuses." See the full report at http: // www.state.gov / g / drl / rls / hrrpt / 2007 / 100635.htm . On March 7, 2008, President Bush asserted that in order to improve U.S.-Cuban relations, Cuba "must release all political prisoners...have respect for human rights in word and deed, and pave the way for free and fair elections." On March 5, 2008, the House Subcommittee on the Western Hemisphere held a hearing on Cuba in the aftermath of Fidel Castro permanently stepping down from power. On February 24, 2008, Cuba's legislature, the National Assembly of People's Power, selected Ra l Castro as President of the Council of State, a position that makes him Cuba's head of state and government. In a surprise move, the Assembly also selected Jos Ram n Machado Venture as the Council's First Vice-President, making him the official successor to Ra l according to the Cuban Constitution. A physician by training, Machado is 77 years old and part of the older generation of so-called hist ricos, part of the 1959 Cuban revolution. On February 19, 2008, Fidel Castro announced that he would not accept the position of President of the Council of State when Cuba's legislature meets on February 24 to select from among its ranks the members of the 31-member Council of State. On February 16, 2008, Cuba released four political prisoners union activist Pedro Pablo Alvarez Ramos, human rights activist Omar Pernet Hern ndez, and journalists Jose Gabriel Ram n Castillo and Alejandro Gonz lez Raga but sent them into forced exile to Spain. The four had been imprisoned since March 2003. On January 20, 2008, Cuba elected representatives to its 614-member legislature, the National Assembly of People's Power, and Fidel Castro was once again among those elected. As in the past, voters were offered only a single slate of candidates. <2. Major Developments in 2007> On December 11, 2007, the Senate Finance Committee held a hearing on the issue of "Promoting American Agricultural and Medical Exports to Cuba" and a related bill, S. 1673 (Baucus). On December 10, 2007, Cuba announced that it would sign two international human rights agreements, the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social, and Cultural Rights. Amnesty International welcomed the news, but noted that Cuba's action would only be meaningful if the government changed its policies of intimidation and arrests of political dissidents. On December 4, 2007, Cuban security officials raided a Catholic Church hall in the city of Santiago, using tear gas and force to detain 18 dissidents who had been protesting the recent arrests of youths in Havana. Church officials said that Cuban government officials subsequently apologized for invading church property, and had released the dissidents. On November 30, 2007, the Government Accountability Office (GAO) issued a report on U.S. enforcement of the Cuba embargo. The report recommended: 1) that the Secretary of Homeland Security direct Customs and Border Protection (CBP) to re-evaluate whether the level of resources dedicated to inspecting passengers from Cuba at the Miami International Airport effectively balances its responsibility for enforcing the Cuba embargo with its responsibilities for keeping terrorists, criminals, and inadmissible aliens out of the country; and 2) that the Treasury Department direct the Office of Foreign Assets Control to reassess the allocation of resources for investigating and penalizing violations of the Cuba embargo with respect to the 20 other sanctions programs it administers. (See the full report available at [http://www.gao.gov/docsearch/abstract.php?rptno=GAO-08-80]) On November 15, 2007, the House Subcommittee on International Organizations, Human Rights, and Oversight of the Committee on Foreign Affairs held a hearing focusing on the case of Luis Posada Carriles, alleged to be involved in the 1976 bombing of a Cuban airliner that killed 73 people. On November 5, 2007, President Bush awarded Cuban dissident Dr. Oscar Elias Biscet with the Presidential Medal of Freedom. Biscet, who has spent most of the last eight years in jail, was sentenced in 2003 to 25 years in prison. On October 24, 2007, President Bush made a policy speech that reflected a continuation of the sanctions-based approach toward Cuba. The President also proposed three new initiatives to provide support to the Cuban people: allowing licensed groups to provide computers and Internet access to the Cuban people; inviting Cuban youths whose families are oppressed to participate in the Partnership for Latin American Youth scholarship programs; and developing an international multi-billion dollar Freedom Fund for Cuba to help the Cuban people rebuild their economy and make the transition to democracy. In a September 25, 2007, speech before the U.N. General Assembly, President Bush stated that "the long rule of a cruel dictator is nearing its end" in Cuba, and called on the United Nations to insist on free speech, free assembly, and free elections as Cuba "enters a period of transition." In a September 17, 2007, speech on Cuba, U.S. Commerce Secretary Carlos Gutierrez stated, "The Administration's position has been unfailingly clear and consistent. Unless the regime changes, our policy will not. We are prepared to respond to genuine democratic change in Cuba." On September 6, 2007, during consideration of the FY2008 foreign aid appropriations measure, H.R. 2764 , the Senate approved S.Amdt. 2694 (Martinez) by voice vote that increased funding for Cuba democracy programs by $30.7 million to fully fund the Administration's request of $45.7 million. The Senate Appropriations Committee report to the bill ( S.Rept. 110-128 ) would have provided $15 million in ESF for Cuba democracy programs. On July 27, 2007, the House rejected, by a vote of 182-245, H.Amdt. 707 (Rangel) to H.R. 2419 , the 2007 farm bill. The amendment would have eased restrictions on the commercial sale of agricultural products to Cuba by clarifying the meaning of "payment of cash in advance" for the sale of such products; authorizing direct transfers between U.S. and Cuban financial institutions for such sales; and authorizing the issuance of U.S. visas for Cubans to conduct activities, including phytosanitary inspections, related to such sales. On July 26, 2007, in a speech on Cuba's revolutionary anniversary, Ra l Castro acknowledged that Cuban salaries were insufficient to satisfy needs, and maintained that structural changes were necessary in order to increase efficiency and production. He also reiterated an offer to engage in dialogue with the United States, and strongly criticized U.S. trade and economic sanctions on Cuba. On July 19, 2007, the Senate Appropriations Committee approved its version of the FY2008 Agriculture appropriations bill, which included a provision, adopted in committee by voice vote, that would authorize general licenses for travel to Cuba for the sale and marketing of U.S. agricultural and medical goods. S. 1859 (Kohl) was subsequently introduced and reported by the Senate Appropriations Committee on July 24, 2007 ( S.Rept. 110-134 ), with the provision in Section 741 of the bill. On July 19, 2007, the U.S. International Trade Commission issued a report, requested by the Senate Committee on Finance, maintaining that the U.S. share of Cuba's agricultural, fish, and forest imports would rise from one-third to between one-half and two-thirds if trade restrictions were lifted. According to the report, lifting travel restrictions would result in travel by U.S. citizens to Cuba rising to between 550,000 and 1 million from an estimate of 171,000 in 2005. See the full report available at [http://www.usitc.gov/ext_relations/news_release/2007/er0719ee1.htm] On July 12, 2007, the Subcommittee on International Organizations, Human Rights, and Oversight of the House Committee on Foreign Affairs held a hearing on human rights and U.S. foreign policy that examined the cases of Azerbaijan, Cuba, and Egypt. On July 3, 2007, independent journalist Armando Betancourt Reina was sentenced to 15 months in prison. On June 28, 2007, the House passed H.R. 2829 , the FY2008 Financial Services and General Government Appropriations Act, which contains a provision in Section 903 that would prevent Treasury Department funds from being used to implement a February 2005 tightening of policy requiring the payment of cash in advance prior to the shipment of U.S. agricultural goods to Cuba. The House adopted the provision when it approved H.Amdt. 467 (Moran, Kansas) by voice vote. On June 26, 2007, the Senate approved by unanimous consent S. 1612 , a measure that would amend the International Emergency Economic Powers Act to increase the potential civil and criminal penalties against violators of U.S. sanctions law. Civil penalties would increase to not exceed the greater of $250,000 (from $50,000) or an amount that is twice the amount of the transaction, while criminal penalties would increased to not more than $1 million and/or 20 years imprisonment. On June 22, 2007, the House passed the FY2008 State, Foreign Operations, and Related Agencies Appropriations Act, H.R. 2764 , with several Cuba provisions. It would fully fund the Administration's request for $45.7 million in Economic Support Funds (ESF) for Cuba democracy programs. (The House committee-reported bill would have provided $9 million in ESF for such programs, but during June 21, 2007 floor consideration, the House approved H.Amdt. 351 (Diaz-Balart) by a vote of 254-170 that increased funding for Economic Support Funds (ESF) by $36.7 million in order to fully fund the Administration's request.) The House-passed bill, in Section 607, would prohibit direct funding for Cuba, and, in Section 673, would specifically prohibit International Narcotics Control and Law Enforcement assistance to the Cuban government. The report to the bill, H.Rept. 110-197 , recommended $33.681 million for Cuba broadcasting, $5.019 million below the Administration's request of $38.7 million and identical to the amount provided for FY2007. On May 9, 2007 a federal judge in Texas dismissed immigration fraud charges against Luis Posada Carriles, alleged to be involved in the 1976 bombing of a Cuban airliner and 1997 bombings in Cuba. The judge maintained that the U.S. government mistranslated testimony from Posada and manipulated evidence. Posada had been released from jail in New Mexico on April 19, 2007, and allowed to return to Miami under house arrest awaiting trial. On May 3, 2007, Cuban authorities prevented a hijacking from Havana to the United States by two military recruits who killed an army lieutenant colonel that they had taken hostage. Cuba denounced U.S. immigration policy for encouraging such violent action. On April 25, 2007, Cuba expelled U.S. fugitive Joseph Adjmi to the United States. Adjmi had been convicted of mail fraud in the 1960s, but disappeared before beginning his 10-year sentence. On April 24, 2007, the Cuban government released six dissidents, arrested in 2005, after serving most or all of their sentences. On April 23, 2007, one of Cuba's longest serving political prisoners, Jorge Luis Garc a P rez, was released from prison after 17 years. On April 16, 2007, many of Cuba's leading dissident groups signed a statement declaring that they were united in their struggle for a peaceful transition toward democracy. In April 2007, the Cuban government conducted secret trials sentencing human rights activist Rolando Jim nez Posada to 12 years in jail, and independent journalist Oscar S nchez Madan to four years. On February 8, 2007, Cuba extradited alleged Colombia drug cartel leader Luis Hernando G mez Bustamante to Colombia. G mez Bustamante was ultimately extradited to the United States in July 2007 to face on drug trafficking charges. In February 2007, the Cuban government released three political prisoners that had been held since July 2005 before a planned protest at the French Embassy: prominent dissident Ren G mez Manzano was released February 8, while dissidents Julio C sar L pez and Ra l Martinez were released on February 3. In January 11, 2007 testimony before the Senate Select Committee on Intelligence, Defense Intelligence Agency Director Lt. Gen. Michael Maples stated that "Ra l Castro is firmly in control as Cuba's acting president and will likely maintain power and stability after Fidel Castro dies, at least for the short-term." <3. Political Conditions> On February 24, 2008, Cuba's legislature selected Ra l Castro as President of the 31-member Council of State, a position that officially made him Cuba's head of government and state. Most observers expected this since he already had been heading the Cuban government on a provisional basis since July 2006 when his brother Fidel Castro, Cuba's long-ruling communist leader, stepped down as President because of poor health. For many years, Ra l, as First Vice President of the Council of State and the Council of Ministers, had been the officially designated successor and was slated to become chief of state with Fidel's departure. Ra l also had served as Minister of the Revolutionary Armed Forces (FAR) since the beginning of the Cuban Revolution. When Fidel stepped down from power in late July 2006 because of poor health, he signed a proclamation that ceded political power to Ra l on a provisional basis, including the positions of First Secretary of the Cuban Communist Party (PCC), Commander in Chief of the Revolutionary Armed Forces (FAR), and President of the Council of State. Despite the change in government in February 2008, Fidel still holds the official title of First Secretary of the PCC. In late April 2008, Ra l announced that the PCC's sixth congress would be held at the end of 2009 (the last was held in 1997). Some observers speculate that Fidel Castro could officially be replaced as the head of the party at that time, and it is likely that some of the PCC's 25-member Political Bureau (Politburo) will be replaced. While it was not a surprise to observers for Ra l to succeed his brother Fidel as head of government, the selection of Jos Ram n Machado Ventura as the Council of State's First Vice President was a surprise. A physician by training, Machado is 77 years old, and is part of the older generation of so-called hist ricos of the 1959 Cuban revolution. He has been described as a hard-line communist party ideologue, and reportedly has been a close friend and confident of Raul's for many years. Machado's position is significant because it makes him the official successor to Ra l, according to the Cuban Constitution. Many observers had expected that Carlos Lage, one of five other Vice Presidents on the Council of State, would have been chosen as First Vice President. He was responsible for Cuba's economic reforms in the 1990s, and at 56 years of age, represents a younger generation of Cuban leaders. While not rising to First Vice President, Lage nevertheless retained his position as a Vice President on the Council of State, and also will continue to serve as the Council's Secretary. Several key military officers and confidants of Ra l also became members of the Council, increasing the role of the military in the government. General Julio Casas Regueiro, 72 years of age, who already was on the Council, became one of its five vice presidents. Most significantly, Casas, who had been first vice minister in the FAR, was selected by Ra l as the country's new Minister of the FAR, officially replacing Ra l in that position. Casas also is chairman of GAESA (Grupo de Administracion Empresarial, S.A.), the Cuban military's holding company for its extensive businesses. Two other military appointments to the Council were Gen. Alvaro L pez Miera, the army's chief of staff, and Gen. Leopoldo Cintra Fr as, who commanded the Western army, one of Cuba's three military regions. Since Fidel stepped down from power in 2006, Cuba's political succession from Fidel to Ra l Castro has been characterized by a remarkable degree of stability. Although initially there were not any significant economic changes under Ra l, there were signs that changes could be coming. In July 2007 speech, Ra l maintained that structural changes were needed in the Cuban economy in order to increase efficiency and production. In his first speech as President in February 2008, Ra l promised to make the government smaller and more efficient, to review the potential reevaluation of the Cuban peso, and to eliminate excessive bans and regulations that curb productivity. Since March 2008, the government has implemented a number of economic changes that from the outside might not seem significant, but are significant policy changes for a government that has heretofore followed a centralized communist economic model. (See " Economic Changes Under Ra l " below.) While additional economic changes under Ra l Castro are likely, few expect there will be any change to the government's tight control over the political system, which is backed up by a strong security apparatus. Some observers point to the reduced number of political prisoners, from 283 at the end of 2006 to around 219 in mid-2008 as evidence of a lessening of repression, but dissidents maintain that the overall situation has not improved. Some observers contend that as the new government of Ra l Castro becomes more confident of ensuring social stability and does not feel threatened, it could move to soften its hard repression, but for now the government is continuing its harsh treatment of the opposition. The selection of Jos Ram n Machado as First Vice President also appears to be a clear indication that the Cuban government has no intention of easing tight control over the political system. For background, also see CRS Report RS22742, Cuba ' s Political Succession: From Fidel to Raul Castro , and CRS Report RL33622, Cuba ' s Future Political Scenarios and U.S. Policy Approaches , written in the aftermath of Fidel Castro's stepping down because of poor health in 2006. <3.1. Background to the Succession> Until Fidel stepped down, he had ruled since the 1959 Cuban Revolution, which ousted the corrupt government of Fulgencio Batista. In April 1961, Castro stated that the Cuban Revolution was socialist, and in December 1961, he proclaimed himself to be a Marxist-Leninist. From 1959 until 1976, Castro ruled by decree. A Constitution was enacted in 1976 setting forth the PCC as the leading force in state and society, with power centered in a Political Bureau headed by Fidel Castro. In October 1997, the Cuban Communist Party held its 5 th Congress (the prior one was held in 1991) in which the party reaffirmed its commitment to a single party state and reelected Fidel and Ra l Castro as the party's first and second secretaries. Cuba's Constitution also outlines national, provincial, and local governmental structures. Legislative authority is vested in a National Assembly of People's Power that meets twice annually for brief periods. When the Assembly is not in session, a Council of State, elected by the Assembly, acts on its behalf. According to Cuba's Constitution, the President of the Council of State is the country's head of state and head of government. Executive power in Cuba is vested in a Council of Ministers, also headed by the country's head of state and government, i.e. the President of the Council of State. From the promulgation of the 1976 Constitution until February 24, 2008, Fidel served as served as head of state and government through his position as President of the Council of State. Although National Assembly members were directly elected for the first time in February 1993, only a single slate of candidates was offered. Direct elections for the National Assembly were again held in January 1998 and January 2003, but voters again were not offered a choice of candidates. In contrast, at the local level elections for municipal elections are competitive, with from two to eight candidates. To be elected, the candidate must receive more than half of the votes cast. As a result, runoff elections between the two top candidates are common. In 2007, the process of nominating candidates for the local municipal assemblies took place in September 2007. Municipal elections were held October 21, 2007 (with runoffs on October 28), and over 15,000 local officials were chosen. The new municipal assemblies then met on December 2, 2007 to nominate candidates for provincial assemblies and for the National Assembly of People's Power. National Assembly elections were held on January 20, 2008 (along with elections for 1,201 delegates to 14 provincial assemblies), and Fidel Castro was once again among the candidates elected to the now 614-member legislative body. As in the past, voters were only offered a single slate of candidates. On February 24, 2008, the new Assembly was scheduled to select from among its ranks the members of the Council of State and its President. Many observers speculated that because of his poor health, Fidel would choose not be re-elected as President of the Council of State, which would officially confirm his departure from heading the Cuban government. Statements from Castro himself in December 2007 hinted at his potential retirement. That proved true on February 19, 2008, when Fidel announced that he would not accept the position as President of the Council of State, essentially confirming his departure as titular head of the Cuban government. Before Fidel stepped down from power in July 2006, observers discerned several potential scenarios for Cuba's future after Fidel. These fit into three broad categories: the continuation of a communist government; a military government; or a democratic transition or fully democratic government. According to most observers, the most likely scenario, at least in the short term, was continued leadership under Ra l. This was likely for a variety of reasons, but especially because of Ra l's designation by Fidel as successor in the party and his position as leader of the FAR. The FAR has been in control of the government's security apparatus since 1989 and has played an increasing role in Cuba's economy through the ownership of numerous business enterprises. The scenario of a military-led government was viewed by some observers as a possibility only if a successor communist government failed because of divisiveness among leaders or political instability. For many observers, the least likely scenario upon Fidel's death or departure was a democratic transition government. With a strong totalitarian security apparatus, the Castro government successfully impeded the development of independent civil society, with only a small and tightly regulated private sector, no independent labor movement, and no unified political opposition. <3.2. Human Rights> <3.2.1. Overview> Cuba has a poor record on human rights, with the government sharply restricting freedoms of expression, association, assembly, movement, and other basic rights. It has cracked down on dissent, arrested human rights activists and independent journalists, and staged demonstrations against critics. Although some anticipated a relaxation of the government's oppressive tactics in the aftermath of the Pope's January 1998 visit, government attacks against human rights activists and other dissidents have continued since that time. The Inter-American Commission on Human Rights maintains in its 2007 annual human rights report that the Cuban government's "restrictions on political rights, freedom of expression, and dissemination of ideas have created, over a period of decades, a situation of permanent and systematic violations of the fundamental rights of Cuban citizens." According to the State Department's human rights report for 2007, issued in March 2008, the Cuban government continued to commit numerous serious abuses during the year. Among the human rights problems cited in the State Department report were arbitrary arrest and detention of human rights advocates and members of independent professional organizations; harassment, beatings, and threats against political opponents by government-recruited mobs, police, and state security officials; beatings and abuse of detainees and prisoners (which led to the death of two prisoners in 2007); denial of fair trial; harsh and life-threatening prison conditions, including denial of medical care; and interference with privacy, including pervasive monitoring of private communications. As noted in the report, the government tightly controlled Internet access, with citizens only accessing it through government-approved institutions or through a few Internet facilities offered by foreign diplomatic offices. The government reviewed and censored e-mail, and forbade attachments. (See the full State Department human rights report on Cuba, available at http: // www.state.gov / g / drl / rls / hrrpt / 2007 / 100635.htm .) The government conducted a severe crackdown on activists in March 2003 and imprisoned 75 democracy activists, including independent journalists and librarians and leaders of independent labor unions and opposition parties. At present, 55 of the "group of 75" political prisoners remain incarcerated. The most recent release of the group of 75 occurred on February 16, 2008, when Cuba released four political prisoners union activist Pedro Pablo Alvarez Ramos, human rights activist Omar Pernet Hern ndez, and journalists Jose Gabriel Ram n Castillo and Alejandro Gonz lez Raga but sent them into forced exile to Spain. Prior to that, Hector Palacios was released for health reasons in December 2006. In 2007, the government released several other political prisoners, including prominent dissident Ren G mez Manzano and two others in February, and Jorge Luis Garc a P rez and six others in April. Incarcerated for 17 years, Garc a P rez was one of Cuba's longest serving political prisoners. In August 2007, two more political prisoners were released after serving much of their sentences: Francisco Chaviano Gonzalez, a leader of the dissident Cuban Civil Rights Council, was released on medical parole after serving 13 of 15 years; Lazaro Gonzalez Adan was released after serving three years in prison. In July 2008, the independent Cuban Commission on Human Rights and National Reconciliation (CCDHRN) documented at least 219 political prisoners, down from 234 in January 2008. This number reflected a decline from previous years when the number of prisoners was at least 283 at the end of 2006 and 333 at the end of 2005. The Commission maintains, however, that the real number of prisoners is likely greater because of Cuba's totalitarian regime that does not allow scrutiny of the prison system. Despite the reduction in the number of prisoners, human rights activists maintain that the overall situation has not improved. Cuban human rights activist Elizardo S nchez, the head of the CCDHRN, asserts that the government is still repressing dissidents, with threats, police searches of people's homes, interrogations, and short detentions. S nchez asserts that the police state is still in force in Cuba, reflected in almost every aspect of national life. In late February 2008, Cuba signed two U.N. human rights treaties: the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social, and Cultural Rights. Some considered this a positive step, but others stressed that it remains to be seen whether the Cuban government will take action to guarantee civil and political freedoms. One significant step taken by the government in late March 2008 was the lifting of a ban on Cubans staying at tourist hotels. Although few Cubans will be able to afford the cost of staying in such hotels, the move is symbolically significant and ends the practices of what critics had dubbed "tourism apartheid." A human rights group known as the Ladies in White (Damas de Blanco) was formed in April 2003 by the wives, mothers, daughters, sisters, and aunts of the members of the "group of 75" dissidents arrested a month earlier in Cuba's human rights crackdown. The group conducts peaceful protests calling for the unconditional release of political prisoners. Dressed in white, its members attend Mass each Sunday at St. Rita's church in Havana and then walk silently through the streets to a nearby park. In October 2005, the group received the Sakharov Prize for Freedom of Thought from the European Parliament. On April 21, 2008, ten members of the Ladies in White were physically removed from a park near the Plaza of the Revolution in Havana when they demanded the release of their husbands and the other members of the "group of 75" still imprisoned. In December 2006, independent Cuban journalist Guillermo Fari as Hern ndez received the 2006 Cyber Dissident award from the Paris-based Reporters Without Borders. Fari as went on a seven-month hunger strike in 2006, demanding broader Internet access for Cubans. In November 2007, President Bush awarded Cuban dissident Dr. Oscar Elias Biscet with the Presidential Medal of Freedom. Biscet, who has spent most of the last eight years in jail, was sentenced in 2003 to 25 years in prison. Legislation was introduced in the 110 th Congress in March 2008 H.R. 5627 (Diaz-Balart, Lincoln) and S. 2777 (Martinez) to award the congressional gold medal to Biscet, although no action was taken on the measures. Since late 2007, Cuban Internet blogger Yoan S nchez has received considerable international attention for her website, Generaci n Y, that includes commentary critical of the Cuban government. In May 2008, S nchez was awarded Spain's Ortega y Gasset award for digital journalism, but the Cuban government did not provide her with an exit permit to accept the award. (S nchez's website is available at http://www.desdecuba.com/ generaciony/ ). In late 2008, two international press rights groups gave awards to two Cuban independent journalists who have been imprisoned since 2003. In November 2008, the New York-based Committee for the Protection of Journalists selected H ctor Maseda Guti rrez as a recipient of its international press freedom award, while in early December 2008, the Paris-based press rights groups Reporters Without Borders awarded Ricardo Gonz lez Alfonso its journalist of the year award. While in prison, Guti rrez wrote a memoir that he managed to smuggle out of prison one page at a time. Before his imprisonment, Gonz lez had started an association to improve independent journalism. As of December 2008, 23 journalists were imprisoned in Cuba. Prior to the 60 th anniversary of the signing of the Universal Declaration of Human Rights on December 10, 2008, up to a dozen Cuban human rights activists reportedly were detained in order to prevent them from attending planned events. On December 17, 2008, Cuban President Ra l Castro offered to exchange some imprisoned Cuban political dissidents for five Cubans imprisoned for espionage in the United States since 2001. The five Cubans are serving sentences ranging from 15 years to life. Cuba's National Assembly had dubbed the so-called Cuban Five as "Heroes of the Republic," and the Cuban government has called for their return to Cuba. In response to Ra l Castro's offer, the State Department said that the jailed dissidents in Cuba should be released immediately without any conditions. <3.2.2. Varela Project and the National Dialogue> Named for the 19 th century priest, Felix Varela, who advocated independence from Spain and the abolition of slavery, the Varela Project has collected thousands of signatures supporting a national plebiscite for political reform in accordance with a provision of the Cuban Constitution. The referendum, if granted, would call for respect for human rights, an amnesty for political prisoners, private enterprise, and changes to the country's electoral law that would result in free and fair elections. The initiative is organized by Oswaldo Pay , who heads the Christian Liberation Movement. In May 2002, organizers of the Varela Project submitted 11,020 signatures to the National Assembly calling for a national referendum. This was more than the 10,000 required under Article 88 of the Cuban Constitution. Former President Jimmy Carter noted the significance of the Varela Project in his May 14, 2002 address in Havana that was broadcast in Cuba. Carter noted that "when Cubans exercise this freedom to change laws peacefully by a direct vote, the world will see that Cubans, and not foreigners, will decide the future of this country." In response to the Varela Project, the Cuban government orchestrated its own referendum in late June 2002 that ultimately led to the National Assembly amending the Constitution to declare Cuba's socialist system irrevocable. The Varela Project has persevered despite the 2003 human rights crackdown, which included the arrest of 21 Project activists. In October 2003, Oswaldo Pay delivered more than 14,000 signatures to Cuba's National Assembly, again requesting a referendum on democratic reforms. More recently, in October 2008, Varela Project activists launched a third campaign to collect signatures. Since December 2003, Pay has been involved in another project known as the National Dialogue with the objective of getting Cubans involved in the process of discussing and preparing for a democratic transition. According to Pay , thousands of Cubans have met in dialogue groups to discuss a working document covering such themes as: economic, political, and institutional changes; social issues; public health and the environment; public order and the armed forces; media, science, and culture; reconciliation; and reuniting with the exile community. <3.2.3. Assembly to Promote Civil Society> Led by three prominent Cuban human rights activists Marta Beatriz Roque, Ren G mez Manzano, and Felix Bone the Assembly to Promote Civil Society held two days of meetings in Havana on May 20-21, 2005, with some 200 participants. The date was significant because May 20 is Cuba's independence day. Many observers had expected the government to prevent or disrupt the proceedings. The Cuban government did prevent some Cubans and foreigners from attending the conference, but overall the meeting was dubbed by its organizers as the largest gathering of Cuban dissidents since the 1959 Cuban revolution. The Assembly issued a ten-point resolution laying out an agenda for political and economic change in Cuba. Among its provisions, the resolution called for the release of all political prisoners, demanded respect for human rights, demanded the abolition of the death penalty, and endorsed a 1997 dissident document on political and economic rights entitled the "Homeland Belongs to Us All." <4. Economic Conditions> With the cutoff of assistance from the former Soviet Union, Cuba experienced severe economic deterioration from 1989-1993, with estimates of economic decline ranging from 35-50%, but there has been considerable improvement since 1994. From 1994-2000, as Cuba moved forward with some limited market-oriented economic reforms, economic growth averaged 3.7% annually. Economic growth was strong in the 2005-2007 period, registering an impressive 11.2% in 2005 (despite widespread damage caused by Hurricanes Dennis and Wilma), 12.1% in 2006, and 7.3% in 2007. The economy benefitted from the growth of the tourism, nickel, and oil sectors, and support from Venezuela and China in terms of investment commitments and credit lines. Cuba benefits from a preferential oil agreement with Venezuela, which provides Cuba with more than 90,000 barrels of oil a day. Some observers maintain that Venezuela's oil subsidies amounted to more than $3 billion a year in 2006. Venezuela also helped Cuba upgrade an oil refinery in Cienfuegos, which was inaugurated in 2007. In 2008, economic growth slowed to an estimated 4.5%. This was prompted by several problems, including the declining price of nickel, which accounts for a major share of Cuba's exports, the rising cost of food imports, and the devastation wrought by Hurricanes Gustav and Ike in 2008, particularly in the agricultural sectors. Over the years, Cuba has expressed pride for the nation's accomplishments in health and education. In 2005, according to the U.N. Development Program's 2007/2008 Human Development Report, life expectancy in Cuba was 77.7 years, adult literacy was estimated at almost 100%, and the infant mortality rate was 6 per 1,000 live births, the lowest rate in Latin America. For 2006 and 2007, Cuba has boasted an infant mortality rate of 5.3. When Cuba's economic slide began in 1989, the government showed little willingness to adopt any significant market-oriented economic reforms, but in 1993, faced with unprecedented economic decline, Cuba began to change policy direction. Beginning in 1993, Cubans were allowed to own and use U.S. dollars and to shop at dollar-only shops previously limited to tourists and diplomats. Self-employment was authorized in more than 100 occupations in 1993, most in the service sector, and by 1996 that figure had grown to more than 150 occupations. Also in 1993, the government divided large state farms into smaller, more autonomous, agricultural cooperatives (Basic Units of Cooperative Production, UBPCs). It opened agricultural markets in 1994, where farmers could sell part of their produce on the open market, and it also permitted artisan markets for the sale of handicrafts. In 1995, the government allowed private food catering, including home restaurants ( paladares) , in effect legalizing activities that were already taking place), and approved a new foreign investment law that allows fully owned investments by foreigners in all sectors of the economy with the exception of defense, health, and education. In 1996, it authorized the establishment of free trade zones with tariff reductions typical of such zones. In 1997, the government enacted legislation to reform the banking system and established a new Central Bank (BCC) to operate as an autonomous and independent entity. After Cuba began to recover from its economic decline, the government began to backtrack on some of its reform efforts. Regulations and new taxes made it extremely difficult for many of the nation's self-employed. Some home restaurants were forced to close because of the regulations. In 2004, the Cuban government limited the use of dollars by state companies for any services or products not considered part of their core business. Some analysts viewed the measure as an effort to turn back the clock on economic reform measures. Also in 2004, Fidel Castro announced that U.S. dollars no longer would be used in entities that currently accept dollars (such as stores, restaurants, and hotels). Instead, dollars had to be exchanged for "convertible pesos," with a 10% surcharge for the exchange. Dollar bank accounts are still allowed, but Cubans are not able to deposit new dollars into the accounts. Beginning in April 2005, convertible pesos were no longer on par with the U.S. dollar, but instead were linked to a basket of foreign currencies. This reduced the value of dollar remittances sent to Cuba and provides more hard currency to the Cuban government. <4.1. Economic Changes Under Ra l> When Ra l Castro assumed provisional power in July 2006, there was some expectation that the government would be more open to economic policy changes, and a debate about potential economic reforms re-emerged in Cuba. On July 26, 2007, in a speech commemorating Cuba's revolutionary anniversary, Ra l Castro acknowledged that Cuban salaries were insufficient to satisfy needs, and maintained that structural changes were necessary in order to increase efficiency and production. He also maintained that the government was considering increasing foreign investment in the country. Some observers maintain that the speech was a forecast for economic reforms under Ra l, while others stressed that only small marginal changes had occurred in Ra l's first year in power. In the aftermath of Ra l's July 2007 speech, Cuban public expectations for economic reform increased. Thousands of officially sanctioned meetings were held in workplaces and local PCC branches around the country where Cubans were encouraged to air their views and discuss the future direction of the country. Complaints focused on low salaries and housing and transportation problems, and some participants advocated legalization of more private businesses. Raised expectations for economic change in Cuba increased the chance that government actually would adopt some policy changes. Doing nothing would run the risk of increased public frustration and a potential for social unrest. Increased public frustration was in evident in a clandestine video, widely circulated on the Internet in early February 2008, of a meeting between Ricardo Alarc n, the head of Cuba's legislature, and university students in which a student was questioning why Cuban wages are so low and why Cubans are prohibited from visiting tourist hotels (a policy subsequently changed in late March 2008) or traveling abroad. The video demonstrated the disillusionment of many Cuban youth with the poor economic situation and repressive environment in Cuba. Since Ra l Castro officially assumed the presidency in February 2008, his government has announced a series of economic changes. In his first speech as President in February 2008, Ra l promised to make the government smaller and more efficient, to review the potential reevaluation of the Cuban peso, and to eliminate excessive bans and regulations that curb productivity. In mid-March, the government announced that restrictions on the sales of consumer products such as computers, microwaves, and DVD and video players would be lifted. In late March, it announced that it would lift restrictions on the use of cell phones, and this officially occurred in mid-April. One of Cuba's major reform efforts under Ra l Castro in 2008 was focused on the agriculture sector, a vital issue because Cuba reportedly imports some 80% of its food needs and is paying an increasing amount for such imports because of rising food prices. In an effort to boost food production, the government is giving farmers more discretion over how to use their land and what supplies to buy. Decision-making on agriculture reportedly has been shifted from the national government to the local municipal level, with government bureaucracy reportedly cut significantly. In April 2008, the government announced that it would be revamping the state's wage system by removing the limit that a state worker can earn. This an effort to boost productivity and to deal with one of Cuba's major economic problems: how to raise wages to a level where basic human needs can be satisfied. Cuban state companies reportedly have until August to revise their salary structures in order to reward workers who work hard with more compensation. The problem of low wages in Cuba is closely related to another major economic problem: how to unify the two official currencies circulating in the country the Cuban convertible peso (CUC) and the Cuban peso, which trades for about 25 to 1 CUC. Most people are paid in Cuban pesos, and the minimum monthly wage in Cuba is about 225 pesos (about $9 U.S. dollars ), but for increasing amounts of consumer goods, convertible pesos are used. Cubans with access to foreign remittances or work in jobs that give them access to convertible pesos are far better off than those Cuban who do not have such access. Looking ahead, several factors could restrain the magnitude of economic policy change in Cuba. A number of observers believe that as long as Fidel Castro is around, it will be difficult for the government to move forward with any major initiatives that are viewed as deviating from Fidel's orthodox policies. Other observers point to the significant oil subsidies and investment that Cuba now receives from Venezuela that have helped spur Cuba's high economic growth levels over the past several years and maintain that such support lessens the government's impetus for economic reforms. Another factor that bodes against rapid economic policy reform is the fear that it could spur the momentum for political change. Given that one of the highest priorities for Cuba's government has been maintaining social and political stability, any economic policy changes are likely to be smaller changes introduced over time that do not threaten the state's control. There was some expectation that Ra l Castro would announce additional economic reforms in his July 26, 2008 speech on Cuba's revolutionary anniversary, but there were no such announcements. Instead, Castro acknowledged the "large number of problems that still need to be resolved, the majority of which directly affect the population." Nevertheless, in an address earlier in the month to the National Assembly, Ra l again pointed to the goal of increasing salaries based on job performance. According to Castro: "Socialism means social justice and equality, but equality of rights and opportunities, not salaries. Equality does not mean egalitarianism." <5. U.S. Policy Toward Cuba> In the early 1960s, U.S.-Cuban relations deteriorated sharply when Fidel Castro began to build a repressive communist dictatorship and moved his country toward close relations with the Soviet Union. The often tense and hostile nature of the U.S.-Cuban relationship is illustrated by such events and actions as U.S. covert operations to overthrow the Castro government culminating in the ill-fated April 1961 Bay of Pigs invasion; the October 1962 missile crisis in which the United States confronted the Soviet Union over its attempt to place offensive nuclear missiles in Cuba; Cuban support for guerrilla insurgencies and military support for revolutionary governments in Africa and the Western Hemisphere; the 1980 exodus of around 125,000 Cubans to the United States in the so-called Mariel boatlift; the 1994 exodus of more than 30,000 Cubans who were interdicted and housed at U.S. facilities in Guantanamo and Panama; and the February 1996 shootdown by Cuban fighter jets of two U.S. civilian planes operated by the Cuban American group, Brothers to the Rescue, which resulted in the death of four U.S. crew members. Since the early 1960s, U.S. policy toward Cuba has consisted largely of isolating the island nation through comprehensive economic sanctions, including an embargo on trade and financial transactions. The Cuban Assets Control Regulations (CACR), first issued by the Treasury Department in July 1963, lay out a comprehensive set of economic sanctions against Cuba, including a prohibition on most financial transactions with Cuba and a freeze of Cuban government assets in the United States. The CACR have been amended many times over the years to reflect changes in policy, and remain in force today. These sanctions were made stronger with the Cuban Democracy Act (CDA) of 1992 ( P.L. 102 - 484 , Title XVII) and with the Cuban Liberty and Democratic Solidarity Act of 1996 ( P.L. 104 - 114 ), the latter often referred to as the Helms/Burton legislation. The CDA prohibits U.S. subsidiaries from engaging in trade with Cuba and prohibits entry into the United States for any vessel to load or unload freight if it has engaged in trade with Cuba within the last 180 days. The Cuban Liberty and Democratic Solidarity Act, enacted in the aftermath of Cuba's shooting down of two U.S. civilian planes in February 1996, combines a variety of measures to increase pressure on Cuba and provides for a plan to assist Cuba once it begins the transition to democracy. Most significantly, the law codified the Cuban embargo, including all restrictions under the CACR. This provision is especially noteworthy because of its long-lasting effect on U.S. policy options toward Cuba. The executive branch is circumscribed in lifting or substantially loosening the economic embargo without congressional concurrence until certain democratic conditions are met. Another significant sanction in the law is a provision in Title III that holds any person or government that traffics in U.S. property confiscated by the Cuban government liable for monetary damages in U.S. federal court. Acting under provisions of the law, however, both President Clinton and President Bush have suspended the implementation of Title III at six-month intervals. In addition to sanctions, another component of U.S. policy, a so-called second track, consists of support measures for the Cuban people. This includes U.S. private humanitarian donations, medical exports to Cuba under the terms of the Cuban Democracy Act of 1992, U.S. government support for democracy-building efforts, and U.S.-sponsored radio and television broadcasting to Cuba. In addition, the 106 th Congress approved the Trade Sanctions Reform and Export Enhancement Act of 2000 ( P.L. 106 - 387 , Title IX) that allows for agricultural exports to Cuba, albeit with restrictions on financing such exports. The Clinton Administration made several changes to U.S. policy in the aftermath of the Pope's January 1998 visit to Cuba, which were intended to bolster U.S. support for the Cuban people. These included the resumption of direct flights to Cuba (which had been curtailed after the February 1996 shootdown of two U.S. civilian planes), the resumption of cash remittances by U.S. nationals and residents for the support of close relatives in Cuba (which had been curtailed in August 1994 in response to the migration crisis with Cuba), and the streamlining of procedures for the commercial sale of medicines and medical supplies and equipment to Cuba. In January 1999, President Clinton announced several additional measures to support the Cuban people. These included a broadening of cash remittances to Cuba, so that all U.S. residents (not just those with close relatives in Cuba) could send remittances to Cuba; an expansion of direct passenger charter flights to Cuba from additional U.S. cities other than Miami (direct flights later in the year began from Los Angeles and New York); and an expansion of people-to-people contact by loosening restrictions on travel to Cuba for certain categories of travelers, such as professional researchers and those involved in a wide range of educational, religious, and sports activities. <5.1. Bush Administration Policy> The Bush Administration essentially continued the two-track U.S. policy of isolating Cuba through economic sanctions while supporting the Cuban people through a variety of measures. However, within this policy framework, the Administration emphasized stronger enforcement of economic sanctions and further tightened restrictions on travel, remittances, and humanitarian gift parcels to Cuba. There was considerable reaction to the Administration's June 2004 tightening of restrictions for family visits and to the Administration's February 2005 tightening of restrictions on payment terms for U.S. agricultural exports to Cuba. <5.1.1. May 2004 Commission for Assistance to a Free Cuba Report> In May 2004, President Bush endorsed the recommendations of a report issued by the inter-agency Commission for Assistance to a Free Cuba, chaired by then-Secretary of State Colin Powell. The Commission made recommendations for immediate measures to "hasten the end of Cuba's dictatorship" as well as longer-term recommendations to help plan for Cuba's transition from communism to democracy in various areas. The President directed that up to $59 million be committed to implement key recommendations of the Commission, including support for democracy-building activities and for airborne broadcasts of Radio and TV Marti to Cuba. The report's most significant recommendations included a number of measures to tighten economic sanctions on family visits and other categories of travel and on private humanitarian assistance in the form of remittances and gift parcels. Subsequent regulations issued by the Treasury and Commerce Departments in June 2004 implemented these new sanctions. (The full Commission report is on the State Department website at http://www.state.gov/ p/ wha/ rt/ cuba/ commission/ 2004/ .) In 2005, the Administration continued to tighten U.S. economic sanctions against Cuba by further restricting the process of how U.S. agricultural exporters may be paid for their sales. In July 2005, Secretary of State Condoleezza Rice appointed Caleb McCarry as the State Department's new Cuba Transition Coordinator to direct U.S. government "actions in support of a free Cuba." Secretary Rice reconvened the Commission for Assistance to a Free Cuba in December 2005 to identify additional measures to help Cubans hasten the transition to democracy and to develop a plan to help the Cuban people move toward free and fair elections. <5.1.2. July 2006 Commission for Assistance to a Free Cuba Report> In July 2006, the inter-agency Commission for Assistance to Free Cuba issued its second report making recommendations to hasten political change in Cuba toward a democratic transition. The full report is available at http://www.cafc.gov/ rpt/ . The Commission called for the United States to provide $80 million over two years for the following: to support Cuban civil society ($31 million); to fund education programs and exchanges, including university training in Cuba provided by third countries and scholarships for economically disadvantaged students from Cuba at U.S. and third country universities ($10 million); to fund additional efforts to break the Cuban government's information blockade and expand access to independent information, including through the Internet ($24 million); and to support international efforts at strengthening civil society and transition planning ($15 million). According to the Cuba Transition Coordinator, this assistance would be additional funding beyond what the Administration is already currently budgeting for these programs. Thereafter, the Commission recommended funding of not less than $20 million annually for Cuba democracy programs "until the dictatorship ceases to exist." This would roughly double the amount currently spent on Cuba democracy programs. The report also set forth detailed plans of how the U.S. government, along with the international community and the Cuban community abroad, could provide assistance to a Cuban transition government to help it respond to critical humanitarian and social needs, to conduct free and fair elections, and to move toward a market-based economy. The report also outlined a series of preparatory steps that the U.S. government could take now, before Cuba's transition begins, so that it will be well prepared in the event that assistance is requested by the new Cuban government. These included steps in the areas of government organization, electoral preparation, and anticipating humanitarian and social needs. The Commission report received a mixed response from Cuba's dissident community. Although some dissidents, like former political prisoner Vladimiro Roca, maintain that they would welcome any U.S. assistance that helps support the Cuban dissident movement, others expressed concerns about the report. Dissident economist and former political prisoner Oscar Espinosa Chepe stressed that Cubans have to be the ones to solve their own problems. According to Chepe, "We are thankful for the solidarity we have received from North America, Europe, and elsewhere, but we request that they do not meddle in our country." Miriam Leiva, a founding member of the Ladies in White, a human rights organization, expressed concern that the report could serve as a rationale for the government to imprison dissidents. Leiva also faulted the Commission's report for presuming what a Cuban transition must be before U.S. recognition or assistance can be provided. According to Leiva, "Only we Cubans, of our own volition ... can decide issues of such singular importance. Cubans on the island have sufficient intellectual ability to tackle a difficult, peaceful transition and reconcile with other Cubans here and abroad." <5.1.3. U.S. Reaction to Fidel's Ceding of Power> In response to Fidel Castro's announcement that he was temporarily ceding power to his brother Ra l, President Bush issued a statement on August 3, 2006, that "the United States is absolutely committed to supporting the Cuban people's aspiration for democracy and freedom." The President urged "the Cuban people to work for democratic change" and pledged U.S. support to the Cuban people in their effort to build a transitional government in Cuba. U.S. officials indicated that there are no plans for the United States to "reach out" to the new leader. Secretary of State Condoleezza Rice reiterated U.S. support for the Cuban people in an August 4, 2006, statement broadcast on Radio and TV Marti. According to Secretary Rice, "All Cubans who desire peaceful democratic change can count on the support of the United States." Although there was some U.S. concern that political change in Cuba could prompt a migration crisis, there was no unusual traffic after Castro ceded provisional power to his brother. The U.S. Coast Guard had plans to respond to such a migration crisis, with support from the Navy if needed. In her August 4, 2006, message to the Cuban people, Secretary of State Rice encouraged "the Cuban people to work at home for positive change." Department of Homeland Security officials also announced several measures to discourage Cubans from risking their lives on the open seas. U.S. officials also discouraged those in the Cuban American community wanting to travel by boat to Cuba to speed political change in Cuba. (For more, see " Migration Issues " below.) Ra l Castro asserted in an August 18, 2006, published interview that Cuba has "always been disposed to normalize relations on an equal plane," but at the same time he expressed strong opposition to current U.S. policy toward Cuba, which he described as "arrogant and interventionist." In response, Assistant Secretary of State for Western Hemisphere Affairs Thomas Shannon reiterated a U.S. offer to Cuba, first articulated by President Bush in May 2002, that the Administration was willing to work with Congress to lift U.S. economic sanctions if Cuba were to begin a political opening and a transition to democracy. According to Shannon, the Bush Administration remains prepared to work with Congress for ways to lift the embargo if Cuba is prepared to free political prisoners, respect human rights, permit the creation of independent organizations, and create a mechanism and pathway toward free and fair elections. In a December 2, 2006 speech, Ra l reiterated an offer to negotiate with the United States. He said that "we are willing to resolve at the negotiating table the longstanding dispute between the United States and Cuba, of course, provided they accept, as we have previously said, our condition as a country that will not tolerate any blemishes on its independence, and as long as said resolution is based on the principles of equality, reciprocity, non-interference, and mutual respect." On July 26, 2007, in a speech on Cuba's revolutionary anniversary (commemorating the 1953 attack on the Moncada military barracks), Ra l Castro reiterated for the third time an offer to engage in dialogue with the United States, and strongly criticized U.S. trade and economic sanctions on Cuba. A U.S. State Department spokesman responded that "the only real dialogue that's needed is with the Cuban people." In the aftermath of Fidel's ceding of power to his brother, the Bush Administration established five interagency working groups to manage U.S. policy toward Cuba. The State Department led working groups on diplomatic actions, to build international support for U.S. policies; strategic communications, to ensure that Cubans understand U.S. government positions; and democratic promotion. The Commerce Department led a working group on humanitarian aid, in the event that a democratic transition government requests assistance. The Department of Homeland Security and the National Security Council headed a working group on migration. In addition to these working groups, in August 2006, then-U.S. Director of National Intelligence John Negroponte announced the establishment of the position of Mission Manager for Cuba and Venezuela responsible for integrating collection and analysis on the two countries across the Intelligence Community. In September 2007, President Bush and other key Administration officials made several statements on Cuba. In a speech before the U.N. General Assembly on September 25, President Bush stated that "the long rule of a cruel dictator is nearing its end," and called on the United Nations to insist on free speech, free assembly, and free elections as Cuba "enters a period of transition." U.S. Commerce Secretary Carlos Gutierrez stated in a speech on September 17 that "unless the regime changes, our policy will not," but indicated that the United States is "prepared to respond to genuine democratic change in Cuba." In a speech on September 20, Assistant Secretary of State for Western Hemisphere Affairs Thomas Shannon contended that "there is a quiet consensus in the Americas and in Europe that Cuba's future must be democratic." He maintained that there are differences about "how to promote Cuba's democratic future" and pointed out how "Latin America's historic commitment to the principles of non-intervention and national sovereignty shape how many in the region are prepared to engage with Cuba." He maintained, however, that "helping the Cuban people achieve their democratic destiny and re-integrate into the Americas will be one of the biggest diplomatic challenges we face." <5.1.4. October 2007 Policy Speech 45> On October 24, 2007, President Bush made a policy speech on Cuba that reflected a continuation of the sanctions-based approach toward Cuba. According to the President: "As long as the [Cuban] regime maintains its monopoly over the political and economic life of the Cuban people, the United States will keep the embargo in place." The President also proposed three new initiatives to provide support to the Cuban people. First, the President proposed allowing licensed non-governmental organizations and faith-based groups to provide computers and Internet access to the Cuban people if the Cuban government ends restrictions on public Internet access. Second, the President proposed inviting Cuban youths whose families suffer oppression to participate in the Partnership for Latin American Youth scholarship programs if the Cuban government allows them to participate. Third, the President announced a new effort to develop an international multi-billion dollar Freedom Fund for Cuba to help the Cuban people rebuild their economy and make the transition to democracy. The effort would be led by Secretary of State Rice and Secretary of Commerce Gutierrez and involve enlisting foreign governments and international organizations to contribute to the initiative. According to the President, monies from the fund would be available if the Cuban government demonstrates that it has adopted, in word and in deed, fundamental freedoms, including freedom of speech, freedom of association, freedom of press, freedom to form political parties, and freedom to change the government through periodic, multi-party elections. In the speech, President Bush also sent a message to Cuban military, police, and government officials that "when Cubans rise up to demand their liberty," they have a choice to embrace the Cuban people's desire for change or "defend a disgraced and dying order by using force." The President conveyed to these officials that "there is a place for you in a free Cuba." The President also lauded the countries of the Czech Republic, Hungary, and Poland as being vital sources of support and encouragement to Cuba's democratic opposition. He called on other nations to make tangible efforts to show public support for the dissidents, by opening up their embassies in Havana to pro-democracy leaders, use the lobbies of their embassies to give Cubans access to the Internet and books and magazines, and encourage their country's non-governmental organizations to reach out directly to Cuba's independent civil society. <5.1.5. U.S. Response to Ra l's Official Selection as President> In the aftermath of Fidel Castro's February 19, 2008 announcement that he was officially stepping down as head of state, President Bush maintained that he viewed "this as a period of transition and it should be the beginning of a democratic transition in Cuba." State Department officials made clear that U.S. policy would not change. On February 24, 2008, the day that Ra l Castro officially became Cuba's head of state, Secretary of State Condoleezza Rice issued a statement urging "the Cuban government to begin a process of peaceful, democratic change by releasing all political prisoners, respecting human rights, and creating a clear pathway towards free and fair elections." In remarks on Cuba policy in early March 2008, President Bush maintained that in order to improve U.S.-Cuban relations, "what needs to change is not the United States; what needs to change is Cuba." The President asserted that Cuba "must release all political prisoners ... have respect for human rights in word and deed, and pave the way for free and fair elections." He reiterated these words again in a speech to the Council of the Americas on May 7, 2008. On May 21, 2008, President Bush called for the Cuban government to take steps to improve life for the Cuban people, including opening up access to the Internet. He also announced that the United States would change regulations to allow Americans to send mobile phones to family members in Cuba. <6. Issues in U.S.-Cuban Relations> <6.1. Debate on the Overall Direction of U.S. Policy> Over the years, although U.S. policymakers have agreed on the overall objectives of U.S. policy toward Cuba to help bring democracy and respect for human rights to the island there have been several schools of thought about how to achieve those objectives. Some advocate a policy of keeping maximum pressure on the Cuban government until reforms are enacted, while continuing current U.S. efforts to support the Cuban people. Others argue for an approach, sometimes referred to as constructive engagement, that would lift some U.S. sanctions that they believe are hurting the Cuban people, and move toward engaging Cuba in dialogue. Still others call for a swift normalization of U.S.-Cuban relations by lifting the U.S. embargo. Fidel Castro's initially provisional, and now permanent, departure as head of government could eventually foster a re-examination of U.S. policy. In this new context, there are two broad policy approaches to contend with political change in Cuba: a status-quo approach that would maintain the U.S. dual-track policy of isolating the Cuban government while providing support to the Cuban people; and an approach aimed at influencing the Cuban government and Cuban society through increased contact and engagement. (For additional information, see CRS Report RS22742, Cuba ' s Political Succession: From Fidel to Raul Castro . Also see CRS Report RL33622, Cuba ' s Future Political Scenarios and U.S. Policy Approaches , written in the aftermath of Fidel Castro's stepping down from power in July 2006.) In general, those who advocate easing U.S. sanctions on Cuba make several policy arguments. They assert that if the United States moderated its policy toward Cuba through increased travel, trade, and diplomatic dialogue then the seeds of reform would be planted, which would stimulate and strengthen forces for peaceful change on the island. They stress the importance to the United States of avoiding violent change in Cuba, with the prospect of a mass exodus to the United States and the potential of involving the United States in a civil war scenario. They argue that since the demise of Cuba's does not appear imminent, even without Fidel Castro at the helm, the United States should espouse a more pragmatic approach in trying to induce change in Cuba. Supporters of changing policy also point to broad international support for lifting the U.S. embargo, to the missed opportunities for U.S. businesses because of the unilateral nature of the embargo, and to the increased suffering of the Cuban people because of the embargo. Proponents of change also argue that the United States should be consistent in its policies with the world's few remaining communist governments, including China or Vietnam, and also maintain that moderating policy will help advance human rights. On the other side, opponents of changing U.S. policy maintain that the current two-track policy of isolating Cuba, but reaching out to the Cuban people through measures of support, is the best means for realizing political change in Cuba. They point out that the Cuban Liberty and Democratic Solidarity Act of 1996 sets forth the steps that Cuba needs to take in order for the United States to normalize relations. They argue that softening U.S. policy at this time without concrete Cuban reforms would boost the Castro government, politically and economically, and facilitate the survival of the communist regime. Opponents of softening U.S. policy argue that the United States should stay the course in its commitment to democracy and human rights in Cuba, and that sustained sanctions can work. Opponents of loosening U.S. sanctions further argue that Cuba's failed economic policies, not the U.S. embargo, are the causes of Cuba's difficult living conditions. <6.2. Aftermath of 2008 Hurricanes and Tropical Storms> From mid-August through early September 2008, two hurricanes and two tropical storms caused widespread damage throughout Cuba. Tropical Storm Fay passed through central Cuba on August 18, causing severe flooding. On August 31, Hurricane Gustav struck the tobacco-growing province of Pi ar del R o in western Cuba and the Isle of Youth. Tropical Storm Hanna, which did not strike Cuba directly, caused flooding in eastern Cuba in early September. Hurricane Ike made landfall in eastern Cuba on September 7 as a Category Four hurricane and severely affected both the eastern and western parts of the island, but especially the provinces of Holguin, Camaguey, and Las Tunas in the eastern part of the island. The two hurricanes caused most of the damage. Overall, just 7 people were killed, but the hurricanes severely affected the housing sector (with almost 500,000 homes damaged and over 63,000 destroyed), the power grid, and the agricultural sector. On November 8, 2008, Hurricane Paloma struck Cuba devastating the town of Santa Cruz el Sur. Initially damages from the storms in August and September were estimated to amount to $5 billion, but Ra l Castro noted in the aftermath of Hurricane Paloma that overall damages from the storm since August amounted to some $10 billion. The U.S. Chief of Mission at the U.S. Interests Section in Havana, Jonathan Farrar, issued a disaster declaration for Cuba on September 3, 2008, and the U.S. Agency for International Development (USAID) approved the release of $100,000 in emergency relief funds to nongovernmental organizations in Cuba in response to Hurricane Gustav. On September 12, in response to Hurricane Ike, the U.S. government provided another $100,000 in cash assistance to relief organizations on the ground in Cuba. The State Department maintains that the United States offered to send a humanitarian assessment team to Cuba to determine additional assistance needs, but that the Cuban government rejected the offer. U.S. officials subsequently offered a $5 million aid package for disaster relief for Cuba on September 13 that was also rejected by the Cuban government. USAID Administrator Henrietta Fore reportedly maintained that $2 million in plastic sheeting, hygiene kits, and other relief items would have been provided directly to the Cuban government, but that about $3 million in cash would still be provided through NGOs. The State Department made a new offer to Cuba on September 19 to supply some $6.3 million in corrugated zinc roofs, nails, tools, lumber, sheeting, and light shelter kits that would help some 48,000 people, but the Cuban government did not accept the offer. In addition, according to the State Department, the U.S. government increased authorizations for U.S.-based non-governmental organizations (NGOs) to provide larger amounts of assistance to Cuba in the aftermath of the hurricanes, including expedited authorization over 90 days for up to $10 million per NGO. In response to the U.S. offer to send a disaster assessment team, the Cuban government maintained that it already had a sufficient number of well-trained experts in Cuba, and noted that other countries worldwide were sending humanitarian aid without inspecting the affected areas. Instead, Cuba asked the United States to allow U.S. companies 1) to sell needed relief supplies to Cuba for the repair of housing and electrical networks; and 2) to grant private commercial credit to Cuba in order to buy food in the United States. In response to the U.S. offer to send $2 million in supplies to the Cuban government, the Cuban Interests Section in Washington again called for the United States to allow U.S. companies to sell relief supplies to Cuba, if not on a permanent basis, then at least for the next six months. <6.2.1. Legislative Initiatives> In the aftermath of the hurricanes, a number of observers, including some Members of Congress, called for the temporary relaxation of restrictions on family travel and remittances (limited to $300 per quarter) as well as on the provision of gift parcels to Cuba, but the Administration did not take any of these actions. Some observers also have called for temporary changes to the U.S. embargo regulations to allow for unrestricted U.S. cash sales to Cuba of food and medicines, farm machinery or equipment, and relief supplies, including building materials and electrical supplies. On September 5, 2008, Chairman of the House Foreign Affairs Committee Howard Berman asked President Bush to suspend for 90 days restrictions on family visits, remittances, and gift parcels. Several legislative initiatives were introduced that would have temporarily eased U.S. embargo restrictions in several areas. On September 15, 2008, Senator Dodd offered S.Amdt. 5581 to the Department of Defense authorization bill ( S. 3001 ) that would have, for a 180-day period: allowed unrestricted family travel; eased restrictions on remittances by removing the limit and allowing any American to send remittances to Cuba; expanded the list of allowable items that may be included in gift parcels; and allowed for unrestricted U.S. cash sales of food, medicines, and relief supplies to Cuba. The amendment was not considered, and therefore not part of the final bill. In the House, two legislative initiatives were introduced. On September 16, 2008, Representative Flake introduced H.R. 6913 , which would have prohibited any funds from going to the Department of Commerce to implement, administer, or enforce tightened restrictions on the contents of gift parcels to Cuba that were introduced in June 2004. On September 18, 2008, Representative Delahunt introduced H.R. 6962 , the Humanitarian Relief to Cuba Act, which would have, for a 180-day period: allowed unrestricted family travel; eased restrictions on remittances by removing the limit and allowing any American to send remittances to Cuba; and expanded the list of allowable items that may be included in gift parcels. <6.3. Restrictions on Travel and Remittances> Restrictions on travel to Cuba have been a key and often contentious component of U.S. efforts to isolate the communist government of Fidel Castro for much of the past 40 years. Over time there have been numerous changes to the restrictions and for five years, from 1977 until 1982, there were no restrictions on travel. Restrictions on travel and remittances to Cuba are part of the CACR, the overall embargo regulations administered by the Treasury Department's Office of Foreign Assets Control (OFAC). Major arguments made for lifting the Cuba travel ban are that it contributes to the suffering of Cuban families; it hinders efforts to influence conditions in Cuba and may be aiding Castro by helping restrict the flow of information; it abridges the rights of ordinary Americans; and Americans can travel to other countries with communist or authoritarian governments. Major arguments in opposition to lifting the Cuba travel ban are that more American travel would support Castro's rule by providing his government with potentially millions of dollars in hard currency; that there are legal provisions allowing travel to Cuba for humanitarian purposes that are used by thousands of Americans each year; and that the President should be free to restrict travel for foreign policy reasons. Under the current Bush Administration, enforcement of U.S. restrictions on Cuba travel has increased, and restrictions on travel and on private remittances to Cuba have been tightened. In March 2003, the Administration eliminated travel for people-to-people educational exchanges unrelated to academic course work. In June 2004, the Administration significantly restricted travel, especially family travel, and the provision of private humanitarian assistance to Cuba in the form of remittances and gift parcels. In April 2005, OFAC cracked down on certain religious organizations promoting licensed travel to Cuba and warned them not to abuse their license by taking individuals not affiliated with their organizations. OFAC's actions were prompted by reports that groups practicing the Afro-Cuban religion Santer a had been taking large groups to Cuba as a means of skirting U.S. travel restrictions. In 2006, the Administration suspended the licenses of several travel service providers, including one of the largest such providers in Florida, La Estrella de Cuba. Several religious organizations also had their licenses suspended, and church groups and several Members of Congress expressed concern about more restrictive licenses for religious travel. Among the June 2004 restrictions that remain in place are the following: Family visits were restricted to one trip every three years under a specific license and are restricted to immediate family members, with no exceptions. Under previous regulations, family visits could occur once a year under a general license, with travel more than once a year allowed, but under a specific license. Previously travel had been allowed to visit relatives to within three degrees of relationship to the traveler. Cash remittances, estimates of which range from $400 million to $800 million, were further restricted. Quarterly remittances of $300 may still be sent, but are now restricted to members of the remitter's immediate family and may not be remitted to certain government officials and certain members of the Cuban Communist Party. The regulations were also changed to reduce the amount of remittances that authorized travelers may carry to Cuba, from $3000 to $300. Gift parcels were limited to immediate family members and were denied to certain Cuban officials and certain members of the Cuban Communist Party. The contents of gift parcels may no longer include seeds, clothing, personal hygiene items, veterinary medicines and supplies, fishing equipment and supplies, or soap-making equipment. The authorized per diem allowed for a family visit was reduced from the State Department per diem rate (currently $179 per day for Havana) to $50 per day. With the exception of informational materials, licensed travelers may not purchase or otherwise acquire merchandise and bring it back into the United States. Previous regulations allowed visitors to Cuba to import $100 worth of goods as accompanied baggage. Fully-hosted travel, by a person not subject to U.S. jurisdiction, was prohibited as a permissible category of travel. Travel for educational activities was further restricted, including the elimination of educational exchanges sponsored by secondary schools. There was mixed reaction to the tightening of Cuba travel and remittance restrictions. Supporters maintain that the increased restrictions deny the Cuban government dollars that help maintain its repressive control. Opponents argue that the tightened sanctions are anti-family and only result in more suffering for the Cuban people. There were also concerns that the new restrictions were drafted without considering the full consequences of their implementation. For example, the elimination of fully-hosted travel raised concerns about the status of 70 U.S. students receiving full scholarships at the Latin American School of Medicine in Havana. Members of the Congressional Black Caucus, who were instrumental in the establishment of the scholarship program for U.S. students, expressed concern that the students may be forced to abandon their medical education because of the new OFAC regulations. As a result of these concerns, OFAC ultimately licensed the medical students in August 2004 to continue their studies and engage in travel-related transactions. On July 19, 2007, the U.S. International Trade Commission issued a report, requested by the Senate Committee on Finance, maintaining that lifting travel restrictions would result in travel by U.S. citizens to Cuba rising to between 550,000 and 1 million from an estimate of 171,000 in 2005. <6.3.1. Legislative Initiatives> From 2000-2004, one or both houses of Congress approved amendments to appropriations bills that would have eased restrictions on travel to Cuba in various ways, but these provisions ultimately were stripped out of final enacted measures. The Administration regularly threatened to veto legislation if it contained provisions weakening Cuba sanctions. In the first session of the 110 th Congress, two Senate Appropriations Committee reported-versions of appropriations bills had provisions that would have eased restrictions on travel to Cuba for the marketing and sale of agricultural and medical goods, but ultimately these provisions were not included in the FY2008 Consolidated Appropriations Act ( P.L. 110 - 161 ). The Senate version of the FY2008 Financial Services and General Government appropriations bill, reported July 19, 2007, H.R. 2829 , had a provision in Section 620 that would eased such travel restrictions, while the Senate version of the FY2008 Agriculture appropriations bill, S. 1859 , reported July 24, 2007, had such a provision in Section 741. In the second session of the 110 th Congress, several appropriations bills had provisions that would have eased restrictions on travel to Cuba, but none of these were included in the Consolidated Appropriations Act for FY2009 ( P.L. 110-329 ) that funded appropriations through March 6, 2009. The House version of the FY2009 Financial Services and General Government Appropriations bill, H.R. 7323 , reported by the House Appropriations Committee December 10, 2008 ( H.Rept. 110-920 ), included provisions that would have eased restrictions on family travel. The committee had approved a draft version of the bill on June 25, 2008. The bill would have liberalized family travel to Cuba by allowing for such travel once a year (instead of the current restriction of once every three years) and allowing such travel to visit aunts, uncles, nieces, nephews, and first cousins (instead of currently being limited to immediate family members). The Senate version of the bill, S. 3260 ( S.Rept. 110 - 417 ), reported out of the Senate Appropriations Committee on July 14, 2008, included provisions that would have eased restrictions on family travel and on travel to Cuba relating to the commercial sale of agricultural and medical goods. With regard to family travel (section 620), the bill would provide that no funds may be used to administer, implement, or enforce the Administration's June 2004 tightening of restrictions related to travel to visit relatives in Cuba. With regard to travel for agricultural or medical sales (section 619), the bill would allow for a general license for such travel instead of a specific license that requires permission from the Treasury Department. This is similar to a provision (section 737) in the Senate Appropriations Committee version of the FY2009 Agriculture Appropriations bill, S. 3289 ( S.Rept. 110 - 426 ), reported out of committee on July 21, 2008. A number of other initiatives introduced in the 110 th Congress would ease Cuba travel restrictions, but no action was taken on these measures. H.R. 654 (Rangel), S. 721 (Enzi), and Section 254 of S. 554 (Dorgan) would have prohibited the President from regulating or prohibiting travel to Cuba or any of the transactions incident to travel. Two bills that would have lifted overall economic sanctions H.R. 217 (Serrano) and H.R. 624 (Rangel) would also have lifted travel restrictions. H.R. 177 (Lee) would have eased restrictions on educational travel to Cuba. H.R. 757 (Delahunt) would have lifted restrictions on family travel and the provision of remittances for family members in Cuba. H.R. 1026 (Moran, Jerry), which would have facilitated the sale of U.S. agricultural products to Cuba, included a provision that would have provided for general license authority for travel-related transactions for people involved in agricultural sales and marketing activities or in the transportation of such sales. H.R. 2819 (Rangel) and S. 1673 (Baucus), which would have eased restrictions on U.S. agricultural and medical exports to Cuba, would also have lifted restrictions on travel to Cuba. In addition, as noted above, several initiative introduced in the aftermath of Hurricanes Gustav and Ike would temporarily ease U.S. embargo restrictions in several areas, including travel and remittances, but no action was taken on these measures. S.Amdt. 5581 (Dodd) to S. 3001 , the FY2009 National Defense Authorization Act, and H.R. 6962 (Delahunt) would have allowed for family travel and unrestricted remittances for six months. <6.4. Agricultural Exports and Sanctions> U.S. commercial agricultural exports to Cuba have been allowed for several years, but with numerous restrictions and licensing requirements. The 106 th Congress passed the Trade Sanctions Reform and Export Enhancement Act of 2000 or TSRA ( P.L. 106 - 387 , Title IX) that allows for one-year export licenses for selling agricultural commodities to Cuba, although no U.S. government assistance, foreign assistance, export assistance, credits, or credit guarantees are available to finance such exports. TSRA also denies exporters access to U.S. private commercial financing or credit; all transactions must be conducted in cash in advance or with financing from third countries. TSRA reiterates the existing ban on importing goods from Cuba but authorizes travel to Cuba, under a specific license, to conduct business related to the newly allowed agricultural sales. In February 2005, OFAC amended the Cuba embargo regulations to clarify that TSRA's term of "payment of cash in advance" means that the payment is received by the seller or the seller's agent prior to the shipment of the goods from the port at which they are loaded. U.S. agricultural exporters and some Members of Congress strongly objected that the action constitutes a new sanction that violates the intent of TSRA and could jeopardize millions of dollars in U.S. agricultural sales to Cuba. OFAC Director Robert Werner maintained that the clarification "conforms to the common understanding of the term in international trade." On July 29, 2005, OFAC clarified that, for "payment of cash in advance" for the commercial sale of U.S. agricultural exports to Cuba, vessels can leave U.S. ports as soon as a foreign bank confirms receipt of payment from Cuba. OFAC's action was aimed at ensuring that the goods would not be vulnerable to seizure for unrelated claims while still at the U.S. port. Supporters of overturning OFAC's February 22, 2005 amendment, such as the American Farm Bureau Federation, were pleased by the clarification but indicated that they would still work to overturn the February rule. Since late 2001, Cuba has purchased almost $2.6 billion in agricultural products from the United States. Overall U.S. exports to Cuba rose from about $7 million in 2001 to $404 million in 2004. U.S. exports to Cuba declined in 2005 and 2006 to $369 million and $340 million, respectively, but increased to $447 million in 2007. In the first 10 months of 2008, U.S. agricultural exports to Cuba amounted to $608 million, far higher than the same time period in previous years, in part because of the rise in the cost of food prices and because of Cuba's increased food needs in the aftermath of several hurricanes and tropical storms that severely damaged Cuba's agricultural sector. On July 19, 2007, the U.S. International Trade Commission issued a report, requested by the Senate Committee on Finance, maintaining that the U.S. share of Cuba's agricultural, fish, and forest imports would rise from one-third to between one-half and two-thirds if trade restrictions were lifted. See the full report available at http://www.usitc.gov/ ext_relations/ news_release/ 2007/ er0719ee1.htm Some groups favor further easing restrictions on agricultural exports to Cuba. They argue that the restrictions harm the health and nutrition of the Cuban population. U.S. agribusiness companies that support the removal of restrictions on agricultural exports to Cuba believe that U.S. farmers are missing out on a market of over $700 million annually so close to the United States. Some exporters want to change U.S. restrictions so that they can sell agriculture and farm equipment to Cuba. Agricultural exporters who support the lifting of the prohibition on financing contend that allowing such financing would help smaller U.S. companies expand purchases to Cuba more rapidly. Opponents of further easing restrictions on agricultural exports to Cuba maintain that U.S. policy does not deny such sales to Cuba, as evidenced by the large amount of sales since 2001. Moreover, according to the State Department, since the Cuban Democracy Act was enacted in 1992, the United States has licensed billions of dollars in private humanitarian donations. Opponents further argue that easing pressure on the Cuban government would in effect be lending support and extending the duration of the Castro regime. They maintain that the United States should remain steadfast in its opposition to any easing of pressure on Cuba that could prolong the Castro regime and its repressive policies. Some agricultural producers that export to Cuba support continuation of the prohibition on financing for agricultural exports to Cuba because it ensures that they will be paid. <6.4.1. Legislative Initiatives> In the first session of the 110 th Congress, Congress approved the FY2008 Consolidated Appropriations Act ( P.L. 110 - 161 ) in December 2007, which dropped provisions easing Cuba sanctions that had been included in the House-passed and Senate-committee versions of H.R. 2829 , the FY2008 Financial Services and General Government appropriations bill, and the Senate-committee version of S. 1859 , the FY2008 agriculture appropriations bill. The House-passed version of H.R. 2829 had a provision in Section 903 that would have prevented Treasury Department funds from being used to implement the February 2005 tightening of policy requiring the payment of cash in advance prior to the shipment of U.S. agricultural goods to Cuba. The House had adopted the provision during June 28, 2007 floor consideration when it approved H.Amdt. 467 (Moran, Kansas) by voice vote. The Senate Appropriations Committee reported version of the bill included a similar provision in Section 619, and in Section 620 that would have ease travel to Cuba for the marketing and sale of agricultural and medical goods. The Administration's statement of policy on the bill maintained that the President would veto the measure if it contained a provision weakening current restrictions against Cuba. The Senate Appropriations Committee-reported version of the S. 1859 ( S.Rept. 110 - 134 ) included a provision that would have authorized general licenses for travel to Cuba for the marketing and sale of agricultural and medical goods. In other first session action, on July 27, 2007, the House rejected (by a vote of 182-245) H.Amdt. 707 (Rangel) to H.R. 2419 , the Farm, Nutrition, and Bioenergy Act of 2007, also known as the 2007 farm bill. The amendment would have eased restrictions on the commercial sale of agricultural products to Cuba by clarifying the meaning of "payment of cash in advance" for the sale of such products; authorizing direct transfers between U.S. and Cuban financial institutions for such sales; and authorizing the issuance of U.S. visas for Cubans to conduct activities, including phytosanitary inspections, related to such sales. In the second session of the 110 th Congress, several appropriations bills had provisions that would have eased restrictions on agricultural exports to Cuba, but none of these were included in the Consolidated Appropriations Act for FY2009 ( P.L. 110-329 ) that funded appropriations through March 6, 2009. The House version of the FY2009 Financial Services and General Government Appropriations bill, H.R. 7323 , reported by the House Appropriations Committee December 10, 2008 ( H.Rept. 110-920 ), included provisions easing restrictions on U.S. agricultural exports. The committee had approved a draft version of the bill on June 25, 2008. The bill had a provision that would have prohibited funds in the Act from being used to administer, implement, or enforce an amendment to the Cuban embargo regulations from February 25, 2005, that requires that U.S. agricultural exports must be paid for before they leave U.S. ports. The Senate version of the bill, S. 3260 ( S.Rept. 110 - 417 ), reported by the Senate Appropriations Committee on July 14, 2007, included a similar provision (section 618) easing restrictions on payment terms for the sale of agricultural goods to Cuba. The bill also had a provision easing restrictions on the travel related to the commercial sale of agricultural and medical goods (section 619). This was similar to a provision (section 737) in the Senate Appropriations Committee version of the FY2009 Agriculture Appropriations bill, S. 3289 ( S.Rept. 110 - 426 ), reported out of committee on July 21, 2008. As noted above, none of these provisions were enacted into law. Several other legislative initiatives introduced in the 110 th Congress would have eased restrictions on the sale of U.S. agricultural exports to Cuba, but none of these were considered: H.R. 1026 (Moran, Jerry) would have facilitated the sale of U.S. agricultural products to Cuba by providing for general license authority for travel-related expenses for people involved in sales and marketing activities or in the transportation for such sales; authorizing the issuance of a temporary visa for a Cuban national conducting activities related to the purchase of U.S. agricultural goods, including phytosanitary inspections; clarifying the "payment of cash in advance" term used in TSRA to mean that the payment by the purchaser and the receipt of such payment to the seller occurs prior to the transfer of title of the commodity or product to the purchaser and the release of control of such commodity or product to the purchaser; and prohibiting the President from restricting direct transfers from a Cuban financial institution to a U.S. financial institution for U.S. agricultural sales under TSRA. H.R. 2819 (Rangel) and S. 1673 (Baucus), among other provisions, would have clarified the meaning of "payment of cash in advance;" authorize direct transfers between Cuban and U.S. financial institutions for the execution of payments for sales pursuant to TSRA; establish an agricultural export promotion program with respect to Cuba; and increase the airport ticket tax for travel to or from Cuba by $1.00, with funds going to a newly established Agricultural Export Promotion Trust Fund. The Senate Finance Committee held a hearing on S. 1673 on December 11, 2007. Two broader bills that would have lifted economic sanctions on Cuba H.R. 217 (Serrano) and H.R. 624 (Rangel) included provisions lifting restrictions on agricultural exports to Cuba by amending TSRA. Three bills that would have lifted overall travel restrictions H.R. 654 (Rangel), S. 554 (Dorgan), and S. 721 (Enzi) would have had the effect of lifting travel restrictions for those involved in travel related to agricultural sales. <6.5. Trademark Sanction65> A provision in the FY1999 omnibus appropriations measure (Section 211 of Division A, Title II, P.L. 105 - 277 , signed into law October 21, 1998) prevents the United States from accepting payment for trademark registrations and renewals from Cuban or foreign nationals that were used in connection with a business or assets in Cuba that were confiscated, unless the original owner of the trademark has consented. The provision prohibits U.S. courts from recognizing such trademarks without the consent of the original owner. The measure was enacted because of a dispute between the French spirits company, Pernod Ricard, and the Bermuda-based Bacardi Ltd. Pernod Ricard entered into a joint venture with the Cuban government to produce and export Havana Club rum, but Bacardi, whose company in Cuba was expropriated in the 1960s, maintains that it holds the right to the Havana Club name. Although Pernod Ricard cannot market Havana Club in the United States because of the trade embargo, it wants to protect its future distribution rights should the embargo be lifted. The European Union initiated World Trade Organization dispute settlement proceedings in June 2000, maintaining that the U.S. law violates the Agreement on Trade-Related Aspects of Intellectual Property (TRIPS). In January 2002, the WTO ultimately found that the trademark sanction violated WTO provisions on national treatment and most-favored-nation obligations in the TRIPS Agreement. On March 28, 2002, the United States agreed that it would come into compliance with the WTO ruling through legislative action by January 3, 2003. That deadline was extended several times since no legislative action had been taken to bring Section 211 into compliance with the WTO ruling. On July 1, 2005, however, in an EU-U.S. bilateral agreement, the EU agreed that it would not request authorization to retaliate at that time, but reserved the right to do so at a future date, and the United States agreed not to block a future EU request. On August 3, 2006, the U.S. Patent and Trademark Office announced that Cuba's Havana Club trademark registration was "cancelled/expired," a week after OFAC had denied a Cuban government company the license that it needed to renew the registration of the trademark. Two different approaches have been advocated to bring Section 211 into compliance with the WTO ruling. Some want a narrow fix in which Section 211 would be amended so that it also applies to U.S. companies instead of being limited to foreign companies. Advocates of this approach argue that it would affirm that the United States "will not give effect to a claim or right to U.S. property if that claimed is based on a foreign compensation." Others want Section 211 repealed altogether. They argue that the law endangers over 5,000 trademarks of over 500 U.S. companies registered in Cuba. They maintain that Cuba could retaliate against U.S. companies under the Inter-American Convention for Trademark and Commercial Protection. In the 110 th Congress, five initiatives H.R. 217 (Serrano), H.R. 624 (Rangel), H.R. 2819 (Rangel), S. 1673 (Baucus), and S. 1806 (Leahy) had provisions that would have repealed the Section 211 trademark sanction from law, while two other initiatives H.R. 1306 (Wexler) and S. 749 (Nelson) would have advanced the narrow fix to Section 211 in order to comply with the WTO ruling. No action was taken on these measures. Similar legislative initiatives on both sides of the issue were introduced in the 108 th and 109 th Congresses, but no action was taken on these measures. The July 2005 EU-U.S. bilateral agreement, in which the EU agreed not to retaliate against the United States, but reserved the right to do so at a later date, reduced pressure on Congress to take action to comply with the WTO ruling. <6.6. Offshore Oil Sector Development> The issue of Cuba's development of its deepwater offshore oil reserves in the Gulf of Mexico has been a concern among some Members of Congress. According to the U.S. Energy Information Administration, industry analysts maintain that there could be at least 1.6 billion crude oil reserves in Cuba's offshore sector; the U.S. Geological Survey estimated a mean of 4.6 billion barrels of undiscovered oil. In October 2008, an official of Cuba's state oil company, Cubapetroleo (Cupet), maintained there may be more than 20 billion barrels of oil in Cuba's deepwaters, but energy analysts expressed skepticism for such a claim. To date, Cuba has signed agreements for seven concessions involving eight foreign oil companies for the exploration of offshore oil and gas. Repsol (Spain), Norsk-Hydro (Norway), and ONGC (India) are partners in a joint project, while Sherritt International (Canada), ONGC (India), PdVSA (Venezuela), Petronas (Malaysia), PetroVietnam, and Petrobras (Brazil) also have additional concessions. In February 2008, Petrobras signed a wide-ranging agreement for potential exploration and production cooperation with Cuba's state oil company, Cupet. This ultimately led to an oil exploration agreement between Petrobras and Cupet signed in late October 2008. Some Members have expressed concern about oil development so close to the United States and about potential environmental damage to the Florida coast. The Repsol project has plans to drill a second well (the first was drilled in 2004) in mid-2009, and some press reports maintain that if that goes well, Cuban oil could be flowing to the market by 2013. Although there have been some claims that China is drilling in Cuba's offshore deepwater oil sector, to date its involvement in Cuba's oil sector has been focused on exploring onshore/close coastal oil extraction in Pi ar del Rio province through its state-run China Petroleum and Chemical Corporation (Sinopec). China does not have a concession in Cuba's offshore oil sector in the deepwaters of the Gulf of Mexico. In the 110 th Congress, two legislative initiatives H.R. 1679 (Ros-Lehtinen), S. 876 (Martinez), and S. 2503 (Nelson, Bill) would have imposed sanctions related to Cuba's offshore oil development on its northern coast, but no action was taken on the measures. H.R. 1679 and S. 876 would have excluded from admission to the United States aliens who have made investments contributing to the enhancement of the ability of Cuba to develop its petroleum resources off its coasts; and require the President to impose sanctions on persons (including foreign subsidiaries) that are determined to have made an investment equal to or exceeding $1 million that contributes to the enhancement of Cuba's ability to develop petroleum resources of the submerged lands off Cuba's coast. S. 2503 would also have excluded from admission to the United States aliens who have directly and significantly contributed to the ability of Cuba to develop its petroleum resources. The bill would also have nullified a 1977 Maritime Boundary Agreement between the United States and Cuba. In contrast, several legislative initiatives S. 1268 (Dorgan), S. 2953 (Craig), H.R. 3182 (Udall), H.R. 3435 (Pickering) would have allowed U.S. companies to work with Cuba for the offshore exploration and extraction of oil along Cuba's northern coast. In addition, H.R. 6735 (Hobson) would have terminated the application of restrictions on exploration, development, and production of oil and gas in areas of the outer Continental Shelf adjacent to Cuba. No action was taken on these measures. <6.7. Drug Interdiction Cooperation> Because of Cuba's geographic location, the country's waters and airspace have been used by illicit narcotics traffickers to transport drugs for ultimate destinations in the United States. Over the past several years, Cuban officials have expressed concerns over the use of their waters and airspace for drug transit as well as increased domestic drug use. The Cuban government has taken a number of measures to deal with the drug problem, including legislation to stiffen penalties for traffickers, increased training for counternarcotics personnel, and cooperation with a number of countries on anti-drug efforts. Cuba has bilateral counternarcotics agreements with 33 countries and less formal arrangements with 16 others, according to the Department of State. For several years, Cuba's Operation Hatchet has focused on maritime and air interdiction and the recovery of narcotics washed up on Cuban shores. Narcotics smuggling through Cuban territory deceased in 2006, according to both U.S. and Cuban officials. According to the Department of State, Cuba aggressively pursues an internal enforcement and investigation program against its incipient drug market with an effective nationwide drug prevention and awareness campaign, Operation Popular Shield. Over the years, there have been varying levels of cooperation with Cuba on anti-drug efforts. In 1996, Cuban authorities cooperated with the United States in the seizure of 6.6 tons of cocaine aboard the Miami-bound Limerick , a Honduran-flag ship. Cuba turned over the cocaine to the United States and cooperated fully in the investigation and subsequent prosecution of two defendants in the case in the United States. Cooperation has increased since 1999 when U.S. and Cuban officials met in Havana to discuss ways of improving anti-drug cooperation. Cuba accepted an upgrading of the communications link between the Cuban Border Guard and the U.S. Coast Guard as well as the stationing of a U.S. Coast Guard Drug Interdiction Specialist (DIS) at the U.S. Interests Section in Havana. The Coast Guard official was posted to the U.S. Interests Section in September 2000, and since that time, coordination has increased. The State Department, in its March 2008 International Narcotics Control Strategy Report , maintains that narcotics cooperation occurs on a case-by-case basis primarily through the Coast Guard DIS, which increased in 2007. The report noted that Cuban authorities carried out some operations in coordination with the Coast Guard DIS in 2007. These included cooperation in the interception of a drug-laden aircraft destined for the Bahamas in February and a joint U.S.-Cuba container inspection at the port of Havana in June. The report also noted that Cuban authorities have provided the DIS more exposure to Cuban counternarcotics efforts, including investigative criminal information, debriefings on drug trafficking cases, visits to the Cuban national canine training center and anti-doping laboratory in Havana, and access to meet with the Chiefs of Cuba's INTERPOL and Customs office. Cuba maintains that it wants to cooperate with the United States to combat drug trafficking, and on various occasions has called for a bilateral anti-drug cooperation agreement with the United States. In January 2002, Cuba deported to the United States Jesse James Bell, a U.S. fugitive wanted on drug charges, and in early March 2002, Cuba arrested a convicted Colombian drug trafficker, Rafael Bustamante, who escaped from jail in Alabama in 1992. At the time, then Drug Enforcement Administration head Asa Hutchison expressed appreciation for Cuba's actions, but indicated that cooperation would continue on a case-by-case basis, not through a bilateral agreement. In February 2007, Cuba extradited drug trafficker Luis Hernando G mez Bustamante to Colombia, an action that drew praise from U.S. Assistant Secretary of State for International Narcotics and Law Enforcement Affairs Anne Patterson. G mez Bustamante was subsequently extradited to the United States in July 2007 to face drug trafficking charges. In April 2008, John Walters, Director of the White House Office of National Drug Control Policy, lauded U.S. anti-drug cooperation with Cuba as a good example of how cooperation has been achieved despite overall political differences between the two countries. <6.7.1. Legislative Initiatives> Over the past several years, House and Senate versions of Foreign Operations appropriations bills have contained contrasting provisions related to funding for cooperation with Cuba on counternarcotics efforts. House bills have generally prohibited funds for such efforts, while Senate versions would have funded such efforts. Ultimately, none of these provisions were included in enacted measures. This happened again in December 2007 when Congress approved the FY2008 Consolidated Appropriations Act ( P.L. 110 - 161 ). The act dropped contrasting provisions from the House and Senate versions of H.R. 2764 , the FY2008 State, Foreign Operations and Related Agencies Appropriations Act. The House-passed version of H.R. 2764 contained a provision, in Section 673, that would have specifically prohibited International Narcotics Control and Law Enforcement (INCLE) assistance to the Cuban government. In contrast, the Senate-passed version of the bill would have provided, in Section 696, $1 million in INCLE funding for preliminary work by the Department of State, or such other entity as the Secretary of State may designate, to establish cooperation with the Cuban government on counternarcotics matters. The amount would not have been available if Cuba did not have in place appropriate procedures to protect against the loss of innocent life in the air and on the ground in connection with the interdiction of illegal drugs, and if there is credible evidence of involvement of the Cuban government in drug trafficking during the preceding 10 years. In the second session of the 110 th Congress, the Senate Appropriations Committee version of the FY2009 State, Department, Foreign Operations, and Related Agencies Appropriations Act, S. 3288 , contained a provision (section 779) that would have provided for $1 million for preliminary work by the Department of State, or other entity designated by the Secretary of State, to establish cooperation with appropriate Cuban agencies on counternarcotics matters. The money would not be available, however, if the Secretary certifies that Cuba 1) does not have in place procedures to protect against the loss of innocent life in the air and on the ground in connection with the interdiction of illegal drugs; and 2) there is credible evidence of involvement of the government of Cuba in drug trafficking during the preceding 10 years. No action was taken on the measure, and no such provision was included in the Consolidated Appropriations Act for FY2009 ( P.L. 110-329 ) that provided foreign operations funding until March 6, 2009. <6.8. Cuba and Terrorism81> Cuba was added to the State Department's list of states sponsoring international terrorism in 1982 because of its alleged ties to international terrorism and support for terrorist groups in Latin America. Cuba had a long history of supporting revolutionary movements and governments in Latin America and Africa, but in 1992, Fidel Castro said that his country's support for insurgents abroad was a thing of the past. Cuba's change in policy was in large part because of the breakup of the Soviet Union, which resulted in the loss of billions of dollars in annual subsidies to Cuba, and led to substantial Cuban economic decline. Cuba remains on the State Department's terrorism list. According to the State Department's Country Reports on Terrorism 2007 report (issued April 30, 2008), Cuba has "remained opposed to U.S. counterterrorism policy, and actively and publicly condemned many associated U.S. policies and actions." The report also noted that Cuba maintains close relationships with other state sponsors of terrorism, such as Iran and Syria, and has provided safe haven for members of several Foreign Terrorist Organizations (FTOs): the Basque Homeland and Freedom (ETA) and two Colombian insurgent groups, the Revolutionary Armed Forces of Colombia (FARC) and the National Liberation Army (ELN). Colombia has publicly acknowledged that it wants Cuba mediation with the ELN. The 2007 report also maintained that Cuba continued to permit U.S. fugitives from justice to live legally in Cuba. Most of the fugitives entered Cuba in the 1970s, and are accused of hijacking or committing violent actions in the United States. The State Department report noted that Cuba stated in 2006 that it would no longer provide safe haven to new fugitives who may enter Cuba. In 2006, Cuba returned a U.S. fugitive who had sequestered his son and flew a stolen plane to Cuba in September. In April 2007, Cuba returned another U.S. fugitive, Joseph Adjmi, who was convicted of mail fraud in the 1960s, but disappeared before beginning his 10-year sentence. On June 13, 2008, Cuba's Ministry of Foreign Affairs announced that it deported another U.S. citizen, Leonard Auerbach, wanted in the United States for sexual exploitation of a minor and for child pornography who had entered Cuba from Mexico in April. More recently, press reports maintain that a number of fugitives from Florida accused of bilking the U.S. government of millions through Medicare fraud have fled to Cuba. In the 110 th Congress, H.R. 525 (King), which was not considered, would have amended the Cuban Liberty and Democratic Solidarity Act of 1996 to require that, in order to determine that a democratically elected government in Cuba exists, the Cuban government extradite to the United States individuals who are living in Cuba in order to escape prosecution or confinement for criminal offense committed in the United States. A similar initiative was introduced in the 109 th Congress, H.R. 332 (King), but no legislative action was taken. In addition, Section101(1)(H) of House-passed H.R. 2601 would have authorized funds for the U.S. Interests Section in Havana to disseminate the names of U.S. fugitives residing in Cuba and any rewards for their capture, but action on the measure was not completed before the end of the Congress. In general, those who support keeping Cuba on the terrorism list argue that there is ample evidence that Cuba supports terrorism. They point to the government's history of supporting terrorist acts and armed insurgencies in Latin America and Africa. They point to the government's continued hosting of members of foreign terrorist organizations and U.S. fugitives from justice. Critics of retaining Cuba on the terrorism list maintain that it is a holdover from the Cold War. They argue that domestic political considerations keep Cuba on the terrorism list and maintain that Cuba's presence on the list diverts U.S. attention from struggles against serious terrorist threats. <6.8.1. Cuba as the Victim of Terrorism> Cuba has been the target of various terrorist incidents over the years. In 1976, a Cuban plane was bombed, killing 73 people. In 1997, there were almost a dozen bombings in the tourist sector in Havana and in the Varadero beach area in which an Italian businessman was killed and several others were injured. Two Salvadorans were convicted and sentenced to death for the bombings in March 1999, and three Guatemalans were sentenced to prison terms ranging from 10-15 years in January 2002. Cuban officials maintain that Cuban exiles funded the bombings. In November 2000, four anti-Castro activists were arrested in Panama for a plot to kill Fidel Castro. One of the accused, Luis Posada Carriles, was also allegedly involved in the 1976 Cuban airline bombing noted above. The four stood trial in March 2004 and were sentenced on weapons charges in the case to prison terms ranging from seven to eight years. In late August 2004, Panamanian President Mireya Moscoso pardoned the four men before the end of her presidential term. Three of the men are U.S. citizens and traveled to Florida, where they received strong support from some in the Cuban American community, while Posada Carriles reportedly traveled to another country. On April 13, 2005, Posada's lawyer said that his client, reportedly in the United States after entering the country illegally, would seek asylum in the United States because he has a "well-founded fear of persecution" for his opposition to Fidel Castro. Posada, a Venezuelan citizen, had been imprisoned in Venezuela for the bombing of the Cuban airliner in 1976, but reportedly was allowed to "escape" from prison in 1985 after his supporters paid a bribe to the prison warden. He had been acquitted for the bombing but remained in prison pending a prosecutorial appeal. Posada also reportedly admitted, but later denied, involvement in the string of bombings in Havana in 1997, one of which killed an Italian tourist. Posada subsequently withdrew his application for asylum on May 17, 2005. Later that day, U.S. Immigration and Customs Enforcement (ICE) arrested Posada, and subsequently charged him with illegally entering the United States. A Department of Homeland Security press release indicated that ICE does not generally deport people to Cuba or countries believed to be acting on Cuba's behalf. Venezuela requested Posada's extradition and pledged that it would not hand Posada over to Cuba. On September 26, 2005, however, a U.S. immigration judge ruled that Posada likely faced torture in Venezuela and could not be deported in keeping with U.S. obligations under the Convention Against Torture. ICE reviewed the case and determined on March 22, 2006, that Posada would not be freed from a detention federal immigration facility in El Paso, Texas. In November 2006, however, a U.S. federal judge, who was considering Posada's plea that he be released, ordered the government to supply evidence, by February 1, 2007, justifying his continued detention. On January 11, 2007, a federal grand jury in Texas indicted Posada on seven counts for lying about how he entered the United States illegally in March 2005, whereupon he was transferred from immigration detention in El Paso to a country jail in New Mexico near the Texas border. The Cuban government responded by maintaining that Posada needs to be charged with terrorism, not just lying about how he entered the United States. Another grand jury in New Jersey is reportedly examining Posada's alleged role in the 1997 bombings in Cuba. Press articles in early May 2007 reported that the FBI has been gathering evidence in the 1997 bombing and that FBI agents have visited Havana as part of their investigation. Posada was released from jail in New Mexico on April 19, 2007, and allowed to return to Miami under house arrest to await an upcoming trial on immigration fraud charges, but on May 9, 2007 a federal judge in Texas dismissed the charges. The judge maintained that the U.S. government mistranslated testimony from Posada and manipulated evidence. On June 5, 2007, Justice Department prosecutors filed a notice of appeal with the 5 th U.S. Circuit Court of Appeals in New Orleans and on November 6, 2007, federal prosecutors field a brief requesting that the court reverse the lower court's decision. On June 4, 2008, the appeals court heard arguments from both sides in the case; a ruling reportedly could take several months. Both Cuba and Venezuela strongly denounced Posada's release, contending that he is a terrorist. In late June 2008, Panama's Supreme Court ruled that Posada's 2004 pardon was unconstitutional, and in mid-July 2008, a Panamanian court initiated a request for Posada's extradition to the Panamanian government. The House Subcommittee on International Organizations, Human Rights, and Oversight of the Committee on Foreign Affairs held a hearing focusing on the Posada case on November 15, 2007. <6.9. U.S. Funding to Support Democracy and Human Rights> Since 1996, the United States has provided assistance primarily through the U.S. Agency for International Development (USAID), but also through the State Department and the National Endowment for Democracy (NED) to increase the flow of information on democracy, human rights, and free enterprise to Cuba. USAID's Cuba program has supported a variety of U.S.-based non-governmental organizations with the goals of promoting a rapid, peaceful transition to democracy, helping develop civil society, and building solidarity with Cuba's human rights activists. These efforts are largely funded through Economic Support Funds (ESF) in the annual foreign operations appropriations bill. In recent years, funding for such projects amounted to about $5 million for each of FY2001 and FY2002, $6 million in FY2003, $21.4 million in FY2004 (because of re-programmed ESF assistance to fund the democracy-building recommendations of the Commission to Provide Assistance for a Free Cuba), and $8.9 million in FY2005. In FY2006, $10.9 million in Cuba democracy funding was provided, including $8.9 million in ESF and $2 million in Development Assistance. For FY2007, the Administration requested $9 million in ESF to support the recommendations of the President's Commission for Assistance to a Free Cuba, and to support USAID-administrated democracy and human rights programs. The report to the House-passed version of the FY2007 Foreign Operations appropriations bill, H.R. 5522 ( H.Rept. 109 - 486 ), recognized the work of USAID in promoting democracy and humanitarian assistance for Cuba and urged the agency to continue to promote its Cuba program. The report to the Senate version of H.R. 5522 ( S.Rept. 109 - 277 ) recommended $2.5 million in ESF for Cuba democracy programs, $6.5 million less than the Administration's request. Final action on H.R. 5522 was not completed before the end of the 109 th Congress. Foreign Operations appropriations for FY2007 was funded by a series of continuing resolutions completed in the 110 th Congress. Ultimately, the Administration provided $13.3 million in ESF for Cuba democracy programs in FY2007, $4.3 million more than it requested. For FY2008, Congress fully funded the Administration's request for $45.7 million in ESF for democracy assistance for Cuba in the Consolidated Appropriations Act for FY2008 ( P.L. 110-161 ); an estimated $45.33 million, however, will be provided because of an overall 0.81% rescission. The amount is more than four times the amount provided in FY2006 and more than five times the amount requested in FY2007. According to the State Department's FY2008 Congressional Budget Justification (CBJ), the increase in assistance is in order to fulfill the recommendations of the July 2006 report of the Commission for Assistance to a Free Cuba to provide support for Cuban civil society, expand international awareness, break the regime's information blockade, and continue support for a democratic transition. That report, as described above, recommended $80 million over two years for a variety of measures to hasten Cuba's transition to democracy, and not less than $20 million annually thereafter for Cuba democracy programs. Both the House- and Senate-passed versions of the FY2008 State, Foreign Operations, and Related Agencies Appropriations Act, H.R. 2764 , fully funded the Administration's request for $45.7 million in ESF for Cuba democracy programs. The House committee-reported version of the bill would have provided just $9 million in ESF for such programs, but during June 21, 2007, floor consideration, the House approved H.Amdt. 351 (Diaz-Balart) by a vote of 254-170 that increased funding for ESF by $36.7 million in order to fully fund the Administration's request. The Senate Appropriations Committee report to the bill would have provided $15 million in ESF for Cuba democracy programs. However, during September 6, 2007, floor consideration, the Senate approved S.Amdt. 2694 (Martinez) by voice vote that increased funding for Cuba democracy programs by $30.7 million to fully fund the Administration's request. For FY2009, the Administration requested $20 million in ESF to continue to implement program recommendations of the Commission for Assistance to a Free Cuba. The money would assist human rights activists, independent journalists, Afro-Cubans, and women, youth, and student activists. The report to the Senate Appropriations Committee version of the FY2009 State Department, Foreign Operations, and Related Agencies Appropriations Act, S, 3288 ( S.Rept. 110 - 425 ), recommended fully funding the Administration's request for Cuba, but also called for the State Department and USAID to conduct regular evaluations to ensure the cost effectiveness of the programs. No final action on the appropriations measure was taken in the 110 th Congress, but overall foreign operations funding was continued under a short-term continuing resolution ( P.L. 110-329 ) until March 6, 2009. Until FY2008, NED's democratization assistance for Cuba had been funded largely through the annual Commerce, Justice, and State (CJS) appropriations measure, but is now funded through the State Department, Foreign Operations and Related Agencies appropriations measure. NED funding for Cuba has steadily increased over the past several years: $765,000 in FY2001; $841,000 in FY2002; $1.14 million in FY2003; and $1.15 million in FY2004. For FY2005, NED funded 17 Cuba projects with $2.4 million. For FY2006, NED funded 13 projects with almost $1.5 million, including $0.4 million from State Department ESF. For FY2007, NED funded 12 projects with almost $1.5 million, which included almost $1.4 million funded by the State Department. <6.9.1. Oversight of U.S. Democracy Assistance to Cuba> In November 2006, the Government Accountability Office (GAO) issued a report examining U.S. democracy assistance for Cuba from 1996-2005, and concluded that the U.S. program had significant problems and needed better management and oversight. According to GAO, internal controls, for both the awarding of Cuba program grants and oversight of grantees, "do not provide adequate assurance that the funds are being used properly and that grantees are in compliance with applicable law and regulations." Investigative news reports on the program maintained that high shipping costs and lax oversight have diminished its effectiveness. Representative William Delahunt, Chairman of the House Foreign Affairs Committee's Subcommittee on International Organizations, Human Rights, and Oversight, had requested the GAO study along with Representative Jeff Flake. In March 2008, a White House aide to President Bush, Felipe Sixto, resigned because of alleged misuse of funds when he worked for the Center for a Free Cuba, which has been a major recipient of U.S. democracy funding. On December 19, 2008, Sixto pled guilty to stealing nearly $600,000, and is expected to be sentenced in March 2009. Another group, Grupo de Apoyo a la Democracia (Group in Support of Democracy), is also under investigation by USAID for misuse of funds. Historically these two groups have been the two largest recipients of U.S. democracy funding for Cuba. GAO issued a second report examining USAID's Cuba democracy program on November 24, 2008. The report lauded the steps that USAID had taken since 2006 to address problems with its Cuba program and improve oversight of the assistance. These included awarding all grants competitively since 2006, hiring more staff for the program office since January 2008; and contracting for financial services in April 2008 to enhance oversight of grantees. The GAO report also noted that USAID had worked to strengthen program oversight through preaward and follow-up reviews, improving grantee internal controls and implementation plans, and providing guidance and monitoring about permitted types of assistance and cost sharing. The report also maintained, however, that USAID had not staffed the Cuba program to the level needed for effective grant oversight. GAO also noted the difficulty of assessing USAID's action to improve its Cuba program because most of its actions to improve the program were only taken recently. Procurement reviews completed in August 2008 by the new financial services contractor identified internal control, financial management, and procurement weaknesses at three grantees. GAO recommended that USAID: 1) ensure that its Cuba program office is staffed at the level that is needed to fully implement planned monitoring activities; and 2) periodically assess the Cuba program's overall efforts to address and reduce grantee risks, especially regarding internal controls, procurement practices, expenditures, and compliance with laws and regulations. The Cuban American National Foundation (CANF) released a report in May 2008 maintaining that a majority of the assistance for Cuba has been spent in operating expenses by U.S.-based grantees, transition studies, and U.S.-based activities. Among the recommendations in its report, the CANF called for USAID grantees to spend a minimum of 75% of government funds in direct aid to Cuban civil society. It also called for the assistance program to provide direct cash aid to independent civil society groups, dissidents, and families of political prisoners. <6.10. Radio and TV Marti> U.S.-government sponsored radio and television broadcasting to Cuba Radio and TV Mart began in 1985 and 1990 respectively. As spelled out in the Broadcasting Board of Governors FY2009 Budget Request , the objectives of Radio and TV Mart are (1) to support the right of the Cuban people to seek, receive, and impart information and ideas through any media and regardless of frontiers; (2) to be effective in furthering the open communication of information and ideas through use of radio and television broadcasting to Cuba; (3) to serve as a consistently reliable and authoritative source of accurate, objective, and comprehensive news; and (4) to provide news, commentary, and other information about events in Cuba and elsewhere to promote the cause of freedom in Cuba. Until October 1999, U.S.-government funded international broadcasting programs had been a primary function of the United States Information Agency (USIA). When USIA was abolished and its functions were merged into the Department of State at the beginning of FY2000, the Broadcasting Board of Governors (BBG) became an independent agency that included such entities as the Voice of America (VOA), Radio Free Europe/Radio Liberty (RFE/RL), Radio Free Asia, and the Office of Cuba Broadcasting (OCB), which manages Radio and TV Marti. OCB is headquartered in Miami, Florida, and operates under the BBG's International Broadcasting Bureau (IBB). Legislation in the 104 th Congress ( P.L. 104 - 134 ) required the relocation of OCB from Washington D.C. to south Florida. The move began in 1996 and was completed in 1998. Radio Mart broadcasts on short and medium wave (AM) channels for 24 hours six days per week, and for 18 hours one day per week utilizing transmission facilities in Marathon, Florida and Greenville, North Carolina, according to the BBG. TV Mart broadcasts daily from its facilities in Cudjoe Key Florida, on the Hispasat satellite, and is available on the Internet 24 hours a day. It is also available on 176 cable stations throughout Latin America, according to the BBG. Until July 2005, TV Mart had also been broadcast via blimps from facilities in Cudjoe Key, Florida for four and one-half hours daily, but the aerostats were destroyed by Hurricane Dennis. From mid-2004 until 2006, TV Mart programming was transmitted for several hours once a week via an airborne platform known as Commando Solo operated by the Department of Defense utilizing a C-130 aircraft. In August 2006, OCB began to use a contracted private aircraft to transmit pre-recorded TV Mart broadcasts six days weekly, and by late October 2006 the OCB inaugurated an aircraft-broadcasting platform known as Aero Mart with the capability of transmitting live broadcasts. Aero Mart transmits broadcasts five hours daily from Monday to Saturday during the evening. According to OCB, since mid-FY2007, it has had two contracted private aircraft transmitting the broadcasts. In December 2006, the OCB contracted with two private U.S. commercial stations to transmit Radio and TV Mart . It provided a six-month contract with Radio Mamb (710 AM) in Florida, at a cost of $182,500, to broadcast one hour of Radio Mart programming five days a week from midnight to 1:00 am. Radio Mamb is a popular station in south Florida, with a 50,000 watt capacity, that is well-known for its strong anti-Castro stance. A second six-month OCB contract with WPMF (Channel 38) in Miami, known as TV Azteca, at a cost of $195,000, provided for two 30-minute TV Mart newscasts at 6 pm and 11:30 pm weekdays, along with one-minute news updates hourly over a 12 hour period weekdays. OCB chose the station because it is offered on DirecTV and because it has only a small audience in Miami. In June 2007, the two contracts were extended for an additional six months with similar terms. The contract with Radio Mamb subsequently expired in early 2008, whereas TV Mart continues to be shown on Channel 38. <6.10.1. Controversies> Both Radio and TV Mart have at times been the focus of controversies, including questions about adherence to broadcast standards. There have been various attempts over the years to cut funding for the programs, especially for TV Mart , which has not had much of an audience because of Cuban jamming efforts. In December 2006, press reports alleged significant problems in the OCB's operations, with claims of cronyism, patronage, and bias in its coverage. In February 2007, the former director of TV Mart programming pled guilty in U.S. federal court to receiving more than $100,000 in kickbacks over a three-year period from a vendor receiving OCB contracts. Over the years, there have been various government studies and audits of Radio and TV Mart , including investigations by the U.S. Government Accountability Office, by a 1994 congressionally established Advisory Panel on Radio and TV Mart , and by the State Department's and BBG's Office Inspector General offices in 1999, 2003, and 2007. In July 2008, GAO issued a report that criticized the IBB's and OCB's practices in awarding the two contracts to Radio Mamb and TV Azteca as lacking discipline required to ensure transparency and accountability. According to GAO, the approach for awarding the Radio Mambi and TV Azteca contracts did not reflect sound business practices. The most recent State Department/BBG Office of Inspector General (OIG) report, issued in June 2007, maintained that OCB has significantly improved its operations under its current director, Pedro Roig, with an organizational realignment that has streamlined operations and has helped improve the quality of broadcasts. According to the report, "IBB quality reviews show that radio and television broadcasts have markedly improved over the past two years in production quality and content," although the report also called for greater emphasis on internal quality control to ensure that editorial standards are followed. The report lauded the introduction of new technology allowing OCB to broadcast television signals live into Cuba using airborne platforms, and maintained that there are indications that more Cubans are watching TV Mart broadcasts. It recommended that the BBG's International Broadcasting Bureau should review and assess the leases with Radio Mamb and TV Azteca at the end of the lease period to determine whether they provide additional listeners and viewers and are worth the cost, or whether they could be replaced with lease options for other stations. Looking ahead, the report maintained that OCB needs a "long-term strategic plan that anticipates the future needs of the Cuban audience, provides a template on how to compete with commercial broadcasters, and addresses what to do with OCB and its broadcasting facilities if and when uncensored broadcasting is allowed inside a democratic Cuba." One of the most controversial aspects of the OIG report, and one that has often been at the center of past congressional debate over TV Mart , is the extent to which TV Mart can be viewed in Cuba. The report maintains that there is anecdotal evidence that the Aero Mart airborne transmissions have increased viewership. The report refers to a January 2007 survey of Cuban arrivals commissioned by Spanish Radio Productions with the cooperation of Miami Dade College that found listening rates for Radio and TV Mart within Cuba were significantly higher than previously reported, especially for TV Mart . Although specific survey figures are not cited in the OIG report, OCB officials maintain that the survey shows that 17% of recent Cuban arrivals had watched TV Mart . The OIG report also points to a February 2007 survey by the U.S. Interests Section (USINT) in Havana that reflected increased viewership. According to the BBG, that survey was completed by 500 Cuban visitors to the USINT (where TV Mart can be viewed) in January and February 2007, with 10% of the visitors indicating that they could watch TV Mart via UHF for brief periods. Other observers contend that TV Mart can hardly be viewed in Cuba because of the government's jamming efforts. John Nichols, a Pennsylvania State University communications professor, visited Cuba in late June 2007 on a fact-finding mission sponsored by the Center for International Policy (a group that opposes U.S. policy toward Cuba), and concluded "that the signal from the plane is essentially unusable" and that there was "no evidence of significant viewership of TV Mart ." In interviews with the Associated Press , more than two dozen Cuban immigrants to Florida contended that while Radio Mart can be heard throughout Cuba, TV Mart can rarely be seen. Prior BBG commissioned phone surveys in Cuba from 2003, 2005, and November 2006 estimated past week TV Mart viewership between 0.1% and 0.3% of those surveyed and past month viewership of almost 0.5%. The November 2006 survey, reportedly designed to show the early effects of the Aero Mart transmissions that began in late October, showed no statistically significant change from the 2003 and 2005 surveys. In the same surveys, Radio Mart had listenership of between 1% to 2% in the past week and 4% to 5% in the past month. <6.10.2. Funding> From FY1984 through FY2007, about $564 million has been spent for broadcasting to Cuba, with $28.6 million in FY2005, $37.5 million in FY2006, and $33.9 million in FY2007, and an estimated $33.4 million in FY2008. For FY2009, the Bush Administration has requested $34.4 million for broadcasting to Cuba. Until FY2005, the Administration provided funding information for Cuba broadcasting with a breakdown of the amounts spent for Radio versus TV Mart . Since FY2005, however, the Broadcasting Board of Governors has not made such a distinction in its annual budget request. <6.10.2.1. FY2007 Funding> The Administration requested $36.279 million for Cuba broadcasting in FY2007, with $2.7 million of this to purchase an aerostat for broadcasting TV Marti. The request was slightly below the $37.129 million appropriated in FY2006 (when Congress funded the Administration's request to acquire and outfit an aircraft for dedicated airborne radio and television broadcasts to Cuba), but almost $9 million above the $27.6 million appropriated in FY2005. On June 29, 2006, the House passed H.R. 5672 , the FY2007 Science, State, Justice, Commerce and Related Agencies appropriations bill, that would fund Cuba broadcasting under the International Broadcasting Operations account. The report to the bill ( H.Rept. 109 - 520 ) recommended $36.102 million for Cuba broadcasting, including $2.7 million to improve transmission capabilities via aerostat for broadcasting TV Mart . The Senate version of H.R. 5522 , the FY2007 Foreign Operations appropriations bill, would fund Cuba broadcasting. The Senate report to the bill ( S.Rept. 109 - 277 ) recommended full funding of the Administration's request of $36.279 million. Final action was not completed on either bill before the end of the 109 th Congress, but ultimately was funded by a series of continuing resolutions completed in the 110 th Congress that provided $33.9 million for Cuba broadcasting for FY2007. <6.10.2.2. FY2008 Funding> For FY2008, the Administration requested $38.7 million for Cuba broadcasting, including $3.2 million to enhance programming to Cuba in support of the recommendations of the July 2006 report of the Commission for Assistance to a Free Cuba. According to the BBG's FY2008 budget request, of the $3.2 million to enhance programming to Cuba, $1.2 million would be to improve programming and Radio and TV Mart program production in OCB's Miami facility by adding a second television studio, virtual sets, and additional portable production capability. The remaining $2 million would be spent to continue and expand transmission leases begun in FY2007 for DirecTV and medium wave radio frequencies. Congress provided $33.681 million for Radio and TV Marti in the FY2008 Consolidated Appropriations Act ( P.L. 110 - 161 ), while a 0.81% rescission brought the enacted amount to $33.408 million. This was about $5 million less than the Administration's request and similar to the amount provided for FY2007. Both the House and Senate committee reports to the FY2008 State Department, Foreign Operations, and Related Program Appropriations bill had recommended $33.681 million. S.Amdt. 2695 (Martinez), which was withdrawn from consideration on September 6, 2007, would have increased funding by $5.019 to fully fund the Administration's request. <6.10.2.3. FY2009 Request> For FY2009, the Administration requested $34.392 million for broadcasting to Cuba, slightly more than provided by Congress in FY2008. The request amount included funding for the airborne platform that the Office of Cuba Broadcasting uses to broadcast Radio and TV Mart . The report to the Senate Appropriations Committee version of the FY2009 State Department, Foreign Operations, and Related Agencies Appropriations Act, S. 3288 ( S.Rept. 110 - 425 ), recommended fully funding the Administration's request for Cuba broadcasting. The 110 th Congress did not finalize FY2009 appropriations, although it did approve the Consolidated Appropriations Act for FY2009 ( P.L. 110-329 ) that provides funding until March 6, 2009. <6.11. Migration Issues> <6.11.1. 1994 and 1995 Migration Accords> Cuba and the United States reached two migration accords in 1994 and 1995 designed to stem the mass exodus of Cubans attempting to reach the United States by boat. On the minds of U.S. policymakers was the 1980 Mariel boatlift in which 125,000 Cubans fled to the United States with the approval of Cuban officials. In response to Castro's threat to unleash another Mariel, U.S. officials reiterated U.S. resolve not to allow another exodus. Amid escalating numbers of fleeing Cubans, on August 19, 1994, President Clinton abruptly changed U.S. migration policy, under which Cubans attempting to flee their homeland were allowed into the United States, and announced that the U.S. Coast Guard and Navy would take Cubans rescued at sea to the U.S. naval base at Guantanamo Bay, Cuba. Despite the change in policy, Cubans continued fleeing in large numbers. As a result, in early September 1994, Cuba and the United States began talks that culminated in a September 9, 1994 bilateral agreement to stem the flow of Cubans fleeing to the United States by boat. In the agreement, the United States and Cuba agreed to facilitate safe, legal, and orderly Cuban migration to the United States, consistent with a 1984 migration agreement. The United States agreed to ensure that total legal Cuban migration to the United States would be a minimum of 20,000 each year, not including immediate relatives of U.S. citizens. In a change of policy, the United States agreed to discontinue the practice of granting parole to all Cuban migrants who reach the United States, while Cuba agreed to take measures to prevent unsafe departures from Cuba. In May 1995, the United States reached another accord with Cuba under which the United States would parole the more than 30,000 Cubans housed at Guantanamo into the United States, but would intercept future Cuban migrants attempting to enter the United States by sea and would return them to Cuba. The two countries would cooperate jointly in the effort. Both countries also pledged to ensure that no action would be taken against those migrants returned to Cuba as a consequence of their attempt to immigrate illegally. On January 31, 1996, the Department of Defense announced that the last of some 32,000 Cubans intercepted at sea and housed at Guantanamo had left the U.S. Naval Station, most having been paroled into the United States. <6.11.2. Coast Guard Interdictions> Since the 1995 migration accord, the U.S. Coast Guard has interdicted thousands of Cubans at sea and returned them to their country, while those deemed at risk for persecution have been transferred to Guantanamo and then found asylum in a third country or eventually the United States. Those Cubans who reach shore are allowed to apply for permanent resident status in one year, pursuant to the Cuban Adjustment Act of 1966 (P.L. 89-732). This so-called "wet foot/dry foot" policy has been criticized by some as encouraging Cubans to risk their lives in order to make it to the United States and as encouraging alien smuggling. Others maintain that U.S. policy should welcome those migrants fleeing communist Cuba whether or not they are able to make it to land. The number of Cubans interdicted at sea by the U.S. Coast Guard has risen in recent years, from 931 in 2002 to 2,952 in 2005, almost twice the number interdicted in 2004. In 2006, Cuban interdictions drooped to 2,293, but 2007 saw a large increase with 3,197 Cubans interdicted for the year. As of late June 2008, over 1,000 Cuban migrants were interdicted at sea. In recent years, increasing numbers of Cuban migrants attempting to reach the United States have been intercepted in Mexico, with some 1,359 intercepted in 2007 and some 1,000 in the first four months of 2008. Cuba and Mexico are reportedly negotiating a migration agreement to curb the irregular flow of migrants through Mexico. U.S. prosecution against migrant smugglers in Florida has increased in recent years with numerous convictions. There have been several violent incidents in which Cuban migrants have brandished weapons or in which Coast Guard officials have used force to prevent Cubans from reaching shore. In late December 2007, a Coast Guard official in Florida called on the local Cuban American community to denounce the smuggling and stop financing the trips that are leading to more deaths at sea. The Cuban government also has taken forceful action against individuals engaging in alien smuggling. Prison sentences of up to three years may be imposed against those engaging in alien smuggling. In the aftermath of Fidel Castro's July 2006, announcement that he was temporarily ceding political power to his brother, Department of Homeland Security officials announced several measures to discourage Cubans from risking their lives on the open seas. On August 11, 2006, Department of Homeland Security (DHS) Deputy Secretary Michael P. Jackson urged "the Cuban people to stay on the island" and discouraged "anyone from risking their life in the open seas in order to travel to the United States." At the same time, DHS announced additional measures to discourage Cubans from turning to alien smuggling as a way to enter the United States. The measures support family reunification by increasing the numbers of Cuban migrants admitted to the United States each year who have family members in the United States, although the overall number of Cubans admitted to the United States annually will remain at about 21,000. Cubans who attempt to enter the United States illegally will be deemed ineligible to enter under this new family reunification procedure. In another change of policy, Cuban medical personnel currently conscripted by the Cuban government to work in third countries are now allowed to enter the United States; their families in Cuba are also allowed to enter the United States. In March 2007, some 50 federal, state, and local agencies conducted a two-day mass migration response exercise in Florida, dubbed Operation Vigilant Sentry, that was designed to prepare for potential mass migration from Cuba in the event of the collapse of the communist government. Coordinated by the Coast Guard, the exercise was designed to improve migrant-interdiction skills as well as skills to intercept vessels heading to Cuba. <6.11.3. U.S. Travel Documents> On July 17, 2007, Cuba's Ministry of Foreign Affairs issued a statement maintaining that the United States had only awarded 10,724 visas for permanent legal migration to the United States so far in FY2007 as of the end of June 2007, out of an annual minimum of 20,000 agreed to in the 1994 bilateral migration accord. The State Department subsequently responded that the United States was not going to meet its minimum quota because Cuba has impaired the ability of the U.S. Interests Section in Havana to operate in several ways. It maintained that Cuba has refused to allow the U.S. Interests Section to hire local staff to replace those who have resigned or retired; for over a year, has held at least 28 shipping containers with essential supplies and materials for the operation of the diplomatic facility; and has refused to issue temporary visas for U.S. technical personnel to visit Havana to maintain systems in the diplomatic facility. In early October 2007, an official at the U.S. Interests Section in Havana said that the United States had issued only about 15,000 of the 20,000 emigrant visas and blamed Cuba because of the inability to hire local personnel. On November 21, 2007, the Department of Homeland Security announced that it was creating a new Cuban Family Reunification Parole (CFRP) Program that offers beneficiaries of approved family-based immigration visa petitions an opportunity to come to the United States rather than remain in Cuba to apply for a green card. According to U.S. Citizenship and Immigration Services (USCIS), the purpose of the program is to expedite family reunification through safe, legal, and orderly channel of migration to the United States and to discourage dangerous and irregular maritime migration. Those granted parole into the United States will count towards the annual 20,000 figure set forth in the 1994 migration accord. <6.11.4. Migration Talks> Semi-annual U.S.-Cuban talks alternating between Cuba and the United States had been held regularly on the implementation of the 1994 and 1995 migration accords, but the State Department cancelled the 20 th round of talks scheduled for January 2004, and no migration talks have been held since. According to the State Department, Cuba has refused to discuss five issues identified by the United States: (1) Cuba's issuance of exit permits for all qualified migrants; (2) Cuba's cooperation in holding a new registration for an immigrant lottery; (3) the need for a deeper Cuban port used by the U.S. Coast Guard for the repatriation of Cubans interdicted at sea; (4) Cuba's responsibility to permit U.S. diplomats to travel to monitor returned migrants; and (5) Cuba's obligation to accept the return of Cuban nationals determined to be inadmissible to the United States. In response to the cancellation of the talks, Cuban officials maintained that the U.S. decision was irresponsible and that Cuba was prepared to discuss all of the issues raised by the United States. <6.12. Guantanamo Naval Base> The 45-square mile U.S. Naval Station at Guantanamo Bay, Cuba, has been a U.S. base since 1903, and under a 1934 treaty that remains in force, the U.S. presence can only be terminated by mutual agreement or by abandonment by the United States. When Fidel Castro assumed power in the 1959 Cuban revolution, the new government gave assurances that it would respect all its treaty commitments, including the 1934 treaty covering the Guantanamo base. Subsequently, however, as U.S.-Cuban relations deteriorated, the Cuban government opposed the presence as illegal. The mission of the base has changed over time. During the Cold War, the base was viewed as a good location for controlling Caribbean sea lanes, as a deterrent to the Soviet presence in the Caribbean, and as a location for supporting potential military operations in the region. In 1994-1995, the base was used to house thousands of Cubans and Haitians fleeing their homeland, but by 1996 the last of the refugees had departed, with most Cubans paroled into the United States, pursuant to a May 1995 U.S.-Cuban migration accord. Since the 1995 accord, the U.S. Coast Guard has interdicted thousands of Cubans at sea and returned them to Cuba, while a much smaller number, those deemed at risk for persecution, have been taken to Guantanamo and then granted asylum in a third country. Another mission for the Guantanamo base emerged with the U.S.-led global campaign against terrorism in the aftermath of the September 11, 2001, terrorist attacks in the United States. With the U.S. war in Afghanistan in 2001, the United States decided to send some captured Taliban and Al Qaeda fighters to be imprisoned in Guantanamo. Although the Cuban government has objected to the U.S. presence at Guantanamo, it did not initially oppose the new mission of housing detainees. Defense Minister Ra l Castro noted that, in the unlikely event that a prisoner would escape into Cuban territory, Cuba would capture the prisoner and return him to the base. The Cuban government, however, has expressed concerns about the treatment of prisoners at the U.S. base and has said it will keep pressing the international community to investigate the treatment of terrorist suspects. In January 2005, it denounced what it described as "atrocities" committed at the Guantanamo base. Some Members of Congress have called for the closure of the Guantanamo detention facility. In the 110 th Congress, S. 1249 (Feinstein) and H.R. 2212 (Harman) would have required the President to close the detention facility at Guantanamo within one year, while S. 1469 (Harkin) would have require the closure of the facility within 120 days. The final version of H.R. 1585 , the FY2008 defense authorization bill, H.R. 1585 , had a provision (Section 1067) requiring the Secretary of Defense to prepare a report within 60 days on transferring individuals detained at Guantanamo. (An earlier version of that provision was first added to the bill by H.Amdt. 297 (Moran, Virginia), approved during May 17, 2007 House floor consideration.) The President ultimately vetoed H.R. 1585 on December 28, 2007 for other policy reasons, but the new version of the FY2008 defense authorization bill, H.R. 4986 , approved by both houses in January 2008 and signed into law on January 28, 2008 ( P.L. 110 - 181 ) contains the identical provision on Guantanamo in Section 1067. With regard to the future of the Guantanamo base, a provision in the Cuban Liberty and Democratic Solidarity Act of 1996 ( P.L. 104 - 114 , Section 210) states that once a democratically elected Cuban government is in place, U.S. policy is to be prepared to enter into negotiations either to return the base to Cuba or to renegotiate the present agreement under mutually agreeable terms. <7. Legislation in the 110th Congress> <7.1. Approved Measures> P.L. 110 - 161 ( H.R. 2764 ). FY2008 Consolidated Appropriations Act. H.R. 2764 was originally introduced and reported by the House Committee on Appropriations ( H.Rept. 110 - 197 ) on June 18, 2007 as the FY2008 State, Foreign Operations, and Related Agencies Appropriations Act. The House passed (241-178) the measure on June 22, 2007. The Senate Appropriations Committee reported the bill on July 10, 2007 ( S.Rept. 110 - 128 ), and the Senate passed (81-12) it on September 6, 2007. On December 17, 2007, H.R. 2764 subsequently became the vehicle for the FY2008 Consolidated Appropriations Act, which included 11 FY2008 appropriations measures. The President signed the measure into law on December 26, 2007. As signed into law, Division J of the Consolidated Appropriations Act covers State Department, Foreign Operations, and Related Agencies appropriations. The law has the following Cuba provisions: Similar to previous years, Section 607 of Division J would prohibit direct funding for Cuba. This provision had been included in both the House and Senate versions of the bill. Section 620 of Division J adds Cuba to the list of countries requiring a special notification to the Appropriations Committees for funds obligated or expended under the act. This provision had been included in the Senate version of the bill. Section 691(b) of Division J provides that Cubans who supported an anti-Castro guerrilla group in the 1960s know as the Alzados are eligible for U.S. refugee status. The Senate version of the bill had included this provision. As set forth in the joint explanatory statement, the measure provides $45.7 million in ESF for Cuba democracy programs as requested by the Administration. Both the House- and Senate-passed versions of H.R. 2764 fully funded the Administration's request for $45.7 million in ESF for Cuba democracy programs. The House committee-reported bill would have provided $9 million in ESF for such programs, but during June 21, 2007, floor consideration, however, the House approved H.Amdt. 351 (Diaz-Balart) by a vote of 254-170 that increased ESF by $36.7 million in order to fully fund the Administration's request. The Senate Appropriations Committee report to the bill would have provided $15 million in ESF for Cuba democracy programs, but during September 6, 2007, floor consideration, the Senate approved S.Amdt. 2694 (Martinez) by voice vote that increased funding for Cuba democracy programs by $30.7 million to fully fund the Administration's request. As set forth in the joint explanatory statement, the measure provides $33.681 million for Radio and TV Marti broadcasting to Cuba, $5.019 million below the Administration's request of $38.7 million and identical to the amount provided for FY2007. Both the House and Senate committee reports to the bill had recommended $33.681 million for Cuba broadcasting. S.Amdt. 2695 (Martinez), which was withdrawn from consideration on September 6, 2007, would have increased funding by $5.019 to fully fund the Administration's request. The measure does not include contrasting provisions related to counternarcotics assistance for Cuba that were included in the House and Senate versions of the bill. Section 673 of the House bill would have specifically prohibited International Narcotics Control and Law Enforcement (INCLE) assistance to the Cuban government. Section 696 of the Senate bill would have provided $1 million in INCLE assistance for preliminary work by the Department of State, or such other entity as the Secretary of State may designate, to establish cooperation with the Cuban government on counternarcotics matters. The final enacted measure does not include provisions easing Cuba sanctions that had been included in the House and Senate-committee versions of the FY2008 Financial Services and General Government Appropriations Act or the Senate-committee reported version of the FY2008 Agriculture Appropriations bill. P.L. 110 - 96 ( S. 1612 ). International Emergency Economic Powers Enhancement Act. Introduced and reported by the Committee on Banking, Housing, and Urban Affairs on June 13, 2007 ( S.Rept. 110 - 82 ). Senate approved, amended, by unanimous consent on June 26, 2007. House approved by voice vote October 2, 2007. As approved, the bill amends the International Emergency Economic Powers Act (IEEPA) to increase the potential civil penalty imposed on any person who commits an unlawful act under the act to not exceed the greater of $250,000 (from $50,000) or an amount that is twice the amount of the transaction. The bill also increases a criminal penalty to not more than $1 million and/or 20 years imprisonment. S.Res. 573 (Martinez). Celebrates Cuba Solidarity Day, recognizes the injustices face by the Cuban people, and stands in solidarity with the Cuban peoples as they continue to work towards democratic changes in their homeland. Introduced and passed by the Senate on May 21, 2008, by unanimous consent. <7.2. Additional Legislative Initiatives> H.Res. 995 (Diaz - Balart, Mario). Commemorates the 12 th anniversary of the 1996 shooting down of two unarmed U.S. civilian aircraft by the Cuban regimes. Introduced February 25, 2008; referred to the House Committee on Foreign Affairs. H.R. 177 (Lee). Pursuit of International Education (PIE) Act of 2007. Prohibits the use of funds available to the Department of the Treasury to implement regulations from June 2004 that tightened restrictions on travel to Cuba for educational activities. Introduced January 4, 2007; referred to Committee on Foreign Affairs. H.R. 216 (Serrano). Baseball Diplomacy Act. Waives certain prohibitions with respect to nationals of Cuba coming to the United States to play organized baseball. Introduced January 4, 2007; referred to Committees on Foreign Affairs and Judiciary. H.R. 217 (Serrano). Cuba Reconciliation Act. Lifts the trade embargo. Removes provisions restricting trade and other relations with Cuba, including repeal of the Cuban Democracy Act of 1992, the Cuban Liberty and Democratic Solidarity Act of 1996, and provisions of Section 211 of the Department of Commerce and Related Agencies Appropriations Act, 1999 related to transactions or payments with respect to trademarks. Introduced January 4, 2007; referred to the Committees on Foreign Affairs, Ways and Means, Energy and Commerce, Judiciary, Financial Services, Oversight and Government Reform, and Agriculture. H.R. 275 (Smith, Christopher). Would promote freedom of expression on the Internet, and protect U.S. businesses from coercion to participate in repression by authoritarian foreign governments. Introduced January 5, 2007, and referred to Committees on Foreign Affairs and on Energy and Commerce. Reported by the House Committee on Foreign Affairs December 10, 2007 ( H.Rept. 110 - 481 , Part 1). H.R. 525 (King). Amends the Cuban Liberty and Democratic Solidarity Act of 1996 to require that, in order to determine that a democratically elected government in Cuba exists, the government extradite to the United States convicted felon William Morales and all other individuals who are living in Cuba in order to escape prosecution or confinement for criminal offense committed in the United States. Introduced January 17, 2007; referred to the Committee on Foreign Affairs. H.R. 624 (Rangel). Free Trade With Cuba Act. Would lift most economic sanctions on Cuba, including a trademark sanction in Section 211 of the Department of Commerce and Related Agencies Appropriations Act, 1999. Introduced January 22, 2007; referred to the Committees on Foreign Affairs, Ways and Means, Energy and Commerce, Judiciary, Financial Services, Oversight and Government Reform, and Agriculture. H.R. 654 (Rangel). Export Freedom to Cuba Act of 2007. Would lift overall restrictions on travel to Cuba. Introduced January 24, 2007; referred to House Committee on Foreign Affairs. H.R. 757 (Delahunt). Cuban-American Family Restoration Act. Would lift restrictions on family travel and the provision or remittances for family members in Cuba. Introduced January 31, 2007; referred to House Committee on Foreign Affairs. H.R. 1026 (Moran, Jerry). Agricultural Export Facilitation Act of 2007. Would facilitate the sale of U.S. agricultural products to Cuba by providing for general license authority for travel-related expenditures for persons engaging in sales and marketing activities for agricultural products or in the transportation by sea or air of such products; authorizing a consular officer to issue a temporary visa for a Cuban national conducting activities related to the purchase of U.S. agricultural goods, including phytosanitary inspections; clarifying the "payment of cash in advance" term used in the Trade Sanctions Reform and Export Enhancement Act of 2000 (TSRA) to mean that the payment by the purchaser and the receipt of such payment to the seller occurs prior to the transfer of title of the commodity or product to the purchaser and the release of control of such commodity or product to the purchaser; and prohibiting the President from restricting direct transfers from a Cuban financial institution to a U.S. financial institution for U.S. agricultural sales under TSRA. Introduced February 13, 2007; referred to House Committees on Foreign Affairs, Judiciary, Financial Services, and Agriculture. H.R. 1306 (Wexler)/ S. 749 (Nelson). Identical bills would modify the prohibition on recognition by U.S. courts of certain rights relating to certain marks, trade names, or commercial names. H.R. 1306 introduced March 1, 2007; referred to House Committee on the Judiciary. S. 749 introduced March 2, 2007; referred to Senate Committee on the Judiciary. H.R. 1679 (Ros - Lehtinen). Caribbean Coral Reef Protection Act. Would exclude from admission to the United States aliens who have made investments contributing to the enhancement of the ability of Cuba to develop its petroleum resources off its coast; require the President to impose economic sanctions on persons (including foreign subsidiaries) that are determined to have made an investment equal to or exceeding $1 million that contributes to the enhancement of Cuba's ability to develop petroleum resources of the submerged lands off Cuba's coast. Introduced March 26, 2007; referred to House Committee on the Judiciary, and in addition to the Committees on Foreign Affairs, Financial Services, and Oversight and Government Reform. Similar, but not identical, to S. 876 described below. H.R. 2419 (Peterson). Farm, Nutrition, and Bioenergy Act of 2007. Introduced May 22, 2007; House passed July 27, 2007. Senate passed December 14, 2007. During House floor consideration on July 27, 2007, the House rejected (182-245) H.Amdt. 707 Rangel, that would have clarified the meaning of "payment of cash in advance" for the sale of agricultural commodities to Cuba; authorized direct transfer between U.S. and Cuban financial institutions for a product authorized for sale under the Trade Sanctions Reform and Export Enhancement Act of 2000; and would have authorized the issuance of U.S. visas for Cubans to conduct activities, including phytosanitary inspections, related to the export of U.S. agricultural goods to Cuba. In the Senate, S.Amdt. 3660 (Baucus), which would have eased restrictions on U.S. agricultural sales to Cuba, was proposed on December 11, 2007, but subsequently withdrawn the same day. Several amendments regarding Cuba were submitted, but never proposed: S.Amdt. 3668 (Baucus), would have eased restrictions on U.S. agricultural exports to Cuba; S.Amdt. 3796 (Nelson, Bill), would have required a certification of certain human rights conditions in Cuba before restrictions on U.S. agricultural exports to Cuba would be eased; S.Amdt. 3792 (Martinez), would have expressed the sense of the Senate regarding the human rights situation in Cuba; and S.Amdt. 3793 (Martinez), would have prevented the easing of restrictions on U.S. agricultural exports to Cuba as long as the country is identified by the Secretary of State as a "state sponsor of terror." H.R. 2819 (Rangel)/ S. 1673 (Baucus). Promoting American Agricultural and Medical Exports to Cuba Act of 2007. H.R. 2819 introduced June 21, 2007; referred to the Committees on Foreign Affairs, Ways and Means, Judiciary, Agriculture, and Financial Services. S. 1673 introduced June 21, 2007; referred to the Committee on Finance, which held hearings on December 11, 2007. Among other provisions, the bills would clarify the meaning of "payment of cash in advance;" authorize direct transfers between Cuban and U.S. financial institutions for the execution of payments for sales pursuant to the Trade Sanctions Reform and Export Enhancement Act; establish an agricultural export promotion program with respect to Cuba; repeal the so-called Section 211 Cuba trademark sanction; lift restrictions on travel to Cuba; repeal an onsite verification requirement for the commercial sale of medicines and medical devices to Cuba; and increase the airport ticket tax for travel to or from Cuba by $1.00, with funds going to a newly established Agricultural Export Promotion Trust Fund. H.R. 2829 (Serrano). FY2008 Financial Services and General Government Appropriations Act. Introduced and reported by House Appropriations Committee ( H.Rept. 110 - 207 ) June 22, 2007. Reported by Senate Appropriations Committee July 13, 2007 ( S.Rept. 110 - 129 ). House passed (240-179) June 28, 2007. As approved by the House, Section 903 would have prevented Treasury Department funds from being used to implement a February 2005 regulation that requires the payment of cash in advance prior to the shipment of U.S. agricultural goods to Cuba. The House adopted the provision during June 28, 2007 floor consideration when it approved H.Amdt. 467 (Moran, Kansas) by voice vote. The Senate Appropriations Committee version had a similar provision in Section 619, as well as another provision in Section 620 that would have allowed for travel to Cuba under a general license for the marketing and sale of agricultural and medical goods. The Cuba provisions of both the House and Senate versions of the bill were not included in the final enacted version of the measure, which was included as Division D of the FY2008 Consolidated Appropriations Act ( P.L. 110 - 161 , H.R. 2764 ). H.R. 3161 (DeLauro)/ S. 1859 (Kohl). FY2008 Agricultural, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act. H.R. 3161 introduced and reported by House Appropriations Committee July 24, 2007; House passed August 2, 2007. S. 1859 introduced and reported by Senate Appropriations Committee July 24, 2007 ( S.Rept. 110 - 134 ). Section 741 of the Senate bill would authorize travel to Cuba under a general license for the marketing and sale of agricultural and medical goods to Cuba. The Cuba provision in the Senate version was not included in the final enacted version of the measure, which was included as Division A of the FY2008 Consolidated Appropriations Act ( P.L. 110 - 161 , H.R. 2764 ). H.R. 3182 (Udall). U.S. Participation in Cuban Energy Exploration Act. Would allow U.S. persons to participate in energy development offshore from Cuba and other nearby countries. Introduced July 25, 2007; referred to the Committees on Foreign Affairs and Ways and Means. H.R. 3435 (Pickering). SAFE Energy Act of 2007. Includes provisions that would allow authorize activities and exports for the exploration of hydrocarbon resources from any portion of any foreign exclusive economic zone that is contiguous to the exclusive economic zone of the United States (section 201); and that would allow for travel-related transactions under a general license for travel to Cuba by persons engaging in hydrocarbon exploration and extraction activities (section 202). Introduced August 3, 2007; referred to the Committee on Energy and Commerce, and in addition to the Committees on Ways and Means, Science and Technology, Natural Resources, Armed Services, Foreign Affairs, and Intelligence. H.R. 5627 (Diaz - Balart, Lincoln)/ S. 2777 (Martinez). Similar bills to award the congressional gold medal to Dr. Oscar Elias Biscet, in recognition of his courageous and unwavering commitment to democracy and human rights in Cuba. Both bills were introduced March 13, 2008, with H.R. 5627 referred to the House Committee on Financial Services and S. 2777 referred to the Senate Committee on Banking, Housing, and Urban Affairs. H.R. 6735 (Hobson). Would terminate the application of restrictions on exploration, development, and production of oil and gas in areas of the outer Continental Shelf adjacent to Cuba. Introduced July 31, 2008; referred to the Committee on Natural Resources. H.R. 6913 (Flake). Would provide that no funds made available to the Department of Commerce may be used to implement, administer, or enforce certain amendments made to regulations relating to license exemptions for gift parcels and humanitarian donations for Cuba. Introduced September 16, 2008; referred to House Committee on Foreign Affairs. H.R. 6962 (Delahunt). Humanitarian Relief to Cuba Act. Would, for a 180-day period: allow unrestricted family travel; ease restrictions on remittances by removing the limit and allowing any American to send remittances to Cuba; and expand the list of allowable items that may be included in gift parcels. Introduced September 18, 2008; referred to House Committee on Foreign Affairs. H.R. 7323 .(Serrano). FY2009 Financial Services and General Government Appropriations bill. Introduced and reported by the House Appropriations Committee on December 10, 2008 ( H.Rept. 110-920 ). The committee had approved a draft version of the bill on June 25, 2008. The bill has several provisions that would have eased Cuba sanctions. Section 621 would have prohibited funds in the Act from being used to administer, implement, or enforce new language in the Cuban embargo regulations added on February 25, 2005 (31CFR Part 515.533) that requires that U.S. agricultural exports to Cuba must be paid for before they leave U.S. ports. Section 622 would have allowed for family travel once a year (instead of the current restriction of once every three years). Section 623 would have expanded family travel to visit an aunt, uncle, niece, nephew, or first cousin (instead of the current restriction limiting such travel to visit a spouse, child, grandchild, parent, grandparent, or sibling.) The report to the bill would require the Treasury Department's Office of Foreign Assets Control (OFAC) to provide detailed information on OFAC's Cuba-related licensing and enforcement actions. None of these provisions were included in the Consolidated Appropriations Act for FY2009 ( P.L. 110-329 ) that provided funding until March 6, 2009. S. 554 (Dorgan). Act For Our Kids. Title I, Section 101 would terminate U.S. government-sponsored television broadcasting to Cuba and prohibit funding. Title II, Section 254, the Freedom to Travel to Cuba Act of 2007, would prohibit the President from regulating or prohibiting travel to or from Cuba by U.S. citizens or legal residents, or any of the transactions ordinarily incident to such travel. Introduced February 12, 2007; referred to Senate Committee on Finance. S. 721 (Enzi). Freedom to Travel to Cuba Act of 2007. Would prohibit the President from regulating or prohibiting travel to or from Cuba by U.S. citizens or legal residents, or any of the transaction ordinarily incident to such travel. Introduced March 1, 2007; referred to Committee on Foreign Relations. S. 876 (Martinez). Would exclude from admission to the United States aliens who have made investments contributing to the enhancement of the ability of Cuba to develop its petroleum resources off its coast; require the President to impose economic sanctions on persons (including foreign subsidiaries) that are determined to have made an investment equal to or exceeding $1 million that contributes to the enhancement of Cuba's ability to develop petroleum resources of the submerged lands off Cuba's coast. Introduced March 14, 2007; referred to the Committee on Banking, Housing, and Urban Affairs. Similar, but not identical, to H.R. 1679 described above. S. 1268 (Dorgan). Would provide for the development of certain outer Continental resources. Amends the Cuba embargo regulations to provide for general license authority for travel-related expenditures by persons engaging in hydrocarbon exploration and extraction activities. Introduced May 2, 2007; referred to the Committee on Energy and Natural Resources. S. 1806 (Leahy). Would repeal the so-called Section 211 Cuba trademark sanction provision of the FY1999 Department of Commerce and Related Agencies Appropriations Act. Introduced July 17, 2007; referred to Senate Committee on the Judiciary. S. 2503 (Nelson, Bill). Would nullify the 1977 Maritime Boundary Agreement between the United States and Cuba, and would exclude from admission to the United States any aliens who have directly and significantly contributed to the ability of Cuba to develop its petroleum resources. Introduced December 18, 2007; referred to the Committee on the Judiciary. S. 2953 (Craig). Domestic Offshore Energy Security Act of 2008. Includes provisions (in section 2) that would: authorize activities and exports for the exploration of hydrocarbon resources from any portion of any foreign exclusive economic zone that is contiguous to the exclusive economic zone of the United States; and allow for travel-related transactions under a general license for travel to Cuba by persons engaging in hydrocarbon exploration and extraction activities. Introduced May 1, 2008; referred to the Committee on Energy and Natural Resources. S. 3001 (Levin). FY2009 National Defense Authorization Act. S.Amdt. 5581 (Dodd) , submitted on September 15, 2008, would, for a 180-day period: allow unrestricted family travel; ease restrictions on remittances by removing the limit and allowing any American to send remittances to Cuba; expand the list of allowable items that may be included in gift parcels; and allow for unrestricted U.S. cash sales of food, medicines, and relief supplies to Cuba. The amendment was not considered and therefore not included in the final bill. S. 3260 (Durbin). Financial Services and General Government Appropriations Act, 2009. Introduced and reported by Senate Appropriations Committee ( S.Rept. 110 - 417 ) on July 14, 2008. Includes provisions easing restrictions on payment terms for the sale of agricultural goods to Cuba (section 618), travel relating to the commercial sale of agricultural and medical goods (section 619), and family travel (section 620). None of these provisions were included in the Consolidated Appropriations Act for FY2009 ( P.L. 110-329 ) that provided funding until March 6, 2009. S. 3288 (Leahy). Department of State, Foreign Operations, and Related Programs Appropriations Act, 2009. Introduced and reported by Senate Appropriations Committee ( S.Rept. 110 - 425 ) July 18, 2008. Includes several Cuba provisions: section 706 continues a prohibition on assistance to Cuba, unless the President determines that it is in the national interest of the United States; section 719 continues the provision from FY2008 that requires that any assistance for Cuba go through the regular notification procedures of the Committees on Appropriations; section 779 provides for $1 million for preliminary work by the Department of State, or other entity designated by the Secretary of State, to establish cooperation with appropriate Cuban agencies on counternarcotics matters, although the money would not be available if the Secretary certifies that Cuba 1) does not have in place procedures to protect against the loss of innocent life in the air and on the ground in connection with the interdiction of illegal drugs; and 2) there is credible evidence of involvement of the government of Cuba in drug trafficking during the preceding 10 years. The Senate Appropriations Committee report to the bill recommended full funding for the Administration's requests of $34.392 million for Cuba broadcasting and $20 million in ESF for Cuba democracy programs, and called for the State Department and USAID to conduct regular evaluations to ensure the cost effectiveness of the programs. S. 3289 (Kohl). Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2008. Introduced and reported by Senate Appropriations Committee ( S.Rept. 110 - 426 ) July 21, 2008. Includes a provision (section 737) that would ease restrictions on travel to Cuba for the sale of agricultural and medical goods. This provision was not included in the Consolidated Appropriations Act for FY2009 ( P.L. 110-329 ) that provided funding until March 6, 2009. <8. Legislation in the 109th Congress> The following listing consists of enacted appropriations measures with Cuba-related provisions, FY2007 appropriations bills with Cuba provisions that were not completed by the end of the 109 th Congress, and human rights resolutions that were approved. For a complete listing of legislative initiatives in the 109 th Congress, see CRS Report RL32730, Cuba: Issues for the 109th Congress , by [author name scrubbed]. <8.1. Appropriations Measures> P.L. 109 - 102 ( H.R. 3057 ). FY2006 Foreign Operations, Export Financing, and Related Programs. Signed into law November 14, 2005. Funds FY2006 democracy and human rights funding for Cuba. The Administration requested $15 million in ESF assistance for democracy activities for Cuba. Neither the House nor the Senate versions addressed this issue, and the conference report did not include a specific earmark for Cuba. P.L. 109 - 108 ( H.R. 2862 ). FY2006 Science, State, Justice, Commerce, and Related Agencies Appropriations Act. Reported by Appropriations Committee ( H.Rept. 109 - 118 ). House passed June 16, 2005. Senate passed September 15, 2005. Conference report ( H.Rept. 109 - 272 ) filed November 7, 2005. House approved conference November 9; Senate approved conference November 16, 2005. Signed into law November 22, 2005. The report to the House bill included a committee recommendation of $27.9 million for Cuba broadcasting, $10 million below the Administration's request, and did not provide funding for an aircraft to transmit Radio and TV Marti programming. Senate action on appropriations for Cuba broadcasting were included in the Senate version of H.R. 3057 rather than H.R. 2862 , and fully funded the Administration's request of $37.7 million. The conference report fully funded the Administration's request of $37.7 million for Broadcasting to Cuba under the International Broadcasting Operations account. H.R. 5384 (Bonilla). FY2007 Agriculture Appropriations bill. Introduced and reported by House Appropriations Committee May 12, 2006; passed House May 23, 2006. Senate Appropriations Committee reported its version June 22, 2006 ( S.Rept. 109 - 266 ). The Senate version contained a provision, Section 755, providing for travel to Cuba under a general license for travel related to the sale of agricultural and medical goods to Cuba. Currently such travel is provided under a specific license issued by the Treasury Department on a case-by-case basis. Final action was not completed by the end of the 109 th Congress. H.R. 5522 (Kolbe). FY2007 Foreign Operations, Export Financing and Related Programs. Introduced June 5, 2006, and reported by the House Appropriations Committee ( H.Rept. 109 - 486 ); House passed (373-34) June 9, 2006. The Senate Appropriations reported its version of the bill July 10, 2006 ( S.Rept. 109 - 277 ). With regard to Cuba democracy programs, the Senate-reported version recommended $2.5 million in ESF, $6.5 million less than the request, while the House report to the bill recognized the work of USAID in promoting democracy and humanitarian assistance for Cuba and urged the agency to continue to promote its Cuba program. With regard to counternarcotics cooperation with Cuba, the House-passed bill, in Section 570, would have provided that no International Narcotics Control and Law Enforcement (INCLE) funds may be made available for Cuba, while the Senate-reported version, in Section 551(e), would have provided $5 million in INCLE funds for preliminary work to establish cooperation with Cuba. The money would not be available if the President certified that Cuba did not have in place appropriate procedures to protect against the loss of innocent life in the air and on the ground in connection with the interdiction of illegal drugs and there was evidence of involvement of the Cuban government in drug trafficking. The Senate-reported version also would have funded Cuba broadcasting, with the Senate report to the bill recommending full funding of the Administration's $36.279 million request. The House would have funded Cuba broadcasting in H.R. 5672 , the FY2007 Science, State, Justice, Commerce and Related Agencies appropriations bill, described below. Final action was not completed before the end of the 109 th Congress. H.R. 5576 (Knollenberg). FY2007 Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia, and Independent Agencies Appropriations Act. Introduced June 9, 2006; reported by House Appropriations Committee ( H.Rept. 109 - 495 ). House passed (406-22) June 14, 2006. Reported by Senate Appropriations Committee ( S.Rept. 109 - 293 ) July 26, 2006. Both the House and Senate versions of the bill include a provision (Section 950 in the House version and Section 846 in the Senate version) that prohibits funds from being used to implement tightened restrictions on financing for U.S. agricultural exports to Cuba that were issued in February 2005. In the House bill, the provision was added by H.Amdt. 1049 (Moran, Kansas), approved by voice vote during floor consideration on June 14, 2006. Final action on the measure was not completed by the end of the 109 th Congress. H.R. 5672 (Wolf). FY2007 Science, State, Justice, Commerce and Related Agencies appropriations. Introduced June 22, 2006; reported by House Appropriations Committee ( H.Rept. 109 - 520 ). House passed June 29, 2006. As approved, Cuba broadcasting is to be funded under the International Broadcasting Operations account. The report to the bill recommends $36.102 million for Cuba broadcasting, including $2.7 million to improve transmission capabilities via aerostat for broadcasting TV Marti. Final action on the measure was not completed before the end of the 109 th Congress. <8.2. Human Rights Resolutions> H.Con.Res. 81 (Menendez). Expresses the sense of Congress regarding the two-year anniversary of the human rights crackdown in Cuba. Introduced March 2, 2005; approved by the House Committee on International Relations March 9, 2005. House passed (398-27, 2 present) April 27, 2005. H.Res. 193 (Diaz - Balart, Mario) . Expresses support of the House of Representatives to the organizers and participants of the May 20, 2005, meeting in Havana of the Assembly to Promote Civil Society. Introduced April 6, 2005; approved by the Committee on International Relations April 27, 2005. House passed (392-22, 1 present) May 10, 2005. H.Res. 388 (Diaz - Balart, Lincoln). Expresses the sense of the House of Representatives regarding the Cuban government's extreme repression against members of Cuba's pro-democracy movement in July 2005; condemns gross human rights violations committed by the Cuban regime; calls on the Secretary of State to initiate an international solidarity campaign on behalf of the immediate release of all Cuban political prisoners; calls on the European Union to reexamine its current policy toward the Cuban regime; and calls on the U.S. Permanent Representative to the United Nations and other international organizations to work with member countries of the U.N. Commission on Human Rights (UNCHR) to ensure a strong resolution on Cuba at the 62 nd session of the UNCHR. Introduced July 26, 2005. House passed (393-31) September 29, 2005. S.Res. 140 (Martinez). Expresses support of the Senate for the May 20, 2005 meeting in Havana of the Assembly to Promote Civil Society. Introduced May 12, 2005; Senate approved by unanimous consent May 17, 2005. S.Res. 469 (Lieberman). Condemns the April 25, 2006, beating and intimidation of Cuban dissident Martha Beatriz Roque. Introduced May 8, 2006; Senate passed May 25, 2006, by unanimous consent. <9. For Additional Reading> <9.1. Active CRS Reports> CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances , by [author name scrubbed]. CRS Report RS22742, Cuba ' s Political Succession: From Fidel to Raul Castro , by [author name scrubbed]. CRS Report RL34523, Financial Services and General Government (FSGG): FY2009 Appropriations , by [author name scrubbed]. CRS Report RS22094, Lawsuits Against State Supporters of Terrorism: An Overview , by [author name scrubbed]. CRS Report RL31258, Suits Against Terrorist States by Victims of Terrorism , by [author name scrubbed]. CRS Report RL32014, WTO Dispute Settlement: Status of U.S. Compliance in Pending Cases , by [author name scrubbed]. <9.2. Archived CRS Reports> CRS Report RS20450, The Case of Elian Gonzalez: Legal Basics , by [author name scrubbed] (pdf). CRS Report RL33622, Cuba ' s Future Political Scenarios and U.S. Policy Approaches , by [author name scrubbed]. CRS Report RL32251, Cuba and the State Sponsors of Terrorism List , by [author name scrubbed]. CRS Report RL32730, Cuba: Issues for the 109 th Congress , by [author name scrubbed]. CRS Report RL31740, Cuba: Issues for the 108 th Congress , by [author name scrubbed]. CRS Report RL30806, Cuba: Issues for the 107 th Congress , by [author name scrubbed] and [author name scrubbed]. CRS Report RL30628, Cuba: Issues and Legislation In the 106 th Congress , by [author name scrubbed] and [author name scrubbed]. CRS Report RL30386, Cuba-U.S. Relations: Chronology of Key Events 1959-1999 , by [author name scrubbed] (pdf). CRS Report RS20468, Cuban Migration Policy and Issues , by [author name scrubbed]. CRS Report RL33499, Exempting Food and Agriculture Products from U.S. Economic Sanctions: Status and Implementation , by [author name scrubbed]. CRS Report RS22094, Lawsuits Against State Supporters of Terrorism: An Overview , by [author name scrubbed]. CRS Report RL32826, The Medical Device Approval Process and Related Legislative Issues , by [author name scrubbed]. CRS Report 94-636, Radio and Television Broadcasting to Cuba: Background and Issues Through 1994 , by [author name scrubbed] and [author name scrubbed] (pdf). CRS Report RS21764, Restricting Trademark Rights of Cubans: WTO Decision and Congressional Response , by [author name scrubbed].

Since the early 1960s, U.S. policy toward Cuba has consisted largely of isolating the communist nation through economic sanctions, which the Bush Administration has tightened significantly. A second policy component has consisted of support measures for the Cuban people, including private humanitarian donations and U.S.-sponsored radio and television broadcasting to Cuba. As in past years, the main issue for U.S. policy toward Cuba in the 110th Congress was how to best support political and economic change in one of the world's remaining communist nations. Unlike past years, however, Congress examined policy toward Cuba in the context of Fidel Castro's departure from heading the government because of poor health. Raúl Castro, who had served as provision head of government since July 2006, was selected on February 24, 2008 by Cuba's legislature to continue in that role officially. In the first session of the 110th Congress, Congress fully funded the Administration's FY2008 request for $45.7 million for Cuba democracy programs in the Consolidated Appropriations Act for FY2008 (P.L. 110-161). In other first session action, on July 27, 2007, the House rejected H.Amdt. 707 to H.R. 2419, the 2007 farm bill, that would have facilitated the export of U.S. agricultural exports to Cuba. In the second session, the Senate approved S.Res. 573 on May 21, 2008, which recognized the struggle of the Cuban people. In both sessions, there were Cuba provisions in several House and Senate appropriations measures (H.R. 2829, H.R. 3161, S. 1859, H.R. 7323, and S. 3260) that would have eased restrictions on travel and on U.S. agricultural sales to Cuba, but none of these provisions were included in enacted measures. Numerous other legislative initiatives on Cuba were introduced in the 110th Congress, but were not considered. Several of these initiatives would have eased sanctions: H.R. 177 (educational travel); H.R. 216 (Cuban baseball players); H.R. 217 and H.R. 624 (overall sanctions); H.R. 654, S. 554, and S. 721 (travel); H.R. 757 (family travel and remittances); H.R. 1026 (sale of U.S. agricultural products); H.R. 2819/S. 1673 (sale of U.S. agricultural and medical products and travel); and S. 1268, S. 2953, H.R. 3182, and H.R. 3435 (development of Cuba's offshore oil). S. 554 would have terminated U.S.-government sponsored television broadcasting to Cuba. Several initiatives would have tightened sanctions: H.R. 525 (related to U.S. fugitives in Cuba), and H.R. 1679/S. 876 and S. 2503 (related to Cuba's offshore oil development). Two initiatives, H.R. 1306 and S. 749, would have amended a provision of law restricting the registration or enforcement of certain Cuban trademarks; five initiatives—H.R. 217, H.R. 624, H.R. 2819, S. 1673, and S. 1806—would have repealed the trademark sanction. H.R. 5627 and S. 2777 would have awarded the congressional gold medal to Cuban political prisoner Dr. Oscar Elias Biscet. H.Res. 995 would have commemorated the 1996 shootdown of two U.S. civilian planes by Cuba. S. 3288 had a provision that would have funded U.S. work to establish anti-drug cooperation with Cuba. In the aftermath of Hurricanes Gustav and Ike, several initiatives would have temporarily eased some U.S. economic sanctions on Cuba: H.R. 6913, H.R. 6962, and S.Amdt. 5581 to S. 3001. This report reflects legislative developments through the 110th Congress, and will not be updated. For additional information on Cuba, see CRS Report RL31139, Cuba: U.S. Restrictions on Travel and Remittances, and CRS Report RS22742, Cuba's Political Succession: From Fidel to Raul Castro

<1. 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. <2. 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. <3. 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. <3.1. 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. <3.2. 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. <4. 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. <4.1. 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. <4.2. 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. <4.3. 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. <4.4. 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. <4.5. 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. <4.6. 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. <5. 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. <5.1. 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. <5.2. 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. <5.3. 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. <6. 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. <6.1. 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. <7. 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. <7.1. 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. <7.2. 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. <7.3. 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. <7.4. 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.

<1. Background> In recent years attention has been focused by international organizations and non-governmental organizations in various fora on the issue of international small arms and light weapons transfers (SA/LW) to less-developed nations undergoing civil conflicts. Views expressed by these groups have raised the interest of governments in examining the implications of the international trade in such weapons, particularly, illicit trading. International actions to deal with the small arms and light weapons trade generally have developed slowly in view of widely divergent views among nations concerned or affected by this trade, either as a recipient or supplier. Congressional interest in the subject resulted in a mandate to the State Department to provide a comprehensive report addressing significant policy questions regarding the international proliferation of small arms and light weapons. This report, formally submitted to Congress in October 2000, provided the first major overview of key views of the U.S. government on this topic. The central elements of U.S. policy regarding international transfers of small arms and light weapons began to develop in the 1990's as part of overall U.S. policy toward conventional arms transfers generally. For its part, the United States, while recognizing that nations have a legal right to acquire weapons, including small arms, for legitimate self-defense purposes, also recognizes that there have been civil conflicts in various less developed nations and regions that have been exacerbated by ready access to small arms and light weapons. The U.S. government wants to deal, in a practical and effective way with the problem of international small arms and light weapons trafficking in regions of conflict, while continuing to recognize the "legitimacy of legal trade, manufacturing, and ownership of arms." <1.1. Principal Objectives of United States Policy> To date, the United States Government has taken the position that illicit trafficking in small arms and light weapons poses the greatest threat to regional security in less-developed areas of the world undergoing civil strife. Thus, the United States believes that combating the illicit weapons trade should be the focal point of international efforts. U.S. diplomacy has been directed to achieving that outcome. Illicit trafficking includes illegal sales to insurgent groups and criminal organizations, illegal diversion of legitimate sales or transfers, and black market sales in contravention of embargoes or national laws. The re-circulation of small arms and light weapons from one conflict to another, and illegal domestic manufacturing of these items are also considered elements of illicit trafficking. The United States has adopted a multi-pronged approach in its diplomacy to combat illicit small arms trafficking. The first element of United States policy is to attempt to curb black market or unauthorized transfers of small arms to zones of conflict, to terrorists, to international criminal organizations, and to drug traffickers. The second is to attempt to raise the arms export standards of other nations to U.S. standards. The third is to streamline and strengthen United States export procedures to improve accountability without interfering with the legal trade in and transfer of arms. The fourth is to support the destruction of excess stockpiles of small arms, particularly in regions where conflicts have ended. As U.S. Ambassador Donald J. McConnell has summarized the U.S. perspective: "Ultimately, simple "one size fits all" solutions are ineffective in dealing with the complex, often region-specific problems caused by the proliferation of small arms and light weapons. Focused efforts to identify and curb the sources and methods of the illicit trade via robust export controls, law enforcement measures, and efforts to expeditiously destroy excess stocks and safeguard legitimate government stocks from theft or illegal transfer are the best ways to attack the problem. " <1.2. Problems in Implementing United States Policy Goals> The U.S. State Department has reported that currently as many as seventy nations produce small arms and light weapons, many through licensing arrangements with other producers. These weapons are generally inexpensive and require minimal maintenance and training to operate. The foreign small arms and light weapons trade, whether it is legal or illegal, does not lend itself to easy monitoring. There is a lack of global standards generally and there are widely differing standards among nations on how to monitor and regulate this trade. Definitions of what items should be covered are also a source of difficulty. While the export licensing and monitoring laws, regulations and procedures of the United States are widely acknowledged to be the most transparent, comprehensive, and stringent in the world, in many countries arms transfers that would be illegal in the United States are not prohibited as a matter of law or regulation. Small arms and light weapons are easily concealed, thus making it relatively easy for corrupt officials to permit illicit trafficking or for criminals to transfer these weapons, especially in nations that lack the human and financial resources needed for adequate inspections and export/import controls. Routes used for smuggling excess weapons into zones of conflict are chosen specifically to defy discovery and monitoring. Furthermore, poorer nations desperate for hard currency are tempted to market excess weapons to secure this revenue. And the widespread availability of these weapons further complicates establishment of control measures. According to the State Department, available rough estimates indicate that the overall number of small arms and light weapons in circulation globally range from 100 to 500 million and up. Efforts to obtain precise data on totals regarding these weapons and their sources, whether legal or illegal, is generally guesswork. <1.3. Steps Taken By the United States to Advance Its Policy Goals> The United States has been active in international efforts to address the illicit trade in small arms and light weapons. On November 15, 1997, the United States and 27 other nations signed the Inter-American Convention Against the Illicit Trafficking in Firearms. This convention, which will be legally binding on its adherents, includes provisions to establish a system to license and track firearms sales in states of the Western Hemisphere, to enhance information exchanges on this trade among adherent states, and to mark firearms to facilitate their global tracing. This convention has not been ratified by many of its key signatories. It was submitted to the U.S. Senate in April 1998. It is still pending before that body. On December 17, 1999, the United States and the European Union signed a "Statement of Common Principles on Small Arms and Light Weapons." This statement contains a pledge by the parties to observe restraint in their export policies and to harmonize these policies and procedures governing small arms. This statement also included a commitment to plan together for a United Nations small arms conference aimed at "achieving tangible results...including an Action Plan for the international community to deal with the problem." The United States has also provided resources to assist other nations destroy their excess weapons stocks. The State Department cites U.S. assistance, through contributing experts and funds, in the destruction of small arms and light weapons and ammunition in Liberia, Kuwait, Haiti, Panama, Mali, Albania, and the former Yugoslavia. The United States has also facilitated an agreement among 10 nations in Southeastern Europe to seize and destroy illicit and surplus arms in that region. The United States continues to participate in international fora aimed at addressing various issues associated with the international small arms and light weapons trade. It actively pursued its principal policy goals at the United Nations Conference on the "Illicit Trade of Small Arms and Light Weapons In All Its Aspects," held July 9-20, 2001 at United Nations Headquarters in New York City. The program of action agreed to at this conference is non-binding on any state. It encourages nations to ensure that manufacturers use markings on small arms and light weapons to facilitate the tracing of illicit weapons transfers. It also encourages nations to establish procedures to monitor legal sales, transfer and stockpiling of small arms and light weapons, and urges governments to make the illegal manufacture, trade and possession of such weapons a criminal offense. The U.N. Conference further agreed to hold a follow-up conference to review measures undertaken to achieve the above goals. On June 26, 2006, the United Nations began a conference aimed at reviewing the progress made in implementation of the previously agreed program of action to prevent, combat, and eradicate the illicit trade in small arms and light weapons. This conference met through July 7, 2006. The conference was unable to agree on an outcome document. The United States Representative to the conference stated on July 7, 2006, that the United States would continue to provide assistance to those nations seeking to implement the program originally agreed upon in 2001. He noted that it was the intent of the United States to continue its efforts in the areas of transport controls, export controls, and marking and tracing. It further "intended to expand its efforts in Africa and Eastern Europe." Other conference participants expressed similar commitments in support of the 2001 program of action.

This report provides general background on U.S. policy regarding the international trade in small arms and light weapons (SA/LW). It outlines major questions associated with the international trade in these items, and reviews United States efforts to assist in controlling the illicit transfers of these items. This report will be revised as developments warrant.

<1. Expedited Removal Authority at Department of Veterans Affairs> Section 707 of the Veterans Access, Choice, and Accountability Act of 2014, P.L. 113-146 , enacted on August 7, 2014, creates new authority for removing an individual in a senior executive position in the Department of Veterans Affairs. Section 707(a) of P.L. 113-146 adds a new Section 713 to Title 38 of U.S. Code. Section 713(a)(1) authorizes the Secretary of Veterans Affairs to remove an individual employed in a Senior Executive Service (SES) position if the Secretary determines that the individual's performance or misconduct merits removal. The Secretary may remove the individual from federal service or transfer him or her to a General Schedule (GS) position for which the individual is qualified and determined appropriate. Section 713(g)(1) defines an "individual in a senior executive position" as not only a career appointee in the Senior Executive Service, but also a departmental SES equivalent (i.e., a health care professional such as a physician or dentist in an administrative or executive position in the Department's Veterans Health Administration who was appointed under 38 U.S.C. Sections 7306(a) or 7401(1)). Sections 713(d)(2)(A) and (B) provide that any removal or transfer may be appealed to the Merit Systems Protection Board (MSPB or Board) if an appeal is filed not later than seven days after the removal or transfer date. The Board is required to refer any appeal to an administrative judge, who must expedite it and issue a decision not later than 21 days after the appeal date. If an administrative judge cannot issue a decision within that time, the Secretary's removal or transfer decision is final. Under Section 713(e)(4), the MSPB or administrative judge may not stay (i.e., suspend) any removal from federal service or transfer to a GS position. A senior executive who is transferred to a GS position, beginning on the transfer date, receives the annual pay rate applicable to that position only if he or she reports for duty. While an appeal is pending, the senior executive may not be paid if placed on administrative leave or any other category of leave which otherwise would be paid. During the period beginning on the date that the senior executive appeals a removal from federal service and ending on the date that an MSPB administrative judge issues a final decision, he or she may not receive any pay, awards, bonuses, incentives, allowances, differentials, student loan repayments, special payments, or benefits. Authority provided by 38 U.S.C. 713 does not preclude the Secretary from using other authorities to transfer career SES members to GS positions or remove them from federal service; Section 713(f)(1) states that authority provided by Section 713 is in addition to authority provided by 5 U.S.C. 3592 or 7541 , 7542 , and 7543 , which relate to removing career members from the SES or adverse actions to remove them from federal service, respectively. Nevertheless, Section 713(d)(1) provides that if the Secretary exercises authority under 38 U.S.C. 713 rather than regular adverse action authority for removing a career member of the SES from federal service, the procedures in 5 U.S.C. 7543(b) shall not apply. This subsection entitles a career SES member to (1) at least 30 days of advance written notice; (2) a reasonable time, but not less than seven days to answer orally or in writing; (3) representation by an attorney or other representative at the senior executive's expense; and (4) a written decision from the agency with specific reasons therefor at the earliest practicable date. Moreover, a career senior executive may appeal an agency decision to the Merit Systems Protection Board (MSPB). A decision of the MSPB may be subject to judicial review under 5 U.S.C. 7703. Section 713(b)(2) provides that Section 3592(b)(1) of U.S. Code Title 5 shall not apply to the expedited removal procedure. This paragraph, designed to apply to situations including changes in administrations, states that a career senior executive may not be removed involuntarily from the SES within 120 days after an appointment of an agency head or the career appointee's most immediate supervisor if that supervisor is a noncareer SES appointee and has authority to remove the career appointee. Section 707(b) of P.L. 113-146 directs the Merit Systems Protection Board within 14 days after enactment to issue regulations to implement Section 713's authority. On August 19, 2014, the Board published Part 1210 of Title 5 of the Code of Federal Regulations as an interim final rule with request for comments. It published a technical correction on August 21, 2014. MSPB responded to comments, rejected them, and adopted the interim final rule, as corrected, as a final rule on October 22, 2014. MSPB's regulations address practices and procedures such as discovery, hearings, and standards of proof. They provide that an administrative judge may uphold or reject a Secretary's decision to remove or transfer a senior executive based on the reasonableness of the Secretary's decision, but may not mitigate it. Section 707(c) of P.L. 113-146 authorizes the Secretary of Veterans Affairs to initiate an adverse action under the regular procedure in 5 U.S.C. 7543 to remove an individual from the Senior Executive Service, notwithstanding 5 U.S.C. 3592(b) or any other provision of law. Subsection(c) of Section 707 of P.L. 113-146 waives the time limitation on removing career senior executives. As noted above, Section 3592(b) prohibits removing a career senior executive within 120 days after the appointment of an agency head or the career appointee's most immediate supervisor if that supervisor is a noncareer SES appointee and has the authority to remove the career appointee. Section 707(d) of P.L. 113-146 provides that nothing in Section 707 or 38 U.S.C. 713, as added by Section 707(a), shall be construed to apply to an appeal of a removal, transfer, or other personnel action that was pending before that public law was enacted. It adds that the authority provided in 38 U.S.C. 713 is in addition to authority provided by 5 U.S.C. 3592, which relates to removing a career SES member from the Senior Executive Service, or subchapter V of U.S. Code Title 5 Chapter 75 (i.e., Sections 7541-7543) which relate to adverse action removal from federal service or suspension of more than 14 days of a career member of the Senior Executive Service. <1.1. Due Process Considerations> <1.1.1. Generally> Because Section 713 of Title 38 authorizes the Secretary of Veterans Affairs to remove an individual in a senior executive position from that position or from federal service, it appears to raise a constitutional question. The Fifth Amendment of the Constitution provides, in relevant part, that, "No person shall be ... deprived of life, liberty, or property without due process of law;.... " Some Supreme Court cases have interpreted this language to determine (1) whether a nonprobationary government employee who is removable for cause, as distinguished from at-will, has a constitutionally protected property interest in continued government employment; (2) whether due process applies to deprivation of such an interest; and (3) if due process applies, what kind of process is constitutionally sufficient? In Board of Regents v. Roth , the Court noted that, "To have a property interest in a benefit, a person must ... have a legitimate claim of entitlement to it.... Property interests, of course, are not created by the Constitution. Rather, they are created and their dimensions are defined by existing rules or understandings that stem from an independent source such as ... law rules or understandings that secure certain benefits and that support claims of entitlement to those benefits." The Court acknowledged that a public employee under some circumstances has a property interest in continued employment that is safeguarded by due process. In Arnett v. Kennedy , a nonprobationary federal Office of Economic Opportunity (OEO) employee in the competitive service named Kennedy was removed from federal service in an adverse action proceeding under the standard in the Lloyd-La Follette Act: "such cause as will promote the efficiency of the service." He allegedly slandered his supervisor by accusing him of bribing or attempting to bribe a community organization's representative with an OEO grant in exchange for signing a statement against Kennedy. Kennedy argued that removing him from federal service before OEO held a hearing deprived him of a property right to continued employment that was protected by the Due Process Clause and that the "such cause" standard was vague because it did not apprise him of the kind of speech that could result in removal. The Supreme Court upheld Kennedy's removal, reversing a decision by a three-judge district court that had accepted his constitutional challenge. The district court in Kennedy v. Sanchez held that Kennedy had a property right to continued employment that was protected from deprivation by the Due Process Clause because he was a nonprobationary employee in the competitive service who was removable for cause. It added that to comply with the Clause, OEO should have granted Kennedy a hearing before removing him from federal service. The district court based its conclusion on the Supreme Court's decision in Goldberg v. Kelly , which held that a recipient could not be deprived of welfare benefits before receiving a hearing on eligibility for continued benefits. It also held that the "for such cause" standard was vague. All Supreme Court justices agreed with the district court that Kennedy had a property right in continued employment subject to the Due Process Clause. Because OEO's regulations and practice provided that a removed employee was entitled to a trial-type hearing a fter removal either at OEO or the Civil Service Commission, the predecessor to the Merit Systems Protection Board, the Court focused on whether a hearing before or after removal provided adequate due process under the Clause. By a vote of 5 to 4, the Court concluded that a hearing after removal sufficed and that the "such cause" standard was not vague. Although this conclusion garnered a majority, the justices disagreed on the reason for it. A plurality opinion representing views of three justices held that, [W]here the grant of a substantive right is inextricably intertwined with the limitations on the procedures which are to be employed in determining that right, a litigant in the position of the appellee must take the bitter with the sweet. . . . To conclude otherwise would require us to hold that although Congress chose to enact what was essentially a legislative compromise, and with unmistakable clarity granted governmental employees security against being dismissed without 'cause,' but refused to accord them a full evidentiary hearing for the determination of 'cause,' it was disabled from making such a choice. We would be holding that federal employees had been granted, as a result of the enactment of the Lloyd-LaFollette Act, not merely that which Congress had given them in the first part of the sentence, but that which Congress had expressly withheld from them in the latter part of the same sentence. Neither the language of the Due Process Clause nor our cases construing it require any such hobbling restrictions on legislative authority in this area. . . . Here, the property interest which the appellee had in his employment was conditioned by the procedural limitations which had accompanied the grant of that interest. The government might, then, under our holdings dealing with government employees in Roth supra and Sinderman , supra , constitutionally deal with appellee's claims as it proposed to do here. This "bitter with the sweet" formulation appears to link the procedures that a legislative body has established for removing a government position to the nature of the right to continue to hold it. It, in effect, would appear to allow a summary or expedited removal authority to transform public employees who are removable for cause into employees who can be terminated pursuant to whatever removal authorities that a legislative body provides. In an opinion that concurred in the plurality opinion's conclusion but not its reasoning, Justice Powell wrote that, The plurality opinion evidently reasons that the nature of appellee's interest in continued federal employment is necessarily defined and limited by the statutory procedures for discharge and that the constitutional guarantee of procedural due process accords to appellee no procedural protections against arbitrary or erroneous discharge other than those expressly provided in statute. The plurality would thus conclude that the statute governing federal employment determines not only the nature of appellee's property interest, but also the extent of the procedural protections to which he may claim. It seems that this approach ... would lead directly to the conclusion that whatever the nature of an individual's statutorily created property interest , deprivation of that interest could be accomplished without notice or a hearing at any time . (Emphasis supplied.) Justice White addressed the authority of Congress to confer or not to confer a property right in continued government employment in an opinion that concurred in part and dissented in part in the plurality opinion. "While the state may define what is and what is not property, once having defined those rights, the Constitution defines due process, and as I understand it six members of the Court are in agreement on this fundamental proposition." In this passage, Justice White referred to the six members of the Court who did not subscribe to the bitter with the sweet formulation in the plurality opinion. The Court expressly rejected this formulation in Cleveland Board of Education v. Loudermill . It held that, the "bitter with the sweet" approach misconceives the constitutional guarantee. If a clearer holding is needed, we provide it today. The point is straightforward: The Due Process Clause provides that certain substantive rights life, liberty, and property cannot be deprived except pursuant to constitutionally adequate procedures. The categories of substance and procedure are distinct. Were the rule otherwise, the Clause would be reduced to a mere tautology. Property cannot be defined by the procedures provided for its deprivation any more than can life or liberty. The right to due process "is conferred not by legislative grace, but by constitutional guarantee. While the legislature may elect not to confer a property interest in public employment, it may not constitutionally authorize the deprivation of such an interest, once conferred, without appropriate procedural safeguards.' While Justice Powell's formulation adopted in Loudermill superficially may appear to differ from the "bitter with the sweet" formulation, the two do not appear to be diametrically opposite; in many situations they could overlap. As Justice Powell said in his Arnett concurrence, to accept the latter formulation for a nonprobationary government employee who is removable for cause would permit the government to deprive that employee of notice of charges, an opportunity to respond, and a hearing at any time . Where these procedures are provided, applying the bitter with the sweet formulation in many cases would not appear to yield a conclusion that would differ from one reached by applying Justice Powell's formulation. The Court in the Loudermill case balanced interests it had asserted in Mathews v. Eldridge : (1) the individual's private interest in retaining employment or a benefit, (2) the government's interest in expeditiously removing an unsatisfactory employee or benefit and avoiding administrative burdens; and (3) the risk of an erroneous termination of employment or a benefit. Eldridge concluded that a hearing after termination of disability benefits provided sufficient due process. The Court in Eldridge added that, " ... [d]ue process, unlike some legal rules, is not a technical conception with a fixed content unrelated to time, place and circumstances.' Cafeteria Workers v. McElroy, 367 U.S. 886, 895 (1961) . '[D]ue process is flexible and calls for such procedural protections as the particular situation demands.' Morrissey v. Brewer, 408 U.S. 471, 481 (1972) ." In Loudermill , the Court concluded that, The tenured public employee [ i.e. a nonprobationary employee who is removable for cause rather than at-will] is entitled to oral or written notice of the charges against him, an explanation of the employer's evidence, and an opportunity to present his side of the story.... To require more than this prior to termination would intrude to an unwarranted extent on the government's interest in quickly removing an unsatisfactory employee. The Court indicated that the Due Process Clause requires that these procedures, which do not need to be elaborate, must be afforded before removal provided that a removed employee receives an evidentiary hearing within a reasonable time after removal. It cited an earlier opinion, Armstrong v. Manzo , to note that this post-removal hearing must be given "at a meaningful time" and "in a meaningful manner." In a case decided after Loudermill , Gilbert v. Homar , the Court reiterated Loudermill's conclusion that a public employee who can be dismissed only for cause is entitled to a limited hearing prior to termination to be followed by a more comprehensive termination hearing after it. <1.1.2. Application to Section 713> Section 713 of Title 38, as added by Section 707 of the Veterans Access, Choice, and Accountability Act of 2014, does not expressly provide for notice and an opportunity to respond. In fact, Section 713(d)(1) states that these procedures, which are provided to a career member of the Senior Executive Service in Section 7543(b) of Title 5 for regular adverse actions, "... shall not apply" in a proceeding under Section 713 of Title 38. If viewed in isolation, this section's lack of those procedures would appear to contravene the Due Process Clause of the Fifth Amendment as interpreted in the Loudermill case and reaffirmed in Gilbert . Nevertheless, the Department of Veterans Affairs has issued guidelines which mandate that an individual in a senior executive position whom it seeks to remove from federal service or from such a position pursuant to 38 U.S.C. 713 will receive prior notice of five days and an opportunity to respond to charges in writing in advance of removal. These guidelines acknowledge that, "Unlike many private sector employees who may be terminated 'at-will,' career federal employees whether at the VA or other federal agency, have a constitutionally protected right in continued employment." The implication is that the Fifth Amendment requires that this right cannot be deprived without due process. Section 713(d)(2)(A) of Title 38 provides that an individual whom the Secretary seeks to remove from federal service or transfer to a non-senior executive position may file an appeal with the Merit Systems Protection Board within seven days after removal or transfer. The Board must assign this appeal to an administrative judge for a hearing. An administrative judge must decide the appeal within 21 days, that decision is final and not subject to further appeal. Section 713(e)(2)(3) states that if an administrative judge cannot issue an opinion in that period, the Secretary's decision becomes final. This post-removal hearing along with the notice and opportunity to respond in writing procedures mandated by the Department's guidelines comply with the basic elements of due process prescribed in the Loudermill case and reaffirmed in Gilbert : The focus, then, turns to whether a court would consider these procedures "meaningful" if it should agree to adjudicate a due process challenge to Section713 of Title 38. In the Manzo case cited in Loudermill , the Court said that a post-termination hearing must be provided not only at a meaningful time, but also in a meaningful manner. While the due process elements are present, the time limits in 38 U.S. C. 713 differ from those in the adverse action procedures that apply to career members of the Senior Executive Service in 5 U.S.C. 7543(b). This subsection states that a career member of the Senior Executive Service is entitled to (1) generally advance notice of 30 days; (2) a reasonable time, but not less than seven days, to answer orally and in writing and to furnish affidavits and other documentary evidence in support of an answer; (3) be represented by an attorney or other representative; and (4) a written decision and specific reasons therefor at the earliest practicable date. <1.1.3. In MSPB Removal Appeals> Two senior executives who were removed from federal service pursuant to the expedited removal authority in 38 U.S. C 713 filed appeals with the MSPB and raised due process arguments to administrative judges. In Helman v. Department of Veterans Affairs , the former Director of the Phoenix Veterans Administration Health Care System asserted that the Department denied her a pre-removal right to due process by failing to give her meaningful notice and an opportunity to respond to the action against her and that the post-removal proceeding before the administrative judge violated her right to due process because of its abbreviated nature. She elaborated that the Department may have removed her because of pressure from Members of Congress and that the Department's five day notice period was not long enough for her to prepare an adequate defense. The administrative judge rejected these pre-removal due process arguments. With respect to the assertion of a post-removal due process violation, the judge ruled that the Board lacks authority to declare 38 U.S.C. 713 unconstitutional. In Talton v. Department of Veterans Affairs , the former Director of the Central Alabama Veterans Administration Health Care System maintained that the Department contravened his right to due process by failing meaningfully to consider his reply to the proposed removal notice and that the Secretary's expedited removal authority in 38 U.S.C. 713 should have been exercised by the Secretary himself and should not have been delegated to the Deputy Secretary. The administrative judge rejected both of these arguments. Another senior executive, the former Director of the New York Stratton Veterans Administration Medical Center, was removed from federal service pursuant to 38 U.S.C. 713. She appealed her removal and challenged it on grounds other than denial of due process. In Weiss v. Department of Veterans Affairs , the administrative judge sustained the Department's charge of misconduct, specifically, that she failed to take timely action to transfer from direct patient care a nursing assistant whom a review board found to have mistreated patients. The penalty of removal from federal service, however, was reversed because the administrative judge determined that it was not reasonable based on the information in the record. The administrative judge concluded that he would have mitigated this penalty, but because the expedited removal procedure in Section 713 did not allow mitigation, he only had authority to approve or disapprove the Department's penalty. Weiss reportedly has retired. Two senior executives who were removed from the Senior Executive Service and transferred to lower paying positions in the General Schedule appealed their demotions. In Graves v. Department of Veterans Affairs , the former Director of the St. Paul Regional Office of the Veterans Benefits Administration (VBA) argued that the Department denied due process to her by failing to give full and impartial consideration to her reply to its charge and to all evidence in the record. The Department had charged that she created an appearance of impropriety by recommending reassignment of a senior executive who was the Director of VBA's St Paul Regional Office to Baltimore and then taking the vacated St. Paul position herself. Pursuant to Section 713 of title 38, the Department imposed a penalty of removal from the Senior Executive Service and transfer to a General Schedule position. The administrative judge rejected her due process contention and sustained the Department's charge. Nevertheless, the administrative judge reversed the Department's penalty as not reasonable on the ground that it subjected her to disparate treatment; the Department also should have brought the same charge against some other senior executives who were involved in the reassignment and placement and, like Graves, did not question the propriety of these actions. In Rubens v. Department of Veterans Affairs , the former Director of VBA's Philadelphia Regional Office, like Graves, contended that the Department denied her due process; it did not give fair and impartial consideration to her reply and to all evidence in the record. She was charged with failing to exercise sound judgment when she participated in facilitating a reassignment of the Director of VBA's Regional Office in Philadelphia to the one in Los Angeles and assuming the vacated Philadelphia position. The administrative judge rejected her due process contention. The penalty, however, was reversed as unreasonable because the Department did not seek to discipline other senior executives who were involved in this reassignment and placement. In both the Graves and Rubens cases, the administrative judges ordered the Department to cancel their removals from the Senior Executive Service and transfers to General Schedule positions, restore them to their former positions, and pay the correct amount of back pay and interest on back pay. They were notified that they could apply for fees for attorneys and expert witnesses and litigation costs where applicable. The Department reportedly reinstated them in their former positions in St. Paul and Philadelphia. Following these Merit Systems Protection Board decisions, the Deputy Secretary of the Department of Veterans Affairs noted that administrative judges upheld the Department's charges that Graves and Rubens created appearances of impropriety, but reversed their penalties as unreasonable because other senior executives who were involved in reassignments and placements were not charged. He ordered an investigation to determine whether the Department should bring the same charge against other senior executives and charge Graves and Rubens a second time. <1.2. Judicial Review> Section 713(e)(2) of Title 38 states that, Notwithstanding any other provision of law, including section 7703 of [U.S. Code] Title 5, the decision of an administrative judge [of the MSPB] shall be final and shall not be subject to any further appeal. Could an individual in a senior executive position at the Department of Veterans Affairs who is removed from federal service or transferred to a non-senior executive position pursuant to the Secretary's expedited authority in 38 U.S.C. 713 obtain review to challenge the constitutionality of that authority? <1.2.1. Pending Appeal> This question currently is before the U.S. Court of Appeals for the Federal Circuit because the former Director of the Phoenix VA Health Care System appealed her removal from federal service. On April 27, 2015, the Department of Veterans Affairs filed a motion to dismiss this appeal for lack of jurisdiction. It acknowledged that the court generally has jurisdiction to hear an appeal from an MSPB final decision under 28 U.S.C. 1295(a)(9) and 5 U.S.C. 7703(b)(1) and (d), but maintained that the finality provision in 38 U.S.C. 713(e)(2), quoted above, precludes an appeal of an MSPB administrative judge's decision on an expedited removal. Responding to this motion, Helman cited three constitutional arguments. First, the expedited removal procedure in 38 U.S.C. 713, on its face and as applied to her, violates her Fifth Amendment due process right by severely limiting the pre-removal and post-removal processes that she received. Second, Section 713, facially and as applied, contravenes the Appointments Clause, Article II, Section 2, Clause 2 of the Constitution. It allows an MSPB administrative judge, an employee who is not appointed by the President and confirmed by the Senate, to render a final decision of the United States without any review by the presidentially appointed, Senate- confirmed members of the Board or any other executive officer. Third, Section 713, facially and as applied, violates Helman's Fifth Amendment right against self-incrimination and her due process rights. This section, she alleged, forced an immediate appeal of her removal to MSPB and provided that her removal would be final within 21 days even though a criminal investigation into the same conduct was pending at that time and the administrative judge denied a motion to postpone the appeal. In a reply to Helman's arguments, the Department asserted that preclusion of judicial review is clear from the language, objectives, and legislative history of 38 U.S.C. 713. It added that the court does not have jurisdiction because Helman failed to present colorable constitutional claims and has no constitutionally protected interest in her continued employment. Moreover, even if Helman has a property right to continued employment, she would have no colorable due process claim to receive an opportunity for discovery and the right against self-incrimination and to assert that Section 713 violates the Appointments Clause or Article III of the Constitution. On July 15, 2015, the court issued an order directing Helman to file a brief on jurisdiction. In her principal brief filed on October 9, 2015, Helman argued that the Court of Appeals for the Federal Circuit has jurisdiction to review the decision of the MSPB administrative judge. She added that Section 713 of Title 38 does not deny the court all jurisdiction and does not clearly strip the court of jurisdiction to review constitutional claims. According to Helman, if Section 713 precludes all judicial review, it violates Article III of the Constitution, which vests federal judicial power in the Supreme Court and in such inferior courts as Congress may establish, whose judges must be appointed consistent with the Appointments Clause. She maintained that the MSPB administrative judge who approved the Secretary's removal decision lacked constitutional authority to preside at her removal hearing because he was not appointed in the manner prescribed in the Appointments Clause of the Constitution, relating to the appointment of principal and inferior officers who exercise significant authority of the United States. Moreover, the removal restrictions on administrative judges violated separation of powers principles. Finally, Helman asserted that her removal contravened the Due Process Clause of the Fifth Amendment because she had a constitutionally protected property interest in continued federal employment that could not be deprived without due process of law and that the pre-termination and post-termination processes did not adequately provide due process. <1.2.2. Generally> Does the finality language in 38 U.S.C. 713(e)(2) quoted above preclude an appeal beyond a decision by an administrative judge issued within 21 days only within MSPB (i.e., to the three-member Board), or does it also preclude any judicial review? The intent to preclude Board review appears straightforward. The conference report states that, The substitute requires that the expedited review by the MSPB be conducted by an administrative judge at the MSPB, and if the MSPB administrative judge does not conclude their review within 21 days then the removal or demotion is final. The substitute does not allow for any further appeal beyond the administrative judge, and does not allow for a second level review by the three-person board at the MSPB . (Emphasis supplied.) On January 22, 2015, after the administrative judge upheld the department's decision to remove Helman from federal service, she submitted a request for an extension of time to file an appeal to the Merit Systems Protection Board. The Board on January 26 informed her that the administrative judge's decision was final and that it would not accept further submissions on this case. Whether this finality passage in 38 U.S.C. 713(e)(2) would preclude any judicial review is more complicated. Before reaching that question, it might be asked whether Congress constitutionally can preclude judicial review. The answer appears to be a qualified yes. Article III, Section 1 of the Constitution states, in relevant part, that, "The judicial power of the United States shall be vested in one Supreme Court and in such inferior courts as the Congress may from time to time establish." The power that this section grants Congress to establish inferior courts implies that it may preclude jurisdiction over certain subjects. Article III, Section 2 identifies subjects of the Supreme Court's original jurisdiction and adds that, "... in all other cases before mentioned, the Supreme Court shall have appellate jurisdiction, both as to law and fact, with such exceptions, and under such regulations as the Congress shall make." This provision suggests that Congress may limit the Supreme Court's appellate jurisdiction, but not its original jurisdiction which the Constitution itself bestows. In the Reconstruction era case E x parte McCardle , the Court dismissed an appeal of a circuit court's denial of a habeas corpus petition because Congress had enacted over the President's veto a provision that repealed the act authorizing the appeal. In the modern era, the Court in Felker v. Tur p in upheld a statutory limitation on its jurisdiction to review second or successive habeas corpus petitions appealed from courts of appeals. It also held that this limitation did not deny the Court authority to consider petitions that were submitted to it as original matters because the statutory limitation did not attempt to preclude them. Would a court interpret Section 713's finality language quoted above effectively to preclude any judicial review? Its operative language is preceded by "[n]otwithstanding any other provision of law, including Section 7703 of Title 5." Section 7703 is the judicial review provision of the Civil Service Reform Act of 1978 that generally authorizes judicial review of MSPB final orders and decisions by the U.S. Court of Appeals for the Federal Circuit. It also provides for trials de novo in district courts for cases subject to antidiscrimination statutes. The intent of including the phrase "[n]otwithstanding any other law" may have been to waive other jurisdictional statutes including 28 U.S.C. 1295(a)(9), which grants the Federal Circuit jurisdiction over final MSPB action. Some Supreme Court cases have analyzed whether statutory language that appears intended to preclude judicial review legally achieves this effect. In Webster v. Doe , the Court addressed whether Section 102(c) of the National Security Act of 1947, which authorized the Director of Central Intelligence summarily to remove an employee from federal service, precluded judicial review. This subsection stated that, Notwithstanding the provisions of section 6 of the Act of August 24, 1912 (37 Stat. 555), or the provisions of any other law, the Director of Central Intelligence may, in his discretion, terminate the employment of any officer or employee of the Agency whenever he shall deem such termination necessary or advisable in the interests of the United States.... The employee asserted that his removal pursuant to this provision, among other things, deprived him of a property right to continued employment without due process of law mandated by the Fifth Amendment. The Court held that this section did not preclude judicial review of his colorable constitutional claims. We do not think section 102(c) may be read to exclude review of constitutional claims. We emphasized in Johnson v. Robison , 415 U.S. 361 (1974), that where Congress intends to preclude judicial review of constitutional claims its intent to do so must be clear. Id. , at 373-374. In Weinberger v. Salfi , 422 U.S. 749 (1975), we reaffirmed that view. We require this heightened showing in part to avoid the "serious constitutional question" that would arise if a federal statute were construed to deny any judicial forum for a colorable constitutional claim. See Bowen v. Michigan Academy of Family Physicians , 476 U.S. 667, 681 (1986). In the Johnson case, an individual who had completed conscientious objector service and was denied veterans' educational benefits filed a constitutional challenge under the equal protection component of the Fifth Amendment to a statute that limited those benefits to veterans who had served on active military duty. The statute governing this denial provided, in relevant part, that, the decisions of the Administrator on any question of law or fact under any law administered by the Veterans Administration providing veterans to benefits ... shall be final and conclusive and no ... court of the United States shall have power or jurisdiction to review any such decision.... The Court concluded that this language did not bar judicial review under the federal question jurisdictional statute in 28 U.S.C. 1331 of a challenge to the constitutionality of the statute. It reasoned that the district court would not review a decision of the Administrator in denying the benefits, but rather whether Congress had enacted an unconstitutional condition on them. This approach has been termed a collateral challenge. In another case cited in the Webster case, Weinberger v. Salfi , which involved a challenge to the constitutionality of a Medicare provision in the Social Security Act, the Court reaffirmed its holding in Johnson . Nevertheless, it held that the claimants could not obtain jurisdiction pursuant to the federal question jurisdiction statute in 28 U.S.C. 1331 because another provision of the act granted court jurisdiction only after administrative remedies were exhausted. Consequently, the claimant in the Salfi case, unlike the Johnson claimant, would receive a judicial forum to hear a constitutional challenge to the act and did not need to obtain jurisdiction under the federal question statute. The Court in Webster also cited the Michigan Academy case, which stated that a "serious constitutional question" would arise if it should construe a statute to deny any judicial forum for constitutional claims. The Court in Michigan Academy quoted this phrase from Salfi , which took it from a passage in Johnson in which the Court declined to accept an interpretation that would have denied any judicial review of a constitutional challenge to the applicable statute. Doing so, it said in Johnson , "... would, of course, raise serious questions and in such a case it is a cardinal principle that this Court will first ascertain whether a construction of the statute is fairly possible by which the [constitutional] question[s] may be avoided." This passage illustrates the doctrine of constitutional avoidance. The Court has reached conclusions similar to those in the Webster case and the other cases it cited. In McNary v. Haitian Refugee Center , for example, the Court considered whether the Immigration Reform and Control Act of 1986 precluded judicial review of Immigration and Naturalization Service denials of special status for individuals except those related to deportation orders. The Court held that this limitation on reviewing denials did not preclude district courts from hearing suits brought to determine whether the agency's procedures for reviewing denials contravened the act and the Due Process Clause. In Lindahl v. Office of Personnel Management , the Court held that 5 U.S.C. 8377(c), which stated that decisions of the Office of Personnel Management on retirement matters "are final and conclusive and are not subject to review" barred judicial review of OPM's factual determinations. It did not, however, deny jurisdiction to the Court of Appeals for the Federal Circuit to review whether there had been a substantial departure from important procedural rights or whether the governing legislation had been misconstrued. The Court said that when Congress intends to preclude any kind of judicial review, it "typically employs language far more unambiguous and comprehensive than the text of section 8347(c)." It quoted the following language from 5 U.S.C. 8128(b), relating to compensation for work injuries, as an example of unambiguous preclusive language: The action of the Secretary [of Labor] or his designee in allowing or denying a payment under this subchapter is (1) final and conclusive for all purposes and with respect to all questions of law and fact: and (2) not subject to review by another official of the United States or by a court by mandamus or otherwise. In a recent case, Elgin v. Department of the Treasury , the Court addressed issues that would appear relevant to whether a court may have jurisdiction to hear a case challenging the constitutionality of the expedited removal authority in 38 U.S.C. 713. Elgin and the other petitioners were removed from federal service because they failed to register with the Selective Service prior to reaching age 26. Section 3328 of U.S. Code Title 5 bars from executive agency employment an individual who has knowingly and willfully failed to register for the Selective Service as required by the Military Service Act. They challenged their removal pursuant to this statutory bar before an MSPB administrative judge on the ground that it was unconstitutional. They argued that the registration requirement contravened the equal protection component of the Fifth Amendment because it did not apply to women and the Constitution's prohibition against bills of attainder (i.e., a legislative punishment). They sought reinstatement with back pay. Asserting that the Board did not have jurisdiction to hear this challenge because removal was based on a statutory bar, the administrative judge dismissed it. The judge also maintained that the Board did not have power to declare a federal statute unconstitutional. Rather than file a petition for review, that is, an appeal, of this initial decision to the three member Merit Systems Protection Board pursuant to 5 U.S.C. 7701 or to the Court of Appeals for the Federal Circuit, as they could have done under 5 U.S.C. 7703, Elgin and some other Supreme Court petitioners filed an equitable claim in district court. They asserted that the court had jurisdiction to hear their case pursuant to the federal question jurisdictional statute, 28 U.S.C. 1331. They added that the Court in Webster v. Doe held that a suit challenging the constitutionality of a statute is subject to judicial review. The Supreme Court in a 6-3 decision concluded that the district court did not have federal question jurisdiction because the petitioners could have sought judicial review of a final MSPB decision before the Court of Appeals for the Federal Circuit under 5 U.S.C. 7703. It rejected the petitioners' argument that despite the Federal Circuit's jurisdiction, they were not barred from also challenging a statute's constitutionality in a district court. The Court added that the scheme provided in the Civil Service Reform Act, particularly 5 U.S.C. 7703, is the exclusive avenue to judicial review when a qualifying employee challenges the constitutionality of a federal employment statute. In reaching this conclusion, the Court declined to accept the petitioners' contention that a statute does not preclude district court federal question jurisdiction unless Congress explicitly directs otherwise. To support their contention, the petitioners cited language from the Webster case which said that a statute will not be found to preclude district court review without a "heightened showing" that Congress intended to preclude it. The Court stated that the petitioners' argument overlooked a "necessary predicate" to applying Webster's heightened standard: To obtain judicial review under 28 U.S.C. 1331, a statute must purport to deny any judicial forum for a colorable constitutional claim. " Webster's standard does not apply where Congress simply channels judicial review of a constitutional claim to a particular court." The Court appears to have adopted a distinction that had been proffered in the government's brief between the level of congressional intent that must be shown before a court will find preclusion. A statute that channels or postpones judicial review will be held to preclude judicial review if Congress's intent is "fairly discernable." A statute that purports to preclude any judicial review, however, will not be held to preclude it without a "heightened showing" (i.e., "clear and convincing evidence") of that intent. The reasoning that the Court's applied in the Elgin case appears to have been strongly influenced by its significant decision in United States v. Fausto , a statutory construction case. A nonpreference eligible employee in the excepted service filed suit in the Court of Claims for back pay under the Back Pay Act alleging that his agency violated its regulations when it suspended him. The Court held that the Court of Claims did not have jurisdiction to hear his claim because at that time the Civil Service Reform Act (CSRA) provision that defined an employee who was eligible for judicial review of agency action did not include a nonpreference eligible in the excepted service such as Mr. Fausto; it limited review to competitive service employees and to preference eligibles in the excepted service. The Court in Fausto said that the act's purpose, entirety of text, and structure all indicated congressional intent to "replace the haphazard arrangements for administrative and judicial review that had built up over almost a century." It rejected the contention that Congress's decision not to grant an MSPB administrative appeal right and judicial review of Board decisions to nonpreference eligible excepted service employees was an oversight. The Court viewed this noninclusion as manifesting a considered congressional judgment that they should not have statutory entitlement to these forms of review and, therefore, that pre-CSRA judicial access to courts for matters covered by the act were repealed impliedly. The Court added that the structure of the CSRA gave a preferred position to competitive service employees and to excepted service preference eligibles. It also gave primacy to the Merit Systems Protection Board for administrative resolution of adverse personnel action disputes and primacy to the Court of Appeals for the Federal Circuit for judicial review. These structural elements permitted the Board to develop a unitary and consistent executive branch position on personnel matters. Moreover, the Federal Circuit's primacy avoided an unnecessary layer of judicial review in lower federal courts and encouraged more consistent judicial decisions than would have been true if district courts could hear them with appeals to regional courts of appeals. Although the finality clause in 38 U.S.C. 713(e)(2) quoted above waives Section 7703 of Title 5 of the U.S. Code, which grants judicial review of MSPB final decisions, as well as "any other provision of law," it does not expressly preclude any judicial review. It provides that a decision of an administrative judge "shall be final and shall not be subject to any further appeal." In this respect, it lacks the clarity of the finality language in the Johnson case which stated, in relevant part, that "... no court ... of the United States shall have power or jurisdiction" to review a decision of the Administrator of the Veterans Administration in denying benefits. This language, the Court in Johnson held, did not preclude judicial review of a challenge to the constitutionality of a statute that limited educational benefits to veterans of active military service. The Court reasoned that it was not reviewing a decision by the Administrator regarding whether or not to grant benefits, but rather whether Congress had enacted an unconstitutional statute (i.e., a collateral issue). In the Webster case, the Court reviewed the CIA Director's summary removal authority. Citing Johnson and some other cases, it held that judicial review of colorable constitutional claims including deprivation of continued employment without due process of law in contravention of the Fifth Amendment could not be precluded without a "heightened showing" of Congress's intent to preclude. It reached this conclusion to avoid a "serious constitutional question" that would arise if a federal statute were to be construed to deny any judicial forum for a colorable constitutional claim. The Elgin case narrowed the scope of the holding in Webster , saying that it applied to cases that precluded any judicial review. Without judicial review, a senior executive who is removed pursuant to Section 713 would have no opportunity to challenge removal as a deprivation of a property right to continued employment without meaningful due process of law. The only review would be in an administrative proceeding before an MSPB administrative judge. A court would have to decide whether the language of the finality clause in Section 713(e)(2) clearly and convincingly provides evidence of that intent. A court's determination arguably could be influenced in part by the legislative history of that clause. The conferees generally accepted the Senate provision, which would have authorized the Merit Systems Protection Board to hear a timely filed appeal from a removed senior executive. This provision would have directed the Board to expedite adjudicating an appeal within 21 days, but if it could not complete action in that time, it would have to notify Congress why it could not do it. Significantly, the Senate language provided no express sanction for failing to complete an appeal in that time; the Board arguably may have been able to continue to adjudicate an appeal until completing it. The Senate provision, however, did have a finality provision which stated that, "A decision made by the Merit Systems Protection Board with respect to a removal or transfer under subsection (a) shall not be subject to any further appeal.'' In the conference, the conferees amended the Senate appeal provision by substituting an MSPB administrative judge in place of the Board itself and adding language about 5 U.S.C. 7703 so that Section 713(e)(2) provides that, "Notwithstanding any other provision of law, including section 7703 of title 5, the decision of an administrative judge under paragraph 1 [directing the MSPB to refer an appeal to an administrative judge] shall be final and shall not be subject to any further appeal." The conferees also added the following language in Section 713(e)(3): "In any case in which the administrative judge cannot issue a decision in accordance with the 21-day requirement under paragraph (1), the removal or transfer is final....." By waiving the judicial review provision in 5 U.S.C. 7703 and "any other law" as well as making the Secretary's decision final if an administrative judge did not issue an opinion within 21 days, the conferees strengthened the finality language in the Senate provision. A court would have to decide whether these changes when compared to the earlier version provided clear and convincing evidence of congressional intent to preclude any judicial review. <1.3. Legislation> H.R. 1994 and a companion, S. 1082 , both named the Department of Veterans Affairs Accountability Act of 2015, and S. 1117 , Ensuring Veterans Safety Through Accountability Act, have been introduced in the 114 th Congress. They would extend to all officers and employees in the Department of Veterans Affairs the expedited removal-demotion authority that 38 U.S.C. 713 grants to the Secretary for individuals in senior executive positions. Hearings have been held on these bills. On July 15, 2015, the House Committee on Veterans Affairs reported H.R. 1994 to the House. The Senate Committee on Veterans Affairs reported S. 1082 to the Senate on July 22, 2015. On July 28, 2015, senior advisors recommended that the President should veto H.R. 1994 . The House agreed to H.R. 1994 by a vote of 256 to 170 on July 29, 2015. No floor action has been taken on S. 1082 .

This report discusses selected legal issues relating to the authority for summary removal of individuals in senior executive positions at the Department of Veterans Affairs. Section 707 of the Veterans Access, Choice, and Accountability Act, P.L. 113-146, enacted on August 7, 2014, created this authority by adding Section 713 to Title 38 of the United States Code. It authorizes the Secretary of Veterans Affairs to remove an individual in a senior executive position from federal service or transfer him or her to a position in the General Schedule if the Secretary determines that the individual's performance or misconduct warrants removal. This report addresses whether this authority raises a constitutional question under the Due Process Clause of the Fifth Amendment as a deprivation of a property right to continued federal employment and whether a court would have jurisdiction to hear a case brought by a senior executive who had been removed pursuant to it. The Supreme Court has held that a nonprobationary government employee who is removable for cause, as distinguished from at-will, has a property right in continued employment. The Fifth Amendment of the Constitution states that property may not be deprived without due process of law. According to the Court, an agency may not remove such an employee from government employment without due process rights of notice and an opportunity to respond to charges. The employee also is entitled to a hearing either before or after removal. A hearing must be provided at a meaningful time and in a meaningful manner. Section 713 of Title 38 does not expressly provide for notice and an opportunity to respond, but the Department of Veterans Affairs has issued guidelines that grant advance notice of five days and an opportunity to respond to charges in writing. Section 713 provides for a hearing after removal by an administrative judge of the Merit Systems Protection Board if a decision can be issued in 21 days and that this decision is not subject to further appeal. If an administrative judge does not issue a decision in that period, the Secretary's removal or transfer is final. A senior executive whose removal from federal service pursuant to this authority was upheld by an administrative judge has filed an appeal to the Court of Appeals for the Federal Circuit. This appeal alleges that these limited time periods for notice and an opportunity to respond to charges, as well as for an appeal to an administrative judge, do not provide meaningful due process. The court is considering whether to accept jurisdiction of this case because the Department of Veterans Affairs, citing the finality clause in Section 713, asserts that an administrative judge's decision is not subject to judicial review. In challenging the constitutionality of Section 713, the removed senior executive also maintains that granting an administrative judge of the Merit Systems Protection Board authority conclusively to determine whether or not to uphold a removal contravenes the Appointments Clause of the Constitution. She asserts that to comply with the Clause, an administrative judge's decision should be supervised or be subject to review by members of the Merit Systems Protection Board or another officer or officers who are principal officers of the United States whom the President appoints and the Senate confirms. An administrative judge is an employee who is not appointed in the manner that the Appointments Clause prescribes, she contends. This report will be updated to reflect later developments.

<1. Introduction> Although a number of U.S. agencies and departments implement global health programs that might improve child survival and maternal health (CS/MH), this report focuses only on CS/MH programs conducted by the U.S. Agency for International Development (USAID) from FY2001 to FY2008. This report also discusses the interconnected nature of USAID's global health programs, such as how advancements made in addressing malaria might improve maternal and child survival. <2. Child Survival> In the United Nations Children's Fund (UNICEF) report The State of the World ' s Children 2008: Child Survival , UNICEF Executive Director Ann Veneman celebrated the decline of total annual deaths among children under age five. In 2006, an estimated 9.7 million children in that age range died, representing a 60% drop in under-five mortality since 1960. Despite the decrease, Ms. Veneman asserted that a critical number of daily deaths among children under five remains high; some 26,000 die each day. Most studies that measure child mortality focus on deaths that occur before age five because 90% of childhood deaths occur during this time, while 37% occur during the neonatal period (the first 28 days), amounting to about 4 million annual newborn deaths. The majority of child deaths occur in developing countries, and almost half of them in Africa. On average, nearly 90% of all child deaths are caused by neonatal infections and five infectious diseases: acute respiratory infections (mostly pneumonia), diarrhea, malaria, measles and HIV/AIDS ( Table 1 ). According to UNICEF, undernutrition is the underlying cause of up to half of these deaths. Some health experts assert that maternal and child health are particularly important to monitor, because their mortality rates serve as a barometer for overall health conditions. Supporters of this idea often use the Millennium Development Goals (MDGs) listed in Table 2 to demonstrate the interconnected nature of health and development and to gauge improvements in child and maternal health ( Table 3 ). MDGs 4 and 5 call for a two-thirds reduction in child and maternal mortality. The ability to reach those goals, however, is affected by progress in other MDGs. For example, countries with significant undernourished populations (MDG 1) that lack sufficient access to clean water (MDG 7) tend to have higher maternal and child mortality rates (MDGs 4 and 5); undernourished women and children are also more likely to be impoverished (MDG 1) and are more susceptible to infectious diseases, such as HIV/AIDS, TB, and malaria (MDG 6). UNICEF found that 62 countries were making no progress towards the Millennium Development Goal on child survival; nearly 75% of these were in Africa. <3. Maternal Health> UNICEF asserts that child survival and maternal health are inextricably linked. More than 500,000 women die each year due to pregnancy-related causes, and an additional 15-20 million more suffer debilitating long-term effects, such as obstetric fistula (discussed below). The vast majority of women who die during or shortly after labor live in developing countries where maternal mortality rates are significantly higher than in industrialized nations ( Table 4 ). The United Nations Food and Agriculture Organization (FAO) maintains that almost all of these deaths could be prevented if women in developing countries had access to adequate diets, safe water and sanitation facilities, basic literacy, and health services during pregnancy and childbirth. UNICEF estimates that 20% of all maternal deaths are linked to undernutrition and that about 75% of maternal deaths are caused by obstetric complications including hemorrhage, sepsis, hypertensive disorders (mostly eclampsia), prolonged or obstructed labor, and unsafe abortions. Maternal mortality and morbidity rates are generally higher for mothers younger than 20 years who typically have more pregnancy and delivery complications, such as toxemia, anemia, premature delivery, prolonged labor, and cervical trauma, and are at higher risk of delivering low birth weight babies. Pregnancy-related complications are the leading cause of death among 15- to-19-year-olds around the world, and their babies have higher morbidity and mortality rates. The United Nations estimates that adolescents give birth to 15 million infants each year. Girls aged between 15 and 19 years are twice as likely to die from childbirth as women in their twenties, and those younger than 15 years are five times as likely to die. A survey conducted in Mali indicated that the maternal mortality rate for girls aged between 15 and 19 years was 178 per 100,000 live births and 32 per 100,000 for women aged between 20 and 34 years. Causes of maternal death vary significantly among regions. Data collected from 1990 through 2006 indicate that hemorrhage caused about 34% and 31% of maternal deaths in Africa and Asia, respectively. In industrialized nations and Latin America and the Caribbean, hemorrhage caused an estimated 13% and 21% of maternal deaths, respectively ( Table 5 ). The United Nations has found that regions with the lowest proportions of skilled health attendants at birth also have the highest maternal mortality rates. In sub-Saharan Africa, 43% of women gave birth with the assistance of a skilled birth attendant, 65% in south Asia, and 99% in industrialized nations. One in every 22 women in sub-Saharan Africa will likely die from pregnancy-related causes, as will one in every 59 Asian women. In industrialized nations, meanwhile, one in every 8,000 woman faces the probability of dying from pregnancy-related causes. UNICEF has found that health systems in many countries do not have the capacity to reduce mortality nationwide. Of the 68 priority countries that account for 97% of all maternal and child deaths, 54 (80%) have health workforce densities below the critical threshold (2.5 health workers per 1,000 people) for significantly improving their health conditions and reaching the health-related MDGs ( Table 6 ). South Africa and Swaziland are the only two sub-Saharan African countries among the 68 priority countries that have reached the minimum standard. Child and maternal survival rates are higher in areas with ample numbers of health workers to administer immunizations, easy access to clean water, controlled mosquito populations, and sufficient access to nutritious food. While the greatest shortage of health care workers in absolute terms is in southeast Asia (mostly in Bangladesh, India, and Indonesia), sub-Saharan Africa suffers from the greatest proportional shortage of health care workers in the world. WHO estimates that there are 57 countries with critical shortages of health care workers, of which 36 are in Africa and none in industrialized nations. Globally, WHO estimates that an additional 4.3 million health workers are needed, and that on average, countries across Africa would need to increase their number of health workers by about 140% in order to meet the minimum threshold of 2.5 health care professionals per 1,000 people. <4. USAID's Efforts to Improve Child Survival> The U.S. Agency for International Development is the lead U.S. agency responsible for improving child survival around the world. According to USAID, research that it supported during the 1970s and 1980s has been used to develop interventions and technologies now used to save millions of children. Over the past 20 years, USAID has committed more than $6 billion in support of global child survival efforts. About half of those funds were committed from FY2001-FY2008, when Congress appropriated $3.4 billion to child survival and maternal health efforts. Recognizing that six health problems (acute respiratory infections, diarrhea, malaria, HIV/AIDS, measles, neonatal complications) cause about 90% of all child deaths in developing countries and that undernutrition contributes to half of these, USAID allocates a significant proportion of its child survival funds to addressing these health issues. This section summarizes information USAID has presented about its efforts to improve child and maternal health. <4.1. Child Survival and Undernutrition> The United Nations Food and Agriculture Organization (FAO) argues that the vast majority of the nearly 10 million children who die each year "would not die if their bodies and immune systems had not been weakened by hunger and malnutrition." Ten WHO-supported community-based studies conducted from 1991 through 2001 of children under age five found that children who are mildly underweight are about twice as likely to die of infectious diseases as children who are better nourished; for those who are moderately to severely underweight, the risk of death is five to eight times higher. The studies also indicated that 45% of children who died after contracting measles were malnourished, as were more than 60% of children who died after the onset of severe diarrhea. Good nutrition can improve child survival, health, and cognitive development, while undernutrition impairs the immune system. Children with impaired immune systems disproportionately suffer from common childhood illnesses such as diarrhea, pneumonia, and measles. Undernourished children have also been found to be more susceptible to other infectious diseases such as malaria and tuberculosis. This section discusses USAID's nutrition programs, which focus on micronutrient supplementation and fortification and infant and young child feeding (IYCF). <4.1.1. Micronutrient Supplementation and Fortification> "USAID-supported micronutrient programs add vital immune-building micronutrients including zinc, vitamin A, iron, and iodine to processed foods such as rice and sugar." USAID funds are also used to expand research on biofortified crops, which could improve the micronutrient content of basic foods, such as maize enhanced with vitamin A, iron, and zinc; beans enhanced with iron and zinc; and sweet potatoes enhanced with vitamin A. Micronutrient supplementation and other USAID nutrition programs are integrated with other interventions, including safe water, hygiene and sanitation. <4.1.2. Infant and Young Child Feeding> USAID estimates that more than "two-thirds of malnutrition-related infant and child deaths are associated with poor feeding practices during the first two years of life." According to USAID, "less than one third of infants in most countries are exclusively breastfed during the first six months of life." Early cessation of breastfeeding and introducing foods either too early or too late expose infants to disease. USAID contends that the foods that are introduced are often nutritionally inadequate and unsafe. One USAID-supported study showed that "exclusively breastfed infants have 2.5 times fewer episodes of childhood diseases, are four times less likely to die of acute respiratory infection, and are up to 25 times less likely to die of diarrheal diseases." The study also indicated that continued breastfeeding during acute episodes of diarrhea protects infants from loss of energy and protein during illness. In communities affected by HIV/AIDS, USAID works with its implementation partners to integrate safe infant feeding practices with programs that prevent mother-to-child HIV transmission (PMTCT). USAID spends about $30 million each year on nutrition programs, which include Vitamin A, iodine, food fortification, anemia packages, and zinc. <4.2. Child Survival and Acute Respiratory Infections (Pneumonia)> UNICEF asserts that pneumonia can be largely prevented if indoor pollution is minimized and if children are adequately nourished, exclusively breastfed, and receive Vitamin A and zinc supplements (as necessary). Children should also receive the full series of immunizations against infections that directly cause pneumonia, such as Haemophilus influenzae type b (Hib), and those that can lead to pneumonia as a complication (e.g., pertussis). International health organizations also seek to expand access to vaccines that protect against Streptococcus pneumoniae, the most common cause of severe pneumonia among children in the developing world. USAID reports that since 2002, it has supported the administration of immunizations to almost 500 million children and the treatment of more than 375 million cases of child pneumonia. In the mid-1990s, UNICEF and WHO developed the Integrated Management of Childhood Illness (IMCI) with USAID support. The strategy integrates interventions for diarrhea, acute respiratory infections, malnutrition, and malaria. In recent years, USAID has expanded the IMCI strategy. <4.3. Child Survival and Malaria> Approximately 40% of the world's population, mostly those living in the world's poorest countries, are at risk of malaria. Every year, more than 500 million people become severely ill with malaria. Most cases, and most deaths, are in sub-Saharan Africa, though Asia, Latin America, the Middle East, and parts of Europe are also affected. The disease is particularly deadly for children; at least 1 million infants and children under age five in sub-Saharan Africa die each year from malaria approximately one every 30 seconds. USAID has been engaged in malaria eradication efforts since the 1950s. In 2005, the President proposed the President's Malaria Initiative (PMI), an interagency effort that aims to increase support for U.S. international malaria programs by more than $1.2 billion from FY2006 through FY2010 in 15 targeted countries and reduce the number of malaria deaths by 50% in those countries by 2010. USAID coordinates all PMI activities, which are implemented in partnership with the Centers for Disease Control and Prevention (CDC) of the Department of Health and Human Services (HHS). Advancements made under the initiative are not reported by agency, thus it is not possible to distinguish USAID's contributions to U.S. anti-malarial programs. In January 2008, USAID reported that in its first year, PMI reached more than 6 million people and within two years, reached more than 25 million. Activities included indoor residual spraying in 10 PMI countries, benefitting more than 17 million people; procuring and distributing more than 4.7 million long lasting insecticide-treated nets (LLITNs) and retreating more than 1.1 million insecticide-treated nets (ITNs); procuring 12.6 million malarial treatments, including the distribution of 6.2 million; training more than 28,000 health workers in the correct use of malarial treatment; and purchasing more than 4 million anti-malarial tablets to reduce the impact of malaria in pregnancy. <4.4. Child Survival and HIV/AIDS> HIV/AIDS is preventable and treatable, but not curable. Most of the 420,000 children who acquired HIV in 2007 contracted the virus from their HIV-infected mothers during pregnancy, birth, or breastfeeding. With successful interventions the risk of mother-to-child HIV transmission can be reduced to 2%. About 33% of HIV-positive pregnant women in most resource-limited countries where the burden of HIV is highest receive drugs that can prevent mother-to-child HIV transmission (PMTCT). Nevirapine, a drug widely used to prevent mother-to-child HIV transmission, costs between $0.29 and $0.40 per dose. A Nevirapine tablet is taken by the mother at the onset of labor and Nevirapine syrup is given to the infant within 72 hours of birth. WHO asserts that it is critical that children are diagnosed early and provided with antiretroviral therapy (ART) as early as possible, as the course of HIV infection is faster and more aggressive in children. The cost of ART is significantly higher for children than for adults. UNAIDS estimates that an annual supply of generic ARTs costs about $260 per child, while the same regimen for adults costs about $183. Fixed-dosed treatments, in which two or three different drugs are combined in a single pill, have proved to be most effective, though they are more expensive for children. In 2005, a one-year supply of a standard three-drug regimen for an adult costs an average of $148 in low-income countries, but the regimen for children cost $2,000 per child and $800 for a generic version. The Clinton Foundation, however, was able to negotiate with pharmaceutical companies to charge lower prices for pediatric ARTs in its programs about $0.16 per day or $60 per year. Health experts point out that ART is not the only treatment that can be used to reduce child mortality among HIV-positive children. Treatment of opportunistic infections, such as pneumonia, can also improve child survival among HIV-positive children. Cotrimoxazole a drug used to treat pneumonia has been found to reduce mortality in children with HIV/AIDS by about 30% and costs about $0.03 per day or $10 per year. It is estimated that only 10% of the 4 million children who need the drug are receiving it. USAID reports that since 1986, it has spent $6 billion on HIV/AIDS interventions in more than 100 countries. Since the inception of the President's Emergency Plan for AIDS Relief (PEPFAR), USAID stopped reporting its projects' outcomes. Instead all participating agency and department outcomes are reported as PEPFAR advancements. Through September 2007, PEPFAR implementing agencies and departments have provided more than $289.2 million to initiatives that have offered care and support to some 2.7 million orphans and vulnerable children (OVC). PEPFAR's food and nutrition programs reached some 332,000 OVC, 50,000 pregnant or lactating women, and an additional 20,000 severely malnourished individuals who were on ART. PEPFAR's child-focus programs support training for those who care for OVC, promote the use of time- and labor-saving technologies, support income-generating activities, and connect children and families to essential health care and other basic social services. The Administration asserts that support for people living with HIV/AIDS who receive treatment, care, and support services should also be considered when analyzing support for children, as HIV-infected adults receiving support are better able to provide a nurturing, protective environment for their children. Through September 2007, PEPFAR has committed some $1.5 billion for programs that offer care and support to people living with HIV/AIDS. In FY2006 and FY2007, PEPFAR partnerships dedicated nearly $191.5 million to pediatric treatment for some 85,900 children and from FY2004 through FY2007, PEPFAR-implementing agencies supported PMTCT services for women during more than 10 million pregnancies. PMTCT services included the provision of ART to HIV-positive women in over 827,000 pregnancies, preventing an estimated 157,000 infant HIV infections. <4.5. Child Survival and Diarrhea> Through research, UNICEF, WHO, and USAID found that diarrhea could be prevented and treated with Oral Rehydration Salts (ORS) and fluids, breastfeeding, continued feeding, and selective use of antibiotics and zinc supplementation for 10-14 days. USAID reports that since 2002, it has provided more than $1.5 billion in support of the treatment of almost 5 billion episodes of child diarrhea with lifesaving ORS. USAID also controls diarrheal disease by training health workers, promoting breastfeeding, applying social marketing and modern communication techniques, and expanding community capacity to administer ORS. USAID's anti-diarrhea programs also focus on hygiene, which plays a significant role in the transmission of diarrhea. USAID estimates that handwashing with soap can decrease diarrhea prevalence among children by 42% to 46%. While soap is found in most households, USAID contends that handwashing with soap is not common in poorer communities and that soap is usually reserved for bathing or washing clothes and dishes. In one USAID-supported study, 1% of mothers in Burkina Faso used soap to wash their hands after using the toilet and 18% after cleaning a child's bottom. In slums in Lucknow, India, 13% of mothers were observed using soap after cleaning up a child and 20% after going outside to defecate. USAID supports public-private partnerships that promote handwashing with soap and other hygienic practices, such as safe storage and treatment of water, which can reduce diarrhea prevalence by 30% to 40%. <4.6. Child Survival and Measles> WHO asserts that measles immunization is one of the most cost-effective public health interventions available for preventing childhood deaths and that it carries the highest health return for the money spent, saving more lives per unit cost than any other health intervention. The vaccine, injection equipment and operational costs amount to less than $1 per dose. The vaccine, which has been available for more than 40 years, costs about $0.33 per bundled dose (vaccine plus safe injection equipment) if bought through UNICEF. In many countries where the public health burden of rubella and/or mumps is considered to be important, the measles vaccine is often incorporated with rubella and/or mumps vaccines as a combined, live-attenuated (weakened) measles-rubella (MR) or measles-mumps-rubella (MMR) vaccine. If bought through UNICEF, a MR vaccine costs about $0.65 per bundled dose, and MMR costs about $1.04 to $1.50 per bundled dose. Immunization coverage rates for measles vaccination vary significantly by region. WHO and UNICEF estimate that in 2006 about 80% of all children were vaccinated, up from 72% in 2000. From 2000 to 2006, an estimated 478 million children from nine months to 14 years of age received measles vaccinations through supplementary immunization activities in 46 out of the 47 priority countries with the highest burden of measles. These accelerated activities have resulted in a significant reduction in global measles deaths. Overall, global measles mortality decreased by 68% between 2000 and 2006. The largest gains occurred in Africa, where measles cases and deaths fell by 91%. USAID does not indicate how it specifically addresses measles, though it asserts that immunization programs are one of its greatest public health success stories. USAID-supported immunization programs "train health workers; strengthen planning capacity; and improve the quality of service delivery and vaccine administration" in more than 100 countries. USAID also partners with others, such as Global Alliance for Vaccines and Immunization (GAVI), the Vaccine Fund, and the Bill and Melinda Gates Foundation to bolster countries' capacity to administer vaccines. <5. USAID's Efforts to Improve Maternal and Newborn Health46> USAID's maternal health programs seek to ensure healthy pregnancy outcomes in low-resource environments through a wide range of interventions, including nutritional supplementation for mothers, treatment for parasitic worms that disrupt nutrient absorption, tetanus toxoid immunizations, prevention of mother-to-child HIV transmission, intermittent treatment for malaria, and detection and treatment of syphilis. USAID advocates that families plan for all births to be attended by a skilled birth attendant and that communities develop contingency plans for accessing emergency obstetric care for mothers who deliver at home the preferred method in many cultures. USAID trains birth attendants to avert infant deaths by facilitating infant breathing, resuscitating, and caring for the infant in the event of birth asphyxia; ensuring hygienic cord and eye care; and encouraging immediate breastfeeding. Community-based maternal health interventions include teaching families and communities to recognize birth complications and where to bring a mother for emergency care, identifying transportation to a hospital ahead of time, identifying a blood donor for the mother, and creating a savings plan for health care costs. This section discusses how USAID reports it addresses key causes of maternal mortality. <5.1. Maternal Health and Hemorrhage> USAID estimates that 32% of all maternal deaths are caused by postpartum hemorrhage. Low-cost interventions can prevent and treat the condition. In order to avert postpartum hemorrhage deaths, USAID urges communities to ensure that all mothers give birth in the presence of a trained health care practitioner who can administer drugs that slow or stop the bleeding and apply other life-saving techniques to prevent and treat postpartum hemorrhage. USAID-supported programs train birth attendants to actively manage the third stage of labor, which includes controlled traction of the umbilical cord, uterine massage, and the use of oxytocin a drug that slows the flow of blood. USAID reports that this intervention can prevent 60% of hemorrhages. <5.2. Maternal Health and Sepsis> On average, sepsis or other infections cause nearly 10% of all maternal deaths in Africa, Asia, Latin America, and the Caribbean. A number of factors contribute to this problem. A USAID-supported study identified unhygienic delivery practices as a key cause of the affliction. Common practices such as introducing unclean hands, local herbs, or cloths inside the vagina during or after delivery and delivering in unclean conditions all contribute to sepsis. In addition, untrained delivery attendants might also use unclean instruments to cut the umbilical cord. USAID supports efforts to distribute delivery kits and ensure the presence of a trained delivery attendant at each birth to prevent mothers and babies from contracting sepsis. In addition, USAID trains birth attendants to identify signs of infection and to use antibiotics and other measures, where necessary. <5.3. Maternal Health and Hypertensive Disorders> Hypertensive disorders cause about 9% of maternal deaths in Africa and Asia and nearly 26% of maternal deaths in Latin America and the Caribbean. USAID trains health care providers to recognize the signs and symptoms of pre-eclampsia (high blood pressure and proteinuria) and of eclampsia (convulsions) and to treat mothers with anti-convulsant drugs and supportive care. <5.4. Maternal Health and Prolonged or Obstructed Labor> A mother might experience prolonged or obstructed labor if she is unable to deliver her baby for any number of reasons, including the position of the baby, the direction in which the baby faces, or if the baby's head can not fit through the mother's pelvis. If the delivery complication is not resolved, the baby may die or the mother and/or baby can suffer life-long debilities. Obstetric fistula is one of the most common consequences of prolonged or obstructed labor for pregnant women in low-resource settings. Young girls and women who were stunted due to undernourishment, and who live in areas without obstetric care, are more likely to develop obstetric fistula because of their underdeveloped pelvic regions. In Kenya, one study found that 45% of all fistula cases were among adolescents. Obstetric fistula can be prevented by delaying pregnancy until the girl's pelvic region is fully developed, ensuring that women have ready access to emergency obstetric care in the case of prolonged labor, and removing the fetus through a caesarean surgery when needed. USAID reports that it has supported fistula prevention programs since 1989 and repair programs since 2005. Obstetric fistula prevention programs are commonly integrated with other programs that address the major causes of maternal death and disability. Key activities include increasing access for women to emergency obstetrical care, encouraging the postponement of child marriage and sexual debut, training families and community health practitioners to identify the signs of prolonged or obstructed labor, increasing access for women to emergency obstetrical care, and reducing stigma about obstetric fistula. <5.5. Maternal Health and Unsafe Abortions> WHO estimates that complications due to unsafe abortion procedures account for 13% of maternal deaths worldwide, amounting to 67,000 deaths each year. There are significant regional variations, however. In Latin America and the Caribbean, the practice accounts for 12% of maternal deaths on average, while in Africa, about 4% of women die after attempting an unsafe abortion. USAID reports that its international family planning programs help to avoid these deaths and that it has helped to avert an estimated 4 million maternal deaths over the last 20 years. <6. Changes in USAID Global Health Appropriations> <6.1. FY2001-FY2003> From FY2001 to FY2003, appropriations to USAID's CS/MH programs, in current terms, grew by about 8%, and overall support for USAID's global health programs grew by about 28% ( Table 7 ). The bulk of that growth came from increases in appropriations to HIV/AIDS and other infectious diseases (OID), which each grew by 65% and 24%, respectively. Higher appropriations for HIV/AIDS programs during this time period reflect support for the President's International Mother and Child HIV Prevention Initiative. The majority of OID funds were directed to tuberculosis and malaria programs. Throughout these years, Congress also demonstrated its strong support for the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria (Global Fund) with increased appropriations for U.S. contributions to the Fund ( Table 7 and Figure 1 ). <6.2. FY2004-FY2008> From FY2004 through FY2008, U.S. support for global HIV/AIDS, TB, and malaria programs began to dominate discussions about USAID's health programs. While some Members applauded the Administration's focus on HIV/AIDS, particularly through the President's Emergency Plan for AIDS Relief (PEPFAR), they questioned why the Administration requested less for other global health interventions, particularly those related to child survival, maternal health, family planning, and reproductive health. Other Members challenged the Administration to consider the ability of recipient countries to absorb burgeoning HIV/AIDS funds because of overtaxed health infrastructures. Congress urged the Administration to better integrate HIV/AIDS and other health programs, particularly those related to TB and nutrition. Still, appropriations to HIV/AIDS, TB, and malaria far outpaced support for USAID's other health programs. From FY2004 through FY2008, Congress provided $19.7 billion for global HIV/AIDS, TB, and malaria programs. During that same time period, Congress appropriated $4.6 billion to USAID's child survival and maternal health, vulnerable children, and family planning and reproductive health initiatives ( Table 8 and Figure 2 ). <7. Issues for Congress> Congress has consistently boosted appropriations to USAID's global health programs throughout the Administration of President George W. Bush, though mostly for specific diseases. From FY2001 through FY2008, Congress has supported the President's calls for higher spending on targeted, disease-specific U.S. programs through three key initiatives: the President's International Mother and Child HIV Prevention Initiative (FY2002-FY2004), PEPFAR (FY2004-FY2008), and the President's Malaria Initiative (FY2006-FY2010). At the same time, appropriations to other health issues, such as child survival and maternal health have changed little (with the exception of FY2008, when appropriations to CS/MH activities increased). While most health experts applaud the recent increase in U.S. commitment to countering the global spread of diseases like HIV/AIDS, many remained concerned that other health programs that offer life-saving interventions for women and children are overlooked and underfunded, particularly in sub-Saharan Africa. The World Health Organization asserts that some two-thirds of child deaths are preventable through practical, low-cost interventions. Those expressing concern about the apportionment of U.S. global health funds argue that HIV/AIDS, TB, and malaria are not the only diseases killing people. In addition to proposing an increase in funding for CS/MH programs, some observers urge Congress to boost support for other health issues that affect child survival and maternal health. <7.1. Consider Role of Family Planning in Improving Maternal and Child Health> Some urge Congress to consider how voluntary family planning could improve maternal and child health. According to USAID, family planning activities protect the health of women by reducing high-risk pregnancies and the health of children by allowing sufficient time between pregnancies; prevent HIV/AIDS with information, counseling, and access to male and female condoms; reduce abortions; and protect the environment by stabilizing population growth. Others oppose funding family planning for a number of reasons, including concern that in some countries abortions and coercive practices may occur in family planning programs. Family planning can help improve the morbidity and mortality rates of adolescent girls. In many rural areas of developing countries, girls are married and begin to have children in their teen years. Some research indicates that mothers younger than 20 years of age are at higher risk of delivering low-birthweight babies and suffer more pregnancy and delivery complications, such as toxemia, anemia, premature delivery, prolonged labor, and cervical trauma. Girls between 15 and 19 years of age are twice as likely to die from childbirth as women in their twenties, and those younger than 15 years of age are five times as likely to die. Young girls are also more likely to develop obstetric fistula. In Kenya, one study found that 45% of all fistula cases were among adolescents. Obstetric fistula can be prevented by delaying pregnancy until the girl's pelvic region is fully developed and performing caesarean surgery when needed. The condition can be repaired for about $300, a cost that is prohibitive to most young girls and women in the most affected countries. <7.2. Increase Support for Health System Strengthening and Improve Donor Coordination> Some observers advocate that Congress increase spending on health systems, because to significantly reduce maternal and child mortality, governments must be able to effectively undertake a range of health strategies, including ensuring income and food levels; the nutritional and health status of mothers; access to immunizations, oral rehydration therapy, and maternal and child health services (including prenatal care); safe drinking water; and basic sanitation. Improvements in these areas are significantly affected by the strength of health systems and availability of health workers. UNICEF has found that without donor support, health systems in many countries cannot deliver essential interventions (such as vaccinations) sufficiently enough to reduce mortality nationwide. Supporters of strengthening health systems urge Congress to direct USAID to better coordinate its health assistance with other donors and with respective health ministries to improve efficiency and overall health outcomes. Proponents of this idea point to WHO's International Health Partnership and related Initiatives (IHP+) a coalition of international health agencies, governments, and donors committed to improving health and development outcomes in developing countries and reaching the health-related MDGs. The IHP+ encourages donors to create a compact with countries to commit development partners and governments to support one results-oriented national health plan in a harmonized way that will ensure predictable, long-term financing from both national and international sources. A compact is a contract through which the international community and the recipient country reach consensus on results based on mutual accountability. Country compacts bind all donors and respective government agencies to one single country health plan, one monitoring and evaluation plan, one budget (with external funding harmonized with recipient countries' budget cycles), one reporting and validation process, and benchmarks for government performance. <7.3. Encourage Governments to Increase National Health Budgets> Global health experts increasingly underscore the role recipient governments should play in improving health systems. Some critics contend that donors must consider the role that political will plays in minimal health spending by many developing countries. According to the International Monetary Fund (IMF), when asked about the most important reason health funds go unspent, some 29% of health practitioners who were surveyed cited a lack of political will, and only 1% blamed IMF or World Bank restrictions. According to WHO, on average each year, the 57 countries with severe shortages of health workers spend about $33 per person on health; comparatively, each year the U.S. government spends approximately, $2,548 per capita on health. The entire continent of Africa spends less than 1% of the world's expenditure on health. African leaders have pledged to increase spending on health. In April 2001, Members of the African Union (AU) and the Organization of African Unity (OAU) signed the Abuja Declaration on HIV/AIDS, Tuberculosis, and Other Infectious Diseases , in which signatories pledged to spend at least 15% of their national budgets on health care. According to the Progress Report on the Implementation of the Plans of Action of the Abuja Declarations on Malaria (2000), and HIV/AIDS and Tuberculosis (2000/1 to 2005) , 33% of AU States had allocated 10% or more of their national budgets to the health sector by 2004, 38% spent between 5% and 10% on health care, and 29% indicated reserving less than 5% of their national budgets for health systems. Only Botswana reported spending at least 15% on health. Although most health experts agree that African governments need to boost their health budgets, some counter that poor political will is not the primary cause of low health spending. Instead, opponents argue that structural adjustment programs and conditional lending practices have limited African governments' abilities to increase investments in public health and health worker education. Shrunken health budgets have led to a decline in the quality of education and training opportunities for medical students, a perpetual shortage of health supplies and equipment (e.g., sanitation gloves and hypodermic needles), insufficient medicine and vaccine stocks, and a brain drain of African health workers. The International Development Research Center maintains, however, that discussions about the impact of structural adjustment, conditional lending, and health reform on public health infrastructures are often laden with biased terminology that observers use to make "sweeping triumphalist or catastrophist arguments." The organization found that results of structural adjustment, conditional lending, and health reform were mixed and that the organization could "support neither the opinion of those who believe the erosion of public expenditure on health is a characteristic feature of adjustment, nor of those who hold the opposite view." <8. Legislation Introduced in the 110th Congress Related to Maternal and Child Health> Below is a list of bills introduced to date in the 110 th Congress to directly and indirectly improve maternal and child health. H.Amdt. 360 to H.R. 2764 , Consolidated Appropriations Act of 2008, increased support for maternal and child health by $5 million for FY2008. The amendment was incorporated into the bill, which was enacted and became P.L. 110-161 . H.R. 5501 and S. 2731 , Tom Lantos and Henry J. Hyde United States Global Leadership Against HIV/AIDS, Tuberculosis, and Malaria Reauthorization Act of 2008, authorize $50 billion and $48 billion, respectively, for international HIV/AIDS, TB, and malaria interventions and require that women receiving drugs to prevent mother-to-child HIV transmission are also provided with or referred to appropriate maternal and child services. The House version, which passed by recorded vote, 308-116, calls for linkages to and referral systems for NGOs that implement multi-sectoral approaches for access to HIV/AIDS education and testing in family planning and maternal health programs supported by the United States. The Senate version does not include language on family planning. The Senate passed H.R. 5501 by voice vote, 80-16, with a substitute amendment that inserted the language of S. 2731 after amendments were made on the Senate floor. H.R. 1302 and S. 2433 , Global Poverty Act of 2007, require the President to develop and implement a comprehensive strategy to advance U.S. efforts to promote the reduction of global poverty, the elimination of extreme global poverty, and the achievement of the Millennium Development Goal of reducing by one-half the proportion of people worldwide, between 1990 and 2015, who live on less than $1 per day. Language in the bills indicates that improving maternal and child health is part of this comprehensive strategy. The House passed the bill by voice vote on September 25, 2007, and referred it to the Senate Foreign Relations Committee. The Senate version was placed on the Senate calendar on April 24, 2007. H.R. 2266 and S. 1418 , U.S. Commitment to Global Child Survival Act of 2007, provide assistance to improve the health of newborns, children, and mothers in developing countries, and for other purposes. The House version was referred to the House Foreign Affairs Committee. The Senate version was reported out of the Senate Foreign Relations Committee and placed on the Senate legislative calendar. H.R. 1225 , Focus on Family Health Worldwide Act of 2007, amends the Foreign Assistance Act of 1961 to improve voluntary family planning programs in developing countries, and for other purposes. The bill was referred to the House Foreign Affairs Committee. H.R. 2114 , Repairing Young Women's Lives Around the World Act, provides a U.S. voluntary contribution to the United Nations Population Fund for the prevention, treatment, and repair of obstetric fistula. The bill was referred to the House Foreign Affairs Committee. H.R. 2604 , United Nations Population Fund Women's Health and Dignity Act, provides financial and other support to the United Nations Population Fund to carry out activities to save women's lives, limit the incidence of abortion and maternal mortality associated with unsafe abortion, promote universal access to safe and reliable family planning, and assist women, children, and men in developing countries to live better lives. The bill was referred to the House Foreign Affairs Committee. S. 1998 , International Child Marriage Prevention Act of 2007, authorizes funds to reduce child marriage, and for other purposes. The bill was referred to the Senate Foreign Relations Committee. S. 2682 , United Nations Population Fund Restoration Act of 2008, directs U.S. funding to the United Nations Population Fund for certain purposes including maternal and child health. The bill was referred to the Senate Foreign Relations Committee. H.Res. 1045 , Global Security Priorities Resolution, while acknowledging a need to address the threat of international terrorism and protect the global security of the United States, calls for reducing the number and accessibility of nuclear weapons and preventing their proliferation. The resolution estimates that "the savings generated in the long term by significant reduction of nuclear armaments will be appreciable, with estimates as high as $13 million annually." The resolution directs a portion of these savings towards child survival, hunger, and universal education, and calling on the President to take action to achieve these goals. The resolution was referred to the House Foreign Affairs Committee. H.Res. 1022 , affirms the House's commitment to promoting maternal health and child survival at home and abroad through greater international investment and participation and recognizes maternal health and child survival as fundamental to the well-being of families and societies, and to global development and prosperity. The House agreed to suspend the rules and agree to the resolution, as amended, but the motion to reconsider was agreed to without objection.

Appropriations for child survival and maternal health programs (CS/MH) have grown by about 22% during the tenure of President George W. Bush. Most of that growth occurred in FY2008, when Congress provided $521.9 million for CS/MH programs, up from $361.1 million in FY2001. Although Congress provided support during this time for other global health initiatives that affect CS/MH, such as some $19.7 billion for international programs that prevent and treat human immunodeficiency virus/ acquired immunodeficiency syndrome (HIV/AIDS), tuberculosis (TB), and malaria, other global health interventions are discussed only as they relate to USAID's CS/MH programs. According to latest estimates, 9.7 million children under the age of five died in 2006; some 26,000 each day. The majority of those deaths occurred in developing countries, and almost half of them in Africa. On average, nearly 90% of all child deaths are caused by neonatal infections and five other diseases: acute respiratory infections (primarily pneumonia), diarrhea, malaria, measles, and HIV/AIDS. Undernutrition contributes to more than half of these deaths. More than 500,000 women die each year due to pregnancy-related causes, and many more suffer debilitating long-term effects, such as obstetric fistula. Most of these deaths occur in developing countries. About 20% of global maternal deaths are linked to undernutrition, and about 75% result from obstetric complications, most often hemorrhage, sepsis, eclampsia, and prolonged or obstructed labor. While most health experts applaud the recent increase in U.S. commitment to global health, many remain concerned that funding is largely aimed at specific diseases, such as HIV/AIDS and malaria. Other health programs that offer life-saving interventions for women and children are overlooked and underfunded, they contend, particularly in sub-Saharan Africa. In addition to proposing an increase in funding for CS/MH programs, some observers urge Congress to boost support for health systems so that countries can better address a wide range of health issues that affect child survival and maternal health. This report will be updated at the end of the 110th Congress.

When the Mississippi River rose to near record levels in 2011, the U.S. Army Corps of Engineers (Corps) intentionally broke several levees along the river, thereby flooding normally protected areas in order to prevent greater damage elsewhere. The decision to detonate levees has been controversial, with opponents arguing that levee detonation combined with the resulting flooding may render extensive amounts of farmland unproductive for a generation. The 2011 Mississippi River floods brought renewed attention to federal liability for floods, which has been the subject of ongoing litigation since Hurricane Katrina. Hurricane Katrina struck the Gulf Coast in August 2005, bringing with it rain, high-velocity winds, and a large storm surge, and leaving behind a massive path of destruction. Much of the extensive damage that occurred resulted when the storm surge breached levees and floodwalls protecting New Orleans. Some of these structures were part of the federally authorized Lake Pontchartrain and Vicinity Project (LPV), constructed by the Corps and maintained by local levee districts. By August 31, 2005, 80% of New Orleans was under water. While some flooding was expected in New Orleans, primarily because the city sits below sea level and lacks natural drainage, the extent of inundation was unprecedented. In many instances, like that of Katrina, floods occur when natural conditions prove too extreme for flood control structures or those structures fail. In other instances, like that of the 2011 Mississippi River flooding, the Corps may flood certain lands in order to reduce damage to other areas. This report examines the legal issues resulting from flood damage in both instances. It analyzes the general framework of liability claims for flood damage and federal government immunity under the Federal Tort Claims Act (FTCA) and the Flood Control Act of 1928 (FCA). The report specifically analyzes claims for federal liability for damage caused by Katrina. Finally, it examines the legal issues surrounding the Corps' decision to activate floodways along the Mississippi River in 2011. <1. Theories of Liability and Sources of Immunity> As a threshold issue, any suit against the federal government (including the Corps) must overcome the doctrine of sovereign immunity. Sovereign immunity means that the government cannot be sued. Congress, however, may waive sovereign immunity and allow the federal government to be sued in specific circumstances. The plaintiff bears the burden of proving that it has the right to sue the government. The FTCA and the FCA govern when lawsuits may be filed against the federal government for flood damages. The FTCA and the FCA frequently appear as defenses to the same claim. One federal circuit court has held that the FTCA does not overrule or invalidate the immunity provision of the FCA. Courts generally consider the underlying liability claim only after determining that the immunity provisions do not apply. <1.1. Federal Tort Claims Act> The FTCA waives the federal government's sovereign immunity if a harmful act of a federal employee causes damage. Specifically, the FTCA creates liability for the following: injury or loss of property, or personal injury or death caused by the negligent or wrongful act or omission of any employee of the government while acting within the scope of his office or employment, under circumstances where the United States, if a private person would be liable to the claimant in accordance with the law of the place where the act of omission occurred. <1.1.1. Discretionary Function Exception> The FTCA contains a number of exceptions under which the United States may not be held liable even if negligent. Among these, the discretionary function exception prevents the government from being sued for any claim ... based upon the exercise or performance or the failure to exercise or perform a discretionary function or duty on the part of a federal agency or an employee of the government, whether or not the discretion involved be abused. The Supreme Court has provided clarification on the discretionary function exception of the FTCA. In Dalehite v. United States , the Court described discretion as being "more than the initiation of programs and activities. It also includes determinations made by executives or administrators in establishing plans, specifications or schedules of operations. Where there is room for policy judgment and decision there is discretion." In United States v. Varig , the Supreme Court found that an agency's execution of a decided-upon action is also a discretionary action. In United States v. Gaubert , the Court stated a two-part test for applying the discretionary function exception. Under the test, (1) the challenged conduct must involve an element of judgment or choice, and (2) the judgment or choice must be based on considerations of public policy. Claims arising from the performance (or non-performance) of mandatory functions required by statute are actionable under the FTCA. Thus, if the government fails to comply with an action required by Congress, the government is not protected from liability. If an action includes both mandatory and discretionary elements, the court must determine which part of the government action Congress specifically required, and which part involved discretion. For example, although Congress specifically required construction of the New Orleans Hurricane Protection System, how it was constructed was discretionary. <1.1.2. Immunity for Corps of Engineers Projects Under the Discretionary Function Exception> Courts typically interpret the discretionary function exception broadly. Generally, the discretionary function exception has prevented claims against the United States for water damage to real property resulting from negligent design or construction of flood control or irrigation projects. In Vaizburd v. United States , plaintiffs alleged that a Corps project to reduce storm damage and protect the shoreline damaged their property because of negligent design and implementation. The court used the Gaubert two-part test to find that the Corps exercised discretion in the design, planning, and implementation of the project. The court found that the Corps chose from several different project plan designs in light of a number of policy considerations, including cost, reliability, resource allocation, environmental protection, and political implications. The court also found that even though the project was required by statute, the actual implementation of the project was not dictated by any plan, regulation, or statute, and thus, the Corps had discretion in how to implement the project. Accordingly, even if there has been negligent design or implementation, the presence of choice and judgment may allow the discretionary function exception to preclude any claim against the United States. A discretionary function can exist in the choice of materials for a required project. In United States v. Ure , the plaintiff argued that the government was negligent in constructing an irrigation canal that burst and flooded the plaintiff's property. The plaintiff claimed the government's duty to ensure against breaks was breached because the canal had not been constructed with a stronger (and more expensive) material. Ultimately, the court found that the government's cost-based decision not to use stronger material was subject to the discretionary function exception. Similarly, when the government builds infrastructure to withstand a certain level of storm, although recognizing that more powerful storms are possible, courts have held that the discretionary function exception applies. In Valley Cattle Co. v. United States , the plaintiff contended that the government was negligent and liable for damages because its flood preparations could handle only a "two-year storm" despite knowledge that much stronger storms hit the area. The court found that the government made decisions at the planning level to prepare only for a two-year storm based on policy factors, and was immune from liability because of the discretionary function exception. Even deciding to delay project improvements can excuse liability under the discretionary function exception. In National Union Fire Insurance v. United States , the court held the Corps' decision to delay a small improvement to a breakwater while planning for a larger improvement was a choice immune from liability. Despite the Corps' awareness of problems with the breakwater protection prior to the plaintiff's property being damaged, the court held that the FTCA's discretionary function exception applied because the Corps had made a decision regarding timing of the improvements. The court also found that considering the cost of greater safety is a discretionary function. Under some circumstances, maintenance has been found not to be a discretionary action. In E. Ritter & Co. v. U.S. Army Corps of Engineers , the court found the government liable for failing to maintain a flood control project. Although the Corps had decided not to maintain the banks of the project, the court found that the discretionary function exception did not automatically apply whenever a decision was involved. Relying on the second prong of the Gaubert test, the court found that only government decisions based on considerations of public policy are protected by the exception. The court found the discretionary function exception did not apply because operating the project incorrectly was not part of the Corps' mandated policy to prevent flooding. In more recent cases, courts have found that the level of maintenance of a government project involved considerations of public policy. In a case based on the National Park Service's (NPS's) failure to maintain a road, the court looked at whether a decision had been made regarding maintenance. It considered that the NPS had developed a maintenance task list, and that maintaining that particular road was to occur following other projects. According to the court, scheduling was discretionary, since agencies are allowed to establish priorities "by balancing the objectives sought to be obtained against such practical considerations as staffing and funding." In a similar case, NPS trail maintenance was held to be a discretionary action. In that case, the court reviewed the policy-prong of the Gaubert test to find that agencies are allowed to balance public policy against "the constraints of resources available to them." <1.2. Flood Control Act of 1928> Even if litigants are able to refute the discretionary function exception and sue the government under the FTCA, the FCA offers additional immunity to the federal government. Section 702c of the FCA provides that "no liability of any kind shall attach to or rest upon the United States from any damage from or by floods or flood waters." Section 702c immunity is not available exclusively to the Corps, but rather may also be available to the Bureau of Reclamation within the Department of the Interior. The overall breadth and scope of FCA immunity from liability is the subject of considerable controversy and litigation. Despite the Supreme Court's comment that "it is difficult to imagine broader language," the case history of the FCA evidences a more nuanced application. In response to a large flood that devastated the Mississippi River Valley in 1927, Congress enacted the FCA in order to fund large flood control projects while limiting government liability for those projects. Essentially, the FCA's immunity provision allowed the government to assist in preventing flood damage without simultaneously subjecting itself to liability if its efforts could not control all damage. <1.2.1. United States v. James: Immunity for Flood Project Waters> The Supreme Court applied Section 702c immunity broadly in United States v. James . In that case, the petitioners filed wrongful death claims against the government after two recreational boaters drowned in the reservoirs of federal flood control projects. The Court wrote that the language of Section 702c was unambiguous and should be given its "plain meaning." Damage under the act included both personal and property damage. In reaching its conclusion, the court looked at the purpose of the act, which was to limit federal liability for flood control projects. In dicta, the court reasoned that the terms flood or flood waters applied to "all waters contained in or carried through a federal flood control project for purposes of or related to flood control, as well as to waters that such projects cannot control." This holding was interpreted by most courts to mean that if a public works project has flood control as one of its purposes, Section 702c immunity would apply. Following the James decision, the courts disagreed on the relationship a federal project must have to flood control in order for the government to have immunity. While all circuits agreed that federally funded public works projects "wholly unrelated" to flood protection purposes are not entitled to Section 702c immunity, confusion arose among the circuits regarding exactly how connected the project must be to flood control in order to invoke Section 702c immunity. The U.S. Supreme Court declined to address this issue in 1992 when it denied review in Hiersche v. United States . In Hiersche , the family of a diver under contract with the federal government to inspect fish screens on the Columbia River sued the government for wrongful death after the diver was fatally injured. The family alleged that the death was caused by the government employees' failure to shut off water flow to the fish bypass system according to plan. The Court declined to review the case, and Justice Stevens issued a concurring memorandum explaining that while it is generally the Court's "duty to resolve conflicts among the courts of appeals," some conflicts, including issues presented in Hiersche , "can be resolved more effectively by Congress." Justice Stevens further discussed Section 702c immunity, stating: The statute at issue here is an anachronism. It was enacted 18 years before the [FTCA] waived the Federal Government's sovereign immunity from liability for personal injuries. At the time of its enactment, no consideration was given to the power generation, recreational, and conservation purposes of flood-control projects, or to their possible impact on the then nonexistent federal liability for personal injury and death caused by negligent operation of such projects. Today this obsolete legislative remnant is nothing more than an engine of injustice. Congress, not this Court, has the primary duty to confront the question whether any part of this harsh immunity doctrine should be retained. Congress remains able to reconsider issues of federal immunity related to flood damage and flood control projects legislatively. As statutory provisions of immunity, it is within Congress's authority to define the scope of the protections offered by both the FTCA and FCA. <1.2.2. Central Green Company v. United States: Immunity for Floods and Floodwaters> In 2001 the Supreme Court revisited its interpretation of Section 702 immunity in Central Green Company v. United States . The Court held that the portion of the James decision that referred to flood control projects was dicta, rendering the bulk of litigation following James of little precedential value. In Central Green , the Court did not focus on the character of the federal project or the purpose it served, but looked at the waters that caused the damage and the purpose for their release. The unanimous Court held that "in determining whether 702c immunity attaches, courts should consider the character of the waters that cause the relevant damage rather than the relation between that damage and a flood control project." Like the discretionary function exception, Section 702c immunity had been claimed in a broad range of cases. A federal district court refused to grant Section 702c immunity for a wrongful death claim in which the victim died after driving into a lake that was created by a flood control project. The victim's family argued that the government negligently designed the road such that drivers were led into the lake. The court explained that "simply because waters are in some way related to a flood control project is insufficient" to satisfy immunity requirements under Central Green and noted that there was "no evidence that the lake overflowed or that [the victim] drowned because flood waters engulfed her car." Without such a link to floods or floodwaters, the court reasoned that the government could not claim Section 702c immunity. However, when floodwaters released during the operation of a flood control project cause injury or death, Section 702c immunity applies under Central Green . When federal operators opened spillway gates at Fort Loudoun Dam in 2003 to discharge water in order to maintain flood control capacity in lakes upstream from the dam, boaters were pulled by undercurrents and ultimately drowned. A federal district court held that the government was immune from liability because the operation of the spillway gates was a flood control activity. <2. Levee Failure and Hurricane Katrina Flooding> In the aftermath of Katrina, numerous legal claims were filed against the government for flood damage. A fundamental question has been whether the breaches occurred because the storm surge was greater than the hurricane protection system was designed to contain, or whether faulty design, construction, or maintenance of the system caused the breaches. Studies indicate that both problems may have played a part. According to a National Hurricane Center (NHC) report, most of the breaches resulted from overtopping, where the water exceeded the protective structures, but some New Orleans floodwall breaches occurred before the surge exceeded the structures' design, meaning the floodwalls failed. Litigation against the federal government and some contractors is ongoing and has been consolidated under the heading In re Katrina Canal Breaches Consolidated Litigation , in the federal District Court for the Eastern District of Louisiana. The legal defenses available to the federal government depend on the facts underlying the specific flooding incident. Therefore, some background regarding Hurricane Katrina's flooding of New Orleans is necessary to analyze the legal issues. <2.1. New Orleans Hurricane Protection System> New Orleans is situated below sea level and is virtually surrounded by water, with Lake Pontchartrain to its north and the Mississippi River to the south. Not far to the east is the Gulf of Mexico. The city faces flooding risks from the Mississippi River, coastal storms, and heavy precipitation. A system of levees and floodwalls was designed to protect the city from the river and coastal storms. Levees are typically broad, earthen structures, while floodwalls are made of concrete and steel, built atop a levee or in place of a levee. The infrastructure around New Orleans represented a combination of federal and local investments and responsibilities, and is referred to in this report as the Hurricane Protection System. Like most of the nation's flood and storm damage reduction infrastructure, many of the levees and floodwalls in New Orleans were built by the federal government but are maintained by local governments and local levee districts once they are completed. Some portions of the Lake Pontchartrain and Vicinity Hurricane Protection Project (LPV), the project most relevant to the Katrina failures, were under construction when Katrina struck. Consequently, while some portions of the system were managed by the levee districts, other portions were still under the Corps' jurisdiction. Since the 1965 Lake Pontchartrain Act, more than 20,000 acres of coastal wetlands have been lost because of some storm damage reduction projects in Louisiana. Because marshlands may slow storm surges, a finding that storm reduction projects reduced protective wetlands may affect the Corps' liability. Moreover, some media reports asserted that the Corps was planning "an array of hurricane-protection projects" in the region surrounding New Orleans in 2002. Such plans might indicate a decision by the Corps to design a new system rather than improve an existing one, and could affect the Corps' liability. <2.2. Failure of the Hurricane Protection System> With respect to the failure of the Hurricane Protection System in New Orleans, a central question has been whether the design of the levees and floodwalls was exceeded or whether they were poorly designed, constructed, or maintained. A significant amount of flooding in New Orleans resulted from structural failure of levees and floodwalls, allowing waters from Lake Pontchartrain, Lake Borgne, and other stormwaters to flow into the low-lying city. Although the protection system was designed to withstand a Category 3 hurricane and Hurricane Katrina was a Category 3 storm at the time of landfall, its storm surges were higher than normal for such a storm. In addition, Katrina dumped more than five inches of rainfall on New Orleans in eight hours. The Hurricane Protection System failed in approximately 50 locations and for a variety of reasons. The vast majority of those failures occurred because waters that exceeded the design capacity of the system flowed over the floodwalls. However, evidence gathered by a panel of experts commissioned by the Corps suggests that at least four levees/floodwalls were breached before they exceeded their design capacity. Following Katrina, the Corps commissioned an extensive report via a multiparty task force known as the Interagency Performance Evaluation Task Force (IPET). The IPET report did not identify one failure, but a series of failures, noting that if one part of the city's flood protection system failed, the risk of failure to the others consequently increased. IPET found "differences in the quality of materials used in levees, differences in the conservativeness of floodwall designs, and variations in structure protective elevations due to subsidence and construction below the design intent due to error in interpretation of datums" all contributed to inconsistent protection within the system. The IPET report states that the 17 th Street and London Avenue levees experienced foundation failures prior to water levels reaching the design levels of protection. The storm surges in the Inner Harbor Navigation Canal (IHNC) exceeded design levels, but IPET also found that the walls had subsided by more than 2 feet, contributing to the amount of overtopping that occurred. Another theory is that the levees were overtopped or breached because the storm surge was enhanced by the Mississippi River Gulf Outlet (MRGO). MRGO (also known as Mr. Go) is a 76-mile navigational channel between the Port of New Orleans and the Gulf of Mexico. It is designed as a shortcut for ships. Studies have reviewed whether MRGO became a hurricane highway, or a funnel, accelerating the movement of water from the Gulf into the IHNC. While IPET found that MRGO did not accelerate the movement of the water, it did find that a portion of MRGO allowed Lake Borgne waters to be pushed into the interior of New Orleans. IPET found that this connection amplified the surge level and velocity through the interior of the city and raised the level of Lake Pontchartrain. In turn, that increased the pressure on the levees throughout the area, according to IPET. <2.3. Hurricane Katrina Liability> <2.3.1. Federal Tort Claims Act> To determine whether FTCA's discretionary function exception applies to the various claims in the Katrina litigation, the court would apply the Gaubert test: (1) the challenged conduct must involve an element of judgment or choice, and (2) the judgment or choice must be based on considerations of public policy. Hence, to be successful, a suit based on the FTCA would have to show that policy decisions and government discretion did not play any part in building the Hurricane Protection System. The resolution of these questions should be independent of any decision regarding negligence or fault. Congress authorized and delegated primary design and construction responsibility to the Corps for the Hurricane Protection System in the Flood Control Act of 1965. The construction of the system was ongoing when Hurricane Katrina hit the city in 2005. In the decades preceding Katrina, the Corps had revised the design and construction of the Hurricane Protection System for a number of reasons, including cost, environmental factors, technical issues, additional land requirements, and aesthetic issues. Thus, the overall design and construction required balancing many different policy factors, supporting the government's invocation of immunity under the discretionary function exception. A more difficult issue may be liability related to maintenance of the system. As discussed earlier, the courts are inconsistent as to whether maintenance is a discretionary action. Courts tend to find that decisions contrary to public policy and unsupported by documentation of the public policy considerations are not discretionary. The Corps' ongoing evaluation of a new Hurricane Protection System could bolster the argument that the Corps was considering public policy when it chose to work on a new system, rather than expend funds on an existing system. It also is not clear who was responsible for maintaining the various levees and floodwalls, because local levee districts managed them only after they were completed, and not all were completed. Discretionary immunity would not apply if persons at the operational level failed to maintain the system according to a prescribed protocol. For example, if inspections had to meet specific guidelines, or if various assessments were strictly prescribed, there may be little or no discretion involved. However, any documented choice involving prioritization would likely be considered a discretionary action, exempting the government from liability. Thus far, the district court has recognized that the FTCA's discretionary function exception applied to alleged negligence related to dredging of the 17 th Street Canal. The court explained that the decision to issue a dredging permit "was a policy judgment left to the Corps to balance a myriad of factors, including flood hazards as opposed to the needs and welfare of the people." Accordingly, challenges related to those particular Corps actions have been barred under the FTCA. On the other hand, the court held that the Corps could not invoke discretionary function immunity with respect to the maintenance and operation of MRGO. In that case, the court explained that the Corps' actions "were in direct contravention of professional engineering and safety standards" and that such actions "are not policy." Furthermore, the court found that the government did not meet the Gaubert test, citing the Corps' failure to comply with its mandatory duty under the National Environmental Policy Act when it did not report that "MRGO was causing significant changes in the environment" and the effects that such changes may have on the surrounding community. The application of FTCA's discretionary function exception to other claims, including those relating to the actions of contractors engaged by the Corps to prepare for lock replacement on the Industrial Canal, remain to be determined. <2.3.2. Flood Control Act of 1928> Even if the government cannot invoke discretionary function immunity, a plaintiff would have to overcome the broad Section 702c immunity of the FCA. To the extent courts find that the waters causing damage were floodwaters released because of the Hurricane Protection System, a flood control project, the Corps would likely be immune with respect to claims based on that system's failure. The district court has found that the Corps was immune from liability for damages associated with the levee breaches of various canals in New Orleans. Although the court rejected the government's contention that Section 702c immunity attached so long as the damages were caused by floodwaters, it noted that immunity under the FCA was broad. Accordingly, the court explained that "immunity arises where damage is caused by flood waters emanating from a flood control project" and barred challenges related to the breaches of certain levees in the LPV. However, the court has indicated in a number of its decisions that Section 702c immunity does not apply to the extent that "the United States may be found liable for damages caused by negligence that is extrinsic to the LPV." The court has held that damages caused by the Corps' operation and maintenance of MRGO fall into this category and do not qualify for immunity under the FCA. The decision was based on the court's understanding of the requirements of Central Green and Graci v. United States , a 1971 decision from the U.S. Court of Appeals for the Fifth Circuit, which found that Section 702c immunity did not apply to MRGO. In Graci , which followed Hurricane Betsy, litigants argued the construction of MRGO caused their properties to flood. The circuit court refused to find Section 702c immunity applied to all flood damage actions, explaining that such an absolute immunity would be contrary to the government's intent to waive immunity for negligent acts of its employees under the FTCA. According to the district court in In re Katrina Canal Breaches , damages caused by floodwater unrelated to a flood control project cannot qualify for immunity under the FCA. Rather, the court reiterated its requirement that Section 702c immunity applies only if the water responsible for the damages is floodwaters and has a nexus to a flood control project. Because the court determined that MRGO was unrelated to the LPV flood control project, it did not meet the requirements for FCA immunity. <2.3.3. Negligence> Only after a court determines that the government is not immune under the FTCA and the FCA would it consider the negligence of the federal government. To prove that the government was negligent, the plaintiffs must show that the federal government owed them a duty when it built a particular project, that the government breached its duty, that the breach caused harm, and that the plaintiffs were injured as a result of that breach. In claims in which the court finds that no immunity applies, the government may still avoid a finding of liability. A common defense for negligence claims is that the damage was caused by an act of God, in this case, a hurricane. The act of God defense appears to apply the most easily to those levees and floodwalls that were overtopped by the waters. They essentially failed because their design capacity was exceeded by the unusually high storm surges brought on by Katrina. However, as was discussed earlier, some of the overtopping occurred because some levees and floodwalls had subsided by as much as 2 feet. Also, plaintiffs may argue that the storm surge was extreme because of MRGO. Furthermore, the government's liability may be diminished if the court finds that it is not solely responsible for the damages incurred. Thus far, the court has reached the merits of the negligence claim in only one instance a set of claims involving the maintenance and operation of MRGO. After reviewing the facts of the case, the court found that MRGO was "a substantial cause" for the breaching of part of the levee system and the subsequent flooding that occurred. The court cited the Corps' duty under Louisiana law for landowners "to discover any unreasonably dangerous condition and either correct that condition or warn of its existence," which it found the Corps failed to do. Upon finding that the Corps had been negligent in maintaining MRGO, the court held the Corps liable for the resulting damages. <3. Floodway Activation and Mississippi River Basin Flooding of 2011> Beginning in April 2011, a series of severe storm systems combined with increased water levels due to snowmelt caused some of the largest floods in the Mississippi River Basin area in the last century. Simultaneous flooding of the Mississippi and Ohio Rivers in late April threatened the safety of Cairo, IL, a town located at the confluence of the two rivers. As river levels continued to rise, the Corps prepared to activate the floodway system of the Mississippi River and Tributaries Project (MRTP). The floodway system allows the Corps to artificially crevasse or open certain levees along the Mississippi River to flood areas normally protected by the levees in order to alleviate flood damage to other areas. After activating the Birds Point-New Madrid Floodway near Cairo, the Corps subsequently activated floodways downstream as the river's crest travelled south, raising questions of the Corps' liability and potential remedies for affected landowners. <3.1. Corps' Authority to Activate Floodways> Congress authorized the MRTP pursuant to the FCA in response to a flood that devastated the Mississippi River Basin in 1927. In order to prevent such damage in the future, the MRTP was designed as a system of civil works to protect against flooding and to maintain navigation of the river channel. The MRTP included a series of floodways that were designed to divert floodwaters in order to provide relief to other segments of the levee system when the river's waters reached certain levels. The MRTP includes four floodways: the Birds Point-New Madrid floodway (Missouri); the Morganza floodway (Louisiana); the West Atchafalaya floodway (Louisiana); and the Bonnet Carre floodway (Louisiana). In May 2011, the Corps intentionally breached the levee protecting the Bird's Point-New Madrid floodway by detonating a hole in the levee to divert floodwaters to protect Cairo, IL, a town located at the confluence of the flooding Mississippi and Ohio rivers. The Corps also opened floodgates on the Morganza floodway to alleviate pressure on the levees protecting Baton Rouge and New Orleans and opened the Bonnet-Carre floodway to prevent floodwaters from reaching New Orleans. The Corps' activation of the Bird's Point-New Madrid and Morganza floodways was only the second use of each since their respective completion in 1933 and 1953, and the activation of the Bonnet-Carre floodway was the ninth use since its completion in 1932. The Corps' initial decision to activate the floodway system at Bird's Point-New Madrid raised questions about the agency's authority to purposely flood some lands to save others. In the case of Bird's Point-New Madrid, detonation of the levee according to the floodway operation plan was expected to flood 130,000 acres in Missouri, an area about 35 miles long and between 3 and 10 miles wide. The decision was particularly controversial because the Corps' decision would protect either an Illinois town or Missouri farmland and residences. Accordingly, Missouri filed a lawsuit challenging the Corps' authority to operate the floodway at the expense of Missouri residents' homes and farms. A federal district court rejected Missouri's challenge to the Corps' authority to operate the floodway system at Bird's-Point-New Madrid. The court relied on precedent from a 1984 case from the U.S. Court of Appeals for the Eighth Circuit to find that the Corps' decision to operate the floodway could not be reviewed by courts. In that case, the Eighth Circuit reviewed the legislative history of the floodway system and noted that Congress authorized both the construction of the levees and the artificial breaching of those levees when water exceeded certain levels set by the operations plan. The Eighth Circuit explained that because Congress broadly delegated authority to operate the levee, providing "no additional standards for determining whether and where to crevasse the levee," courts must afford the Corps' decision a "high degree of deference" since it required highly technical expertise. Accordingly, the district court refused to bar the Corps from artificially crevassing the levee in response to the 2011 floods. <3.2. Flowage Easements> The Corps' decisions to divert floodwaters through the MRTP floodway system meant that property owners that typically were protected by the levee and floodway structures instead suffered flooding to their land, homes, farms, or other property. The government generally cannot deprive a property owner of the possession or use of his property without compensating the owner for the loss caused by the government's action. In the case of the MRTP's floodway system, Congress had provided for the acquisition of "flowage rights for additional destructive flood waters that will pass by reason of diversions from the main channel of the Mississippi River." The acquisition of these rights could occur through a variety of legal methods, including acquiring title to the property itself or acquiring a right-of-way. For the purposes of this report, such a right will be referred to generally as a flowage easement. Acquisition of flowage easements from property owners of potentially affected land allows the government to operate levees without risk of liability for the resulting damages from operating the floodways. As the district court explained in Missouri v. U.S. Army Corps of Engineers , "under those easements, the landowners released and held harmless the United States for any and all damages that occur as the result of flooding." By selling flowage easements to the government, property owners were compensated for damage resulting from the operation of the floodway at any future time. Flowage easements are a property right and as such are transferred in the same manner as the title to property is transferred. If the original owner of property assumed the risk of future flooding and agreed to not hold the government liable for damages resulting from operation of the floodway, subsequent owners would be bound by that promise as well. Although the subsequent owner would not consent to such risk directly, the attachment of the easement to the property means that the subsequent owner had notice of the risk as part of his or her purchase of the property. Some questions of liability regarding the sufficiency of the flowage easements have been raised since the Corps initiated floodway operations. The Corps has not acquired such easements to all lands affected by operation of the various floodways. For example, with respect to the Bird's Point-New Madrid floodway, the Corps has asserted that it "obtained all flowage easements necessary to legally operate the Floodway." Although there has been public debate regarding the Corps' failure to obtain easements for all affected property, the Eighth Circuit has held that such a failure does not justify barring the operation of the floodway. Rather, the court noted that landowners had other adequate legal remedies, including seeking compensation from the government in courts for the resulting damage. In addition to challenging whether the Corps had acquired the necessary easements, some of the landowners affected by the operation of the MRTP have claimed that "to the extent any easements existed, they were insufficient to allow the flowage of water and debris over the plaintiffs' land and property in the force and magnitudes that existed during the flood." The landowners argue that the scope of the easements was exceeded by the damage caused by the Corps' operations. Specifically, concerns have been raised about the amount of sediment that would cover the floodway after the waters recede and whether the Corps would owe additional compensation for excess sand and gravel that might be deposited on the land by floodwaters. <3.3. Floodway Operation and Immunity Under the FTCA and FCA> The focus of legal challenges related to the 2011 Mississippi floods has focused on the Corps' authority with respect to the MRTP and the sufficiency of floodway easements. No claims related to the FTCA appear to have been filed alleging negligence in the operation of the floodways. In legal challenges to previous decisions to operate the floodways, however, courts have emphasized the degree to which Congress deferred to the Corps' discretion in MRTP operations. Therefore, if an FTCA claim is filed, parties may find it difficult to challenge the Corps' actions under the Gaubert test. Given the recognition of the role of the Corps' judgment in how to operate the system and the policy considerations involving the impacts of flooding on the natural and human environment, it appears that the Corps would be able to defend such challenges under the discretionary function exception of the FTCA. In addition to authorizing the MRTP, as discussed above, the FCA also granted immunity to the government, including the Corps, for damages caused by floods or floodwaters. Under the Central Green analysis, the Corps could avoid liability for damage caused by its operation of the floodways depending on the character of the waters causing damage and the purpose of their release. In the case of the 2011 floods, the waters causing damage are clearly floodwaters that were diverted through the floodway as a primary facet of the MRTP, one of the nation's largest flood control projects. Therefore, it appears likely that Section 702c immunity would apply.

Over the past century, the federal government has undertaken a number of civil works projects to prevent widespread damage from flooding of various waterways. These flood control projects generally have been designed and constructed by the U.S. Army Corps of Engineers (Corps). Despite the existence of these flood control structures, floods have caused major damage to various regions of the country. Hurricane Katrina was the most costly natural disaster ever to hit the United States. Striking land in August 2005 as a Category 3 hurricane, Hurricane Katrina left 80% of New Orleans under water. Since Katrina, a number of major floods in the midwestern states have caused significant damage. In particular, heightened flows of the Mississippi River in 2011 have resulted in historic flooding and controversy over the use of floodways to redirect floodwaters. In the wake of these floods, the issue of federal liability for flood damage is receiving attention in the media and in Congress. The costly and unprecedented nature of recent flood damage has led to an upsurge in litigation over flood damage liability. Some lawsuits filed against the federal government, particularly after Katrina, assert government liability for damages resulting from the failure of levees and floodwalls designed and constructed by the Corps. Other lawsuits claim federal liability for damages resulting from the Corps' decision to activate floodways during the 2011 Mississippi River flooding. The Federal Tort Claims Act (FTCA) and the Flood Control Act of 1928 (FCA) may protect the government from liability for some flood-related claims. Under the FTCA, the federal government is exempt from liability for discretionary actions. Under the FCA, the government cannot be sued for damages resulting from federally supported damage reduction projects or floodwaters. This report examines federal liability for flood damage and analyzes legal defenses available to the federal government. Specifically, it provides an overview of the discretionary function exemption under the FTCA and immunity under the FCA as applied to Corps projects. The report also considers the Corps' potential liability for damages caused by levee failure during Hurricane Katrina and the activation of floodways during the 2011 Mississippi flooding.

<1. Introduction> This report provides an analytic overview of the professional experiences and qualifications of those individuals who are currently serving as active U.S. circuit court judges. Ongoing congressional interest in the professional experiences of judicial nominees reflects, in part, the evaluative role of Congress in examining the qualifications of those who are nominated by the President to life-tenure positions. Senators, when giving floor speeches supporting circuit court nominations, routinely highlight certain professional experiences or qualifications often considered important to serving as a federal judge. Examples of such statements include the following: A Senator noting that a nominee to the Fourth Circuit Court of Appeals had 22 years of prior judicial experience "at the State courts and the Federal courts." The Senator stated that the nominee "has not only served as a distinguished judge, but also he came to the courts as an experienced prosecutor. He was with the Civil Rights Division at the Department of Justice and with the U.S. Attorney's Office in Maryland." A Senator noting that a nominee to the First Circuit had joined a prestigious law firm in the Senator's home state, "where over the subsequent 32 years [he] specialized in complex civil litigation at both the trial and appellate levels." The Senator also stated that the nominee had served as chairman of the state's Professional Ethics Commission and as president of the state's bar association, and that "his 30-plus years of real-world litigation experience would bring a valuable perspective to the court." A Senator emphasizing that a nominee to the Seventh Circuit Court of Appeals would "bring almost 12 years of judicial experience" to the bench as a result of her service on the Wisconsin Supreme Court and as a trial judge on the Milwaukee County Circuit Court. The Senator also noted that prior to the nominee's service as a state judge, the nominee had "practiced commercial litigation for 7 years at one of Wisconsin's most prestigious law firms." The professional experiences of judicial nominees are also of interest to interest groups, particularly professional organizations such as the American Bar Association (ABA). Judicial nominees are evaluated by the ABA's Standing Committee on the Federal Judiciary. The committee's evaluation criteria focus "strictly on professional qualifications: integrity, professional competence and judicial temperament." The committee "believes that a prospective nominee to the federal bench ordinarily should have at least twelve years' experience in the practice of law" and that "substantial courtroom and trial experience as a lawyer or trial judge is important." The committee also notes, however, that "distinguished accomplishments in the field of law or experience that is similar to in-court trial work ... may compensate for a prospective nominee's lack of substantial courtroom experience." For prospective circuit court nominees, the committee states that "because an appellate judge deals primarily with the review of briefs and the records of lower courts, the committee places somewhat less emphasis on the importance of trial experience as a qualification for the appellate courts." Additionally, the professional or career experiences of judges prior to the start of their judicial service has also been of interest to scholars examining whether particular professional experiences might influence or explain variation in aspects of judicial decision making (e.g., whether a judge votes in a consistent ideological direction, the sources relied upon by a judge in reaching his or her decisions, whether a judge decides to publish his or her opinions, etc.). For example, one study found that prior judicial experience for U.S. circuit court judges did not influence variation in judicial decision making in terms of the extent a judge voted in a consistent ideological fashion (such prior experience might have been hypothesized to be a source of consistency in judicial voting). Another study found that district court judges whose primary work before becoming a judge involved non-private practice work experience (e.g., working as a government attorney or law professor) were less likely to rely on regulations and other Internal Revenue Service pronouncements in interpreting the federal tax code than judges whose work prior to becoming a judge was predominately as an attorney in private practice. Other scholars suggest that the lack of career diversity among federal judges might be problematic, in terms of the lack of diversity diminishing the institutional performance of the courts. Specifically, they argue that, given appropriate procedural conditions, "the greater diversity of participation by people of different [professional] backgrounds and experiences, the greater the range of ideas and information contributed to the institutional process." Consequently, in the context of judicial decision making, "judges with varied career experiences bring distinct perspectives to the bench perspectives that ultimately lead them to make distinct judicial choices [and] merging jurists with diverse career paths on a particular court ought ... [to] lead to more effective decision making" by that court. In light of ongoing interest in the professional qualifications of those nominated to circuit court judgeships, this report seeks to inform Congress by providing statistics related to the professional qualifications or experiences of those currently serving on the bench as U.S. circuit court judges. Specifically, this report provides statistics and analysis related to (1) the percentage of active circuit court judges with judicial experience, as well as the type of judicial experience; (2) the percentage of active circuit court judges with private practice experience, as well as the length of time of such experience; and (3) the percentage of active circuit court judges by professional experience immediately prior to their appointment to a circuit court judgeship. <2. Data Caveats> Note that the statistics provided in this report are based upon the professional experiences of individuals serving, as of February 1, 2014, as active U.S. circuit court judges. Consequently, the statistics do not include circuit court judges who, prior to February 1, 2014, had assumed senior status, retired, or resigned. The total number of circuit court judges included in the analysis is 163. Consequently, this is the denominator used to calculate most of the statistics included in the report. The analysis is based on information provided by the Biographical Directory of Federal Judges . This report will be updated annually by CRS at the beginning of each calendar year. <3. Most Common Types of Professional Experiences> Figure 1 provides statistics related to the two most common types of professional experiences of U.S. circuit court judges who are currently serving on the bench prior judicial experience and experience working as an attorney in private practice. The percentages reported for the two types of experiences are not mutually exclusive, meaning that there is some overlap between the two categories. For example, 47.9% of all active circuit court judges have both prior judicial experience as well as experience as an attorney in private practice (while 9.0% have neither prior judicial nor private practice experience). Altogether, 54.6% of U.S. circuit court judges who are currently serving had prior experience as another type of judge before their appointment to a circuit court (and 45.4% had no such experience). Of the judges with prior judicial experience, 22.7% served solely as another type of federal judge (e.g., a U.S. district court judge), while 20.9% served solely as a state judge and another 11.0% had both prior federal and state judicial experience. Of the 74 circuit judges with no prior judicial experience, 81.8% had worked as attorneys in private practice, including 39.2% who worked in private practice for 15 or more years (and another 14.9% who worked in private practice for 10 to 14 years). Although over half of active circuit court judges have prior judicial experience (54.6%), a greater percentage have at least some prior experience as attorneys in private practice (84.7%). Similarly, while 45.6% of active circuit judges do not have prior judicial experience, a much smaller percentage, 15.3%, have no prior experience in private practice. Figure 1 also shows that of active circuit court judges with private practice experience, a plurality (26.4%) had 15 or more years of experience as attorneys in private practice. Another 21.5% had less than 5 years of experience, while 17.2% had 5 to 9 years of experience and 19.6% had 10 to 14 years of experience. Altogether, 46.0% of active circuit court judges had 10 or more years of experience as attorneys in private practice (while 54.0% had less than 10 years of experience or no private practice experience). <4. Professional Position Immediately Prior to Appointment> Figure 2 reports the percentage of active U.S. circuit court judges who had a particular type of position or occupation immediately prior to their appointment as a circuit court judge. So, for example, a plurality of active circuit court judges, 27.0%, were U.S. district court judges immediately prior to being appointed as circuit court judges. Altogether, half (50.3%) of all active circuit court judges were serving as another type of judge (either a U.S. district court judge, another type of federal judge, or a state judge). The percentage of circuit court judges serving as another type of judge immediately prior to appointment might be lower than what has been the case, historically, for circuit court judges (at least during the first half of the 20 th century). For example, of circuit court judges appointed during the seven presidencies from Theodore Roosevelt to Franklin Roosevelt, 63.7% were serving as another type of judge at the time of appointment or promotion to the U.S. courts of appeals. Additionally, 55.6% and 57.5% of Eisenhower and Johnson circuit court appointees, respectively, were serving as judges prior to their appointment to a circuit court. In general, service as a U.S. district court judge was the most common type of judicial experience of those serving as judges immediately prior to their appointment as a circuit court judge. As noted by one scholar, the "federal district court bench is a training camp for the federal courts of appeals bench. A president faced with a vacancy on a court of appeals looks, though not exclusively, to sitting district court judges." Of circuit court judges currently serving on the bench, approximately one-quarter (25.8%) were working as attorneys in private practice prior to being appointed as a circuit court judge, with 22.1% having worked in private practice for 10 years or more. Additionally, of those working in private practice for 10 years or more, 80.6% had been working as an attorney in private practice for at least 15 years. As the percentages reported in Figure 2 indicate, a relatively large majority of active circuit court judges (72.4%) were, prior to being appointed as circuit judges, serving as either another type of judge or engaged in private practice for 10 or more years (and often for 15 or more years). Other types of positions held by active U.S. circuit court judges prior to being appointed include working as an attorney at the Department of Justice (DOJ) or a U.S. Attorneys' Office (7.4%) or working as a law professor (6.7%). Another 9.8% of active circuit court judges held other types of positions immediately prior to being appointed. Of appointees of Democratic Presidents who are currently on the bench, the most common type of position immediately prior to appointment as a circuit court judge was service as another type of judge (54.8% of all active appointees), with a plurality (31.0%) having prior service as a U.S. district court judge. Other types of positions or occupations held by active circuit court appointees of Democratic Presidents immediately prior to appointment were attorneys in private practice (26.2%), attorneys at the Department of Justice or a U.S. Attorney's Office (8.3%), and law professors (6.0%). Of appointees of Republican Presidents currently on the bench, the most common type of position immediately prior to appointment as a circuit court judge was service as another type of judge (45.6%), with a plurality (22.8%) having served as a U.S. district court judge. Other types of positions or occupations held by active circuit court appointees of Republican Presidents immediately prior to appointment were attorneys in private practice (25.3%), attorneys at the Department of Justice or a U.S. Attorney's Office (6.3%), and law professors (7.6%). Another 15.2% of Republican appointees had another type of position or occupation immediately prior to their appointment. <5. Conclusion> This report provides a statistical overview of the professional qualifications and experiences of active U.S. circuit court judges. Ongoing congressional interest in the professional background of those nominated to the federal bench reflects, in part, the role of Congress in evaluating the qualifications of those who are nominated by the President to life-tenure positions. As discussed above, a majority of current circuit court judges have prior judicial experience. A greater majority of active circuit judges also have experience working as attorneys in private practice, often for relatively lengthy periods of time. There are, however, judges without either type of experience who have other types of professional experiences such as working as an attorney for the federal government or as a law professor.

This report provides an analysis of the professional qualifications and experiences of U.S. circuit court judges who are currently serving on the federal bench. Interest in the professional qualifications of those nominated to the federal judiciary has been demonstrated by Congress and others. Congressional interest in the professional experiences of those nominated by a President to the federal courts reflects, in part, the evaluative role of Congress in examining the qualifications of those who are nominated to life-tenure positions. Other organizations, such as the American Bar Association (ABA), also have an ongoing interest in the professional qualifications of those appointed to the federal judiciary. Additionally, scholars have demonstrated an interest in this topic by examining whether a relationship exists between the professional or career experiences of judges and judicial decision making. The analysis in this report focuses on the professional experiences of 163 active U.S. circuit court judges who were serving as of February 1, 2014. Active judges are those who have not taken senior status, retired, or resigned. Consequently, the statistics provided do not necessarily reflect all circuit court judges who are sitting on the bench (which include judges who have assumed senior status). Some of this report's findings include the following: A majority, 54.6%, of active circuit court judges had prior judicial experience at some point before being appointed as circuit court judges (and 45.4% had no such experience). Of the judges with prior judicial experience, 22.7% served solely as another type of federal judge (e.g., a U.S. district court judge), while 20.9% served solely as a state judge and another 11.0% had both prior federal and state judicial experience. A majority, 84.7%, of active circuit court judges had at least some prior experience as an attorney in private practice at some point prior to their appointment as a circuit judge. Of active circuit court judges with private practice experience, a plurality (26.4%) had 15 or more years of experience as an attorney in private practice. While 45.4% of active circuit judges do not have prior judicial experience, a much smaller percentage, 15.3%, have no prior experience in private practice. Circuit court judges without either prior judicial experience or experience as an attorney in private practice had other professional experiences such as working as an attorney for the federal government or as a law professor. Immediately prior to their appointment to the appellate bench, most circuit court judges were either serving as another type of judge or had been engaged in private practice for at least 10 years. Approximately half, 50.3%, of all active circuit judges were serving as another type of judge immediately prior to their appointment (i.e., serving as a district court judge, another type of federal judge such as a bankruptcy judge, or a state judge). Approximately one quarter, 25.8%, of active circuit court judges were working as attorneys in private practice immediately prior to being appointed as a circuit judge (with 22.1% having worked in private practice for 10 years or more).

<1. The Federal NITRD Program> The federal government has long played a key role in the country's information technology (IT) research and development (R&D) activities. The government's support of IT R&D began because it had an important interest in creating computers and software that would be capable of addressing the problems and issues the government needed to solve and study. One of the first such problems was calculating the trajectories of artillery and bombs; more recently, such problems include simulations of nuclear testing, cryptanalysis, and weather modeling. That interest continues today. These complex issues have led to calls for coordination to ensure that the government's evolving needs (e.g., homeland security) will continue to be met in the most effective manner possible. <1.1. Structure> Established by the High-Performance Computing Act of 1991 ( P.L. 102-194 ), the Networking and Information Technology Research and Development (NITRD) Program is the primary mechanism by which the federal government coordinates its unclassified networking and information technology (NIT) R&D investments. Eighteen federal agencies, including all of the large science and technology agencies, are formal members of the NITRD Program, with many other federal entities participating in NITRD activities. The program aims to ensure that the nation effectively leverages its strengths, avoids duplication, and increases interoperability in such critical areas as supercomputing, high-speed networking, cybersecurity, software engineering, and information management. Figure 1 illustrates the organizational structure of the NITRD Program. The National Coordinating Office (NCO) coordinates the activities of the NITRD Program. The NCO was established in September 1992 and was initially called the National Coordination Office for High Performance Computing and Communications (NCO/HPCC). Its name has changed several times over the years; since July 2005, it has been called the National Coordination Office for Networking and Information Technology Research and Development (NCO/NITRD). The NCO/NITRD supports the planning, coordination, budget, and assessment activities of the program. The NCO's role in the NITRD enterprise is recognized in the National Science and Technology Council (NSTC) charters, authorizing NITRD Program structures as well as in legislation and congressional hearings. The director of the White House Office of Science and Technology Policy (OSTP) appoints a director for the NCO. The director of the NCO reports to the director of the White House Office on Science and Technology Policy (OSTP). The NCO supports the National Science and Technology Council's Subcommittee on NITRD (also called the NITRD Subcommittee). The NITRD Subcommittee provides policy, program, and budget planning for the NITRD Program and is composed of representatives from each of the participating agencies, OSTP, the Office of Management and Budget (OMB), and the NCO. NITRD Program activities are described under a set of seven Program Component Areas (PCAs), 10 working groups (see Figure 1 ), and a number of Interagency Working Groups, Coordinating Groups, Senior Steering Committees, and Communities of Practice (see Figure 2 ). <1.2. Budget, Funding, and Spending> The President's FY2017 budget request for the NITRD Program is $4.54 billion, an increase of $0.05 billion, or approximately 1.11%, compared to the $4.49 billion FY2016 estimate. The overall change is due to both increases and decreases in individual agency NITRD budgets. The NITRD budget is an aggregation of the IT R&D components of the individual budgets of NITRD participating agencies and is reported in the annual release of the Networking and Information Technology Research and Development Program Supplement to the President's Budget . The NITRD budget is not a single, centralized source of funds that is allocated to individual agencies. In fact, the agency IT R&D budgets are developed internally as part of each agency's overall budget development process. These budgets are subjected to review, revision, and approval by the OMB and become part of the President's annual budget submission to Congress. The NITRD budget is then calculated by aggregating the IT R&D components of the appropriations provided by Congress to each federal agency. An interactive history of NITRD Program funding, dating back to 1991, is available online at http://www.nitrd.gov/open/index.aspx . <2. Federal Technology Funding: Background and Context> In the early 1990s, Congress recognized that several federal agencies had ongoing high-performance computing programs, but no central coordinating body existed to ensure long-term coordination and planning. To provide such a framework, Congress passed the High-Performance Computing Program Act of 1991 to improve the interagency coordination, cooperation, and planning of agencies with high-performance computing programs. In conjunction with the passage of the act, OSTP released Grand Challenges: High-Performance Computing and Communications . That document outlined an R&D strategy for high-performance computing and communications and a framework for a multi-agency program, the HPCC Program. The NITRD Program is part of the larger federal effort to promote fundamental and applied IT R&D. The government sponsors such research through a number of channels, including federally funded research and development laboratories, such as Lawrence Livermore National Laboratory; single-agency programs; multi-agency programs, including the NITRD Program, but also programs focusing on nanotechnology R&D and combating terrorism; funding grants to academic institutions; and funding grants to industry. In general, supporters of federal funding of IT R&D contend that it has produced positive results. In 2003, the Computer Science and Telecommunications Board (CSTB) of the National Research Council released a "synthesis report" based on eight previously released reports that examined "how innovation occurs in IT, what the most promising research directions are, and what impacts such innovation might have on society." The CSTB's observation was that the unanticipated results of research are often as important as the anticipated results. For example, electronic mail and instant messaging were byproducts of (government-funded) research in the 1960s that was aimed at making it possible to share expensive computing resources among multiple simultaneous interactive users. Additionally, the report noted that federally funded programs have played a crucial role in supporting long-term research into fundamental aspects of computing. Such "fundamentals" provide broad practical benefits but generally take years to realize. Furthermore, supporters state that the nature and underlying importance of fundamental research makes it less likely that industry would invest in and conduct more fundamental research on its own. As noted by the CSTB, "companies have little incentive to invest significantly in activities whose benefits will spread quickly to their rivals." Further, in the board's opinion: Government sponsorship of research, especially in universities, helps develop the IT talent used by industry, universities, and other parts of the economy. When companies create products using the ideas and workforce that result from Federally-sponsored research, they repay the nation in jobs, tax revenues, productivity increases, and world leadership. Another aspect of government-funded IT R&D is that it often leads to open standards, something that many perceive as beneficial, encouraging deployment and further investment. Industry, on the other hand, is more likely to invest in proprietary products and will typically diverge from a common standard if it sees a potential competitive or financial advantage; this happened, for example, with standards for instant messaging. Finally, proponents of government R&D support believe that the outcomes achieved through the various funding programs create a synergistic environment in which both fundamental and application-driven research are conducted, benefitting government, industry, academia, and the public. Supporters also believe that such outcomes justify government's role in funding IT R&D as well as the growing budget for the NITRD Program. Critics have asserted that the government, through its funding mechanisms, may set itself up to pick "winners and losers" in technological development, a role more properly residing with the private sector. For example, the size of the NITRD Program could encourage industry to follow the government's lead on research directions rather than selecting those directions itself. Overall, the CSTB stated that government funding appears to have allowed research on a larger scale and with greater diversity, vision, and flexibility than would have been possible without government involvement. <3. Legislative Activity in the 115th Congress> There has been no legislative activity related to the NITRD Program in the 115 th Congress. <4. Potential Issues for Congress> Federal IT R&D is a multi-dimensional issue involving many government agencies working together toward shared, complementary, and disparate goals. Many observers believe that success in this arena requires ongoing coordination among government, academia, and industry. Issues related to U.S. competitiveness in high-performance computing and the direction the IT R&D community has been taking have remained salient over the last 5 to 10 years and include the United States' status as the global leader in high-performance computing research; the apparent ongoing bifurcation of the federal IT R&D research agenda between grid computing and supercomputing capabilities; the possible overreliance on commercially available hardware to satisfy U.S. research needs; and the potential impact of deficit cutting on IT R&D funding. <4.1. Appendix. NITRD Enabling and Governing Legislation> The NITRD Program is governed by two laws. The first, the High-Performance Computing Act of 1991 ( P.L. 102-194 ), expanded federal support for high-performance computing R&D and called for increased interagency planning and coordination. The second, the Next Generation Internet Research Act of 1998 ( P.L. 105-305 ), amended the original law to expand the mission of the NITRD Program to cover Internet-related research, among other goals. High-Performance Computing Act of 1991 The High-Performance Computing Act of 1991 ( P.L. 102-194 ) was the original enabling legislation for what is now the NITRD Program. Among other requirements, it called for the following: Setting goals and priorities for federal high-performance computing research, development, and networking. Providing for the technical support and research and development of high-performance computing software and hardware needed to address fundamental problems in science and engineering. Educating undergraduate and graduate students. Fostering and maintaining competition and private sector investment in high-speed data networking within the telecommunications industry. Promoting the development of commercial data communications and telecommunications standards. Providing security, including protecting intellectual property rights. Developing accounting mechanisms allowing users to be charged for the use of copyrighted materials. This law also requires an annual report to Congress on grants and cooperative R&D agreements and procurements involving foreign entities. Next Generation Internet Research Act of 1998 The Next Generation Internet Research Act of 1998 ( P.L. 105-305 ) amended the High-Performance Computing Act of 1991. The act had two overarching purposes. The first was to authorize research programs related to high-end computing and computation, human-centered systems, high confidence systems, and education, training, and human resources. The second was to provide for the development and coordination of a comprehensive and integrated U.S. research program to focus on (1) computer network infrastructure that would promote interoperability among advanced federal computer networks, (2) economic high-speed data access that does not impose a "geographic penalty," and (3) flexible and extensible networking technology. America COMPETES Act of 2007 Section 7024 of the America COMPETES Act of 2007 ( P.L. 110-69 ) revised the program requirements for the National High-Performance Computing Program. Among other requirements, the bill amended the original enabling legislation to Require the director of the OSTP to (1) establish the goals and priorities for federal high-performance computing research, development, networking, and other activities; (2) establish PCAs 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 roadmap covering all states and regions for the provision of high-performance computing and networking systems. Revise requirements for annual reports by requiring that such reports (1) describe PCAs, 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 PCA; (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 DOE activities taken to carry out the National High-Performance Computing Program. Require 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. Instruct the NSF 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.

In the early 1990s, Congress recognized that several federal agencies had ongoing high-performance computing programs, but no central coordinating body existed to ensure long-term coordination and planning. To provide such a framework, Congress passed the High-Performance Computing and Communications Program Act of 1991 (P.L. 102-194) to enhance the effectiveness of the various programs. In conjunction with the passage of the act, the White House Office of Science and Technology Policy (OSTP) released Grand Challenges: High-Performance Computing and Communications. That document outlined a research and development (R&D) strategy for high-performance computing and a framework for a multi-agency program, the High-Performance Computing and Communications (HPCC) Program. The HPCC Program has evolved over time and is now called the Networking and Information Technology Research and Development (NITRD) Program to better reflect its expanded mission. Current concerns are the role of the federal government in supporting information technology (IT) R&D and the level of funding to allot to it. Proponents of federal support of IT R&D assert that it has produced positive outcomes for the country and played a crucial role in supporting long-term research into fundamental aspects of computing. Such fundamentals provide broad practical benefits but generally take years to realize. Additionally, the unanticipated results of research are often as important as the anticipated results. Another aspect of government-funded IT research is that it often leads to open standards, something that many perceive as beneficial, encouraging deployment and further investment. Industry, on the other hand, is more inclined to invest in proprietary products and will diverge from a common standard when there is a potential competitive or financial advantage to do so. Proponents of government support believe that the outcomes achieved through the various funding programs create a synergistic environment in which both fundamental and application-driven research are conducted, benefitting government, industry, academia, and the public. Supporters also believe that such outcomes justify government's role in funding IT R&D as well as the growing budget for the NITRD Program. Critics assert that the government, through its funding mechanisms, may be picking "winners and losers" in technological development, a role more properly residing with the private sector. For example, the size of the NITRD Program may encourage industry to follow the government's lead on research directions rather than selecting those directions itself. The President's FY2017 budget request for the NITRD Program was $4.54 billion and the FY2016 NITRD budget estimates totaled $4.49 billion. The FY2018 budget is not yet available. The NITRD budget is an aggregation of the IT R&D components of the individual budgets of NITRD participating agencies and is reported in the annual release of the Networking and Information Technology Research and Development Program Supplement to the President's Budget. The NITRD budget is not a single, centralized source of funds that is allocated to individual agencies. Rather, it is calculated by aggregating the IT R&D components of the appropriations provided by Congress to each federal agency. There has been no legislative activity related to the NITRD Program in the 115th Congress.

<1. The 9/11 Commission's Proposal> On November 27, 2002, Congress created a commission charged with investigating theSeptember 11, 2001, terrorist attacks on the United States. The National Commission on TerroristAttacks Upon the United States, also known as the 9/11 Commission, was to make a full and complete accounting of thecircumstances surrounding the attacks, and the extent of the United States' preparedness for, andimmediate response to, the attacks; and investigate and report to the President and Congress on itsfindings, conclusions, and recommendations for corrective measures that can be taken to prevent actsof terrorism. (3) The panel's July 22 report was the culmination of a series of hearings and investigations by the paneland its staff into the terrorist attacks. The report included a wide-ranging series of proposals tochange intelligence agencies of the executive branch and some committee structures within thelegislative branch. The 9/11 Commission's recommendations on the appointment process are designed to makeit quicker and more predictable for a relatively small group of nominees. The proposal is relativelysparse on details, and implementing it would require the Senate to flesh out the plan substantially;however, it is clear that the recommended changes in the Senate's confirmation process wouldprovide a certain up-or-down vote by the full chamber on all National Security Team nomineeswithin a definitive time frame (30 days) after a nomination is made at the start of an administration. <1.1. Congressional Response> On October 6, the Senate passed, by a vote of 96-2, legislation ( S. 2845 ),introduced by Senate Governmental Affairs Committee Chair Susan Collins and Ranking MemberJoseph I. Lieberman, that would implement many of the 9/11 Commission's recommendations. Asintroduced, the bill did not address the 9/11 Commission's proposal to institute a time-frame forSenate consideration of national security nominees at the start of a new presidential administration. During consideration of the measure, Senators adopted by voice vote an amendment that added"sense of the Senate" language to the bill. It states that the "Senate committees to which thesenominations are referred should, to the fullest extent possible, complete their consideration of thesenominations, and, if such nominations are reported by the committees, the full Senate should voteto confirm or reject these nominations within 30 days of their submission." This is, essentially, anaffirmation of the current confirmation process. The House-passed version of the bill contains a different approach. The bill (an amendmentto S. 2845 , formerly H.R. 10 , which passed by a vote of 282-134) wouldrequire that the Office of Personnel Management create a list of all national security positions whichrequire Senate confirmation. The House provision would not change the current system for the top level of nationalsecurity appointees, such as the Secretary of Defense, who are Level I employees on the ExecutiveSchedule. The President would chose his nominee and submit their name to the Senate for its adviceand consent. The nominee would not be confirmed in the position without Senate action. For Executive Schedule Level II employees, such as the Deputy Attorney General, andExecutive Level III employees, such as an under secretary of State, however, the House provisionwould require that the Senate act within 30 days of receiving a nomination, or the nomination wouldgo into effect without action by the Senate. Finally, for Level IV and Level V national securityemployees who currently require Senate confirmation, the House provision would remove thatrequirement and make them appointed at the discretion of the President. The House-passed bill does not contain any details about how the Senate would implementthe change for Level II and Level III employees, concerning the 30-day deadline, but it is reasonableto assume that the analysis of the 9/11 Commission's recommended 30-day deadline would beapplicable (see section "Implementation of the 9/11 Commission's Recommendation"). On November 20, House and Senate conferees on the 9/11 legislation reported out acompromise measure. It includes the Senate-passed "sense of the Senate" provision on presidentialnominations, not the House-passed language. Last-minute objections prevented either chamber fromvoting on the compromise measure at that time, but Congress returned in early December to considerthe bill. (4) The Housepassed the bill by a vote of 336-75 on December 7, 2004, and the Senate followed suit the next day,passing the bill by a vote of 89-2. President George W. Bush signed the bill into law on December17, 2004 ( P.L. 108-458 ). <1.2. Scope of the Issue> The National Security Team, as defined by the 9/11 Commission, would include roughly 31positions from the Defense Department, the Homeland Security Department, the Justice Department,the State Department, and the Central Intelligence Agency. The group extends from the heads of thedepartments down through and including the Under Secretary positions. (5) In testimony before the Senate Governmental Affairs Committee on July 30, CommissionChair Thomas Kean told Members that the Senate should "treat these nominations unlike othernominations in that they recognize the speed with which we need those people in place." (6) The report of the 9/11Commission also pointed out that the time for transition between the Clinton Administration and theBush Administration was shortened. "The dispute over the election and the 36-day delay cut in halfthe normal transition period. Given that a presidential election in the United States brings wholesalechange in personnel, this loss of time hampered the new administration in identifying, recruiting,clearing and obtaining Senate confirmation of key appointees." (7) The commission's recommendations built on the work of a series of commissions andscholars who have investigated the appointment process generally over the last 20 years. Virtuallyall of the studies reached a similar conclusion: that it takes too long to get presidential nominationsthrough the appointment process. The Presidential Appointment Initiative, for example, a projectof the Brookings Institution, found in 2001 that "there is ample evidence that the process for bothnominating and confirming talented citizens to presidential service is failing at its most basictasks." (8) That followeda similar study in 1996 called the 20th Century Task Force on the Presidential Appointment Process,which called for prohibiting Senators from delaying consideration of nominee by using extendeddebate, called a filibuster. (9) "That the nomination and confirmation process is broken is a truism now widely acceptedby both Republicans and Democrats," wrote congressional scholars Norman Ornstein and ThomasDonilon in 2001. "The lag in getting people into office seriously impedes good governance. A newpresident's first year -- clearly the most important year for accomplishments and the most vulnerableto mistakes -- is now routinely impaired by the lack of supporting staff. For executive agencies,leaderless periods mean decisions not made, initiatives not launched, and accountability notupheld." (10) <1.3. Recent Experience> One of the complaints about the nominations process from scholars and commissions hasbeen that nominations can get bogged down in the Senate confirmation process, sometimes fallingvictim to parliamentary devices that can prevent a final vote on the nomination from taking place. An analysis of data on how the Clinton Administration and the current Bush Administration wereable to fill those offices considered to make up the National Security Team at the beginning of theiradministrations shows that Senate delay does not tend to be a major problem for this subset ofnominees. The Senate did not reject any of the National Security Team nominations in eitheradministration. (11) The amount of time it took nominations to work their way through the Senate varied widelyin this small sample, from one day for secretaries of state and defense in both administrations, to 128days for the Defense Department's Under Secretary for Policy in the Clinton Administration. Forboth administrations, the Secretary of Defense and the Secretary of State were confirmed onInauguration Day. As Table 1 shows, of the 31 positions in the Bush Administration that would be included inthe new deadline, 22 were confirmed ahead of the 30-day schedule, four were holdovers from theClinton Administration (and did not require reconfirmation) and five nominations took longer than30 days to win Senate confirmation. The median elapsed days from submission of the nominationuntil Senate confirmation was 21 days. As Table 1 also shows, for all National Security Team nominees, the process of nominationby the President took longer than the process of confirmation by the Senate. In some instances, thedelay between the start of the vacancy to the choice of a presidential nomination was two to threetimes longer than the time from nomination to confirmation. Of the five nominations that exceeded 30 days for Senate confirmation in the BushAdministration, all were confirmed within 73 days -- four of the five were confirmed in less than 60days. In all five instances, the delay between the start of the vacancy and the choice of nominee waslonger than the time between the nomination and confirmation of the nominee. As Table 2 shows, the four holdovers from the Clinton Administration had a longerconfirmation time during their original consideration by the Senate. The mean time for thosenominations was 75 days. As Table 3 shows, the Clinton Administration's National Security Team members were alsoconfirmed largely ahead of the 30-day deadline. For the 23 positions covered by the definition, (12) seven were considered bythe Senate for more than 30 days. One was a holdover from the previous administration (and didnot require reconfirmation), one of those was confirmed at 36 days, another at 44 days, the next after47 days and another at 51 days. The remaining two nominees had lengthy confirmations -- one was122 days and the final one was 128 days. Table 3 also shows, however, that, as with the Bush Administration, the delays by theClinton Administration in making its appointments were generally longer than the Senateconfirmation process. Typically, the time to presidential nomination was significantly longer thanthe Senate confirmation, sometimes several times as long. As this information shows, the 9/11 Commission's proposal for an accelerated Senateconfirmation process would not have affected 35 of the 49 National Security Team nominations thatwere in office before the 30-day deadline. A review of the data on the speed with which newadministrations have been able to get their National Security Team members in place suggests thisis an issue in a minority of cases. <2. Advice and Consent> The recommendation of the 9/11 Commission would deal with only a small subset of thepresidential nominations considered by the Senate. With respect to the offices included in theNational Security Team, however, it would place substantial new conditions on how the Senatecarries out its role in confirming presidential nominees. While the Constitution includes the Senatein the confirmation process, it does not spell out how the chamber should fulfill its role of providingadvice and consent to a nomination. The extent of legislative and executive control of the processhas in many respects remained undetermined. In response to this Constitutional indeterminancy, some have asserted that the Senate shouldhave a co-equal role with the President in the process. The Senate's responsibility for confirming presidentialnominees, although fixed firmly in the Constitution, remains unsettled in its application. The Senatewas not meant to be a passive participant. Delegates to the Philadelphia convention believed thatthe Senate would be knowledgeable about nominees and capable of voting wisely. Yet, for the mostpart, it has acted cautiously, uncertain of the scope of its own constitutional power. The source ofthis uncertainty is not the Constitution. Nowhere in that document, or in its history, is there anobligation on the part of the Senate to approve a nomination. On the contrary, the burden should beon the President to select and submit a nominee with acceptable credentials. (13) Others have said the Senate should play a lesser role, allowing the President greater leewayin his choices for office than is currently the case. Law professor John C. Eastman told the SenateRules Committee on June 5, 2003, that ... the appointment power is located in Article II of theConstitution, which defines the powers of the President, not in Article I, which defines the powersof the legislature. As the Supreme Court itself has noted, by vesting appointment power in ArticleII, the framers of our Constitution intended to place primary responsibility for appointments in thePresident. The "advice and consent" role for the Senate, then, was to be narrowly construed. (14) The practice of the Senate, however, has not systematically reflected either of theseperspectives. Historically, much of the regular order of business on the nomination and confirmationof presidential appointments has been regulated not by strict, formal rules, but rather by informalcustoms that can change (and have changed) over the years, as the relative balance of power betweenthe President and the Senate ebbs and flows. It is these traditions which form the process, accordingto appointments expert Michael J. Gerhardt. These informal arrangements -- those not clearlyrequired or clearly prohibited by the Constitution -- have come to define the dynamic in the federalappointments process. The informal arrangements through which the system operates -- includingsenatorial courtesy; logrolling; individual holds, "blue slips"; consultation between presidents,members of Congress, and other interested parties, including judges; interest group lobbying;strategic leaking by administrations, senators and interest groups; manipulation of the press; themedia's effort to influence the news; and nominees' campaigning -- are the sum and substance of thefederal appointments process. Studying these arrangements provide even greater illumination thanstudying Supreme Court decisions or the Constitution itself of how the different branches of thefederal government interact on matters of mutual concern. (15) Under these informal customs, individual Senators have, historically, been deeply involvedin the nomination and confirmation process. The procedures and traditions that have developed havetended to protect the autonomy of individual Senators to choose how to fulfill the advice and consentrole, rather than to dictate the process for all Senators. (16) It is this combination -- unwritten Senate traditions and the protection of each Senator's rights-- that has led critics of the process to call for changes similar to those proposed by the 9/11Commission. "[T]he Senate's confirmation process is entirely consistent with all of its other norms,traditions and rules. Concern for the rights and prerogatives of individual senators gives rise tonumerous opportunities for obstruction and delay," argued political scientists Nolan McCarty andRose Razaghian. (17) <2.1. The Current Process> With respect to nominations to the National Security Team, the recommendations made bythe 9/11 Commission would require some major changes in the way the Senate typically conductsits business. In exchange for a relatively quick and predictable process, Senators as a group and asindividuals would relinquish some of their current rights under the Senate's rules and practices. Under current practice, once the President has chosen an individual for a position, thenomination is submitted to the Senate, and referred to the committee with jurisdiction over theagency or office which the nominee would fill. The committee may or may not act on thenomination. If the committee approves the nomination, it goes before the full Senate, which mayor may not take up the nomination on the floor. If the Senate does proceed to consider thenomination, it may or may not proceed to a final vote. A final vote of the full Senate is required fora nomination to be confirmed. The President gives to the confirmed nominee a commission withthe seal of the United States, and the individual is sworn into office. (18) Nominations are part of the executive business of the Senate (the other component beingratification of treaties). These are matters that come directly from the President and require theSenate's approval to implement. The Senate treats these items as separate from its legislativebusiness: they are placed on a different calendar (the Executive Calendar ), and the Senate must bein executive session to consider them. The official record of Senate action on treaties andnominations is known as the Executive Journal , while the record of Senate action on legislation andother matters is called the Senate Journal . In practice, the chair of the committee of jurisdiction generally has the discretion whether tomove the nominee through his or her committee or not. The action can take the form of a hearingat which the nominee testifies or a markup of the committee to formally approve the nomination andsend it on to the full chamber, or both. If the committee reports a nomination, the majority leadermay ask unanimous consent, or move, that the Senate enter executive session to take it up. He is not required to take either action. (In principle, any Senator may move to take up a nomination, but inpractice the Senate treats this action as the prerogative of the majority leader.) If the Senate agreesto take up the nomination, it may proceed to a final vote, but again, it is not required to do so. While a nomination is pending before the Senate, any Senator or group of Senators may actto delay or defeat the nomination by extended debate, called a filibuster. The Senate custom of"holds," which can allow a Senator or group of Senators to delay consideration of a measure ormatter, has also been used to prevent full Senate consideration of nominations. While the vast majority of presidential nominees receive Senate action, not all do. Senaterules do not require that a nominee receive consideration. "There is nothing inherent in theappointments process that forces action, as there is, for example in the budget process. If theCongress fails to act on the budget, the unpleasant prospect of a government shutdown looms. Thisusually inspires action, even if it is not always completed by the first day of the new fiscal year. Anappointment carries no similar sense of urgency," noted political scientist G. Calvin Mackenzie. (19) In the case of nominees, by contrast, if the Senate does act, there is no established time framefor that action. "The mere fact that the President submits a name for consideration does not obligatethe Senate to act promptly," wrote separation-of-powers scholar Fisher. (20) <3. Implementation of the 9/11 Commission's Recommendation> <3.1. Committee Proceedings> The 9/11 Commission's proposal, and most likely the House-passed provision to S. 2845 , would presumably require that Senate committee chairs schedule confirmationhearings on the proposed members of the National Security Team. If hearings were not held on thenominee in a timely fashion or the nomination not reported out after a certain number of days, thenomination would presumably be discharged, either automatically or through a motion to discharge. As a result of this change, a nomination could come before the full Senate for consideration withouthaving had a hearing in the committee of jurisdiction. While some argue that too many nominationsare subject to Senate confirmation hearings, it is unlikely that Senators would want to skip such astep in the case of the Secretary of State or Secretary of Defense. This change would constitute a major change in the established prerogative of committeechairs. The power of committee chairs to control the agenda of their panels is longstanding. Severaltimes in recent years, committee chairs have refused to grant a nominee a hearing, and effectivelyprevented the Senate from being able to act on the nomination. (21) The Senate can dischargea committee from consideration of a nomination, and frequently does so by unanimous consent whenthe nominations concerned are non-controversial. When there is opposition, however, the processto discharge the committee from further consideration of the nomination is difficult and subject tofilibuster, and has been used rarely. Responding to concerns that committee chairs were too powerful in their ability to blockconsideration of legislation, the 1970 Legislative Reorganization Act created a new Senate rule toallow a majority of a committee to call a meeting without the approval of the chair. (22) It is rarely used, perhapsbecause of the inherent political consequences of challenging a committee chair's authority, becausethe chair retains control over the agenda for any new meeting scheduled, or because the threat issufficient to bring about action by the chair. Implementing the 9/11 Commission's proposal would require guaranteeing action on anominee at the committee level. It would accordingly weaken the power of the chair to use his orher position to block a nomination. <3.2. Floor Consideration> The deadline proposed by the 9/11 Commission and the House also would seem to excludethe possibility of Senators placing holds on these nominees to postpone their consideration for anylength of time. It would mean that votes on these specific nominations would have to be protectedagainst being delayed by a filibuster. Senators have several times refused to allow the Senate to reach a final vote on a nomination,thus permitting a filibuster, or extended debate, to kill that nomination. (23) In other instances, aSenator or a group of Senators has placed a "hold" on a nomination, which can also effectively killthe nominee's chance for confirmation. The system of "holds" is not a formal part of the Senaterules; rather, it is a practice honored by the Senate leadership. If a Senator or a group of Senatorstell their leader they want to place a hold on a nomination (or a piece of legislation), the leader maydecide to honor that request and not schedule the nomination for floor consideration. The leader alsomay decide to honor the hold for a specific period of time or not at all. The power of the hold liesin its implicit threat -- that if the item is scheduled for floor consideration, the concerned Senator andhis or her allies might wage a filibuster and try to prevent a final up or down vote on the matter. (24) Holds and filibusters are essentially two versions of the negative power of the Senate and itsMembers -- the ability to stop something from happening, whether it be passage of piece oflegislation, ratification of a treaty or confirmation of a nomination. The 9/11 Commission'srecommendation, which calls for a guaranteed up or down vote on all nominees in the NationalSecurity Team, would require altering these traditions. In order to ensure that nominees receive afinal vote, it would be necessary to preclude the possibility of a successful filibuster. If thenomination had to be acted upon within 30 days, the hold would lose its power as well -- under thoserules, a delay of a day, even a week, is unlikely to be detrimental to a nominee's ultimateconfirmation. Many critics argue that Senators should not be able to use these powers to block action onnominations, that it distorts the confirmation process and prevents the full chamber from workingits will. "Holds, mentioned nowhere in Senate rules, are antidemocratic and probablyunconstitutional (although not likely subject to judicial review since the courts tend to be deferentialto political questions) Yet the hold subjects nominations to a single senator's veto," argue Ornsteinand Donilon. (25) Political scientist Christopher J. Deering wrote that the practice of holds has been destructiveto the confirmation process. "[M]embers of the Senate of both parties have placed holds onparticular individuals. In some cases, the nominee is the target, in other cases merely a pawn, butin either case the use of the nominees as, in effect, hostages has undermined the integrity of thesystem. [T]he use of such holds is a serious abuse of the current system." (26) As political scientist Barbara Sinclair has noted, however, holds are not meaningful unlessthey are backed up by the threat of filibuster. Therefore, it is the Senate's tradition of unlimiteddebate on most subjects, including nominations, that is at the heart of this dispute. Sinclair observed: As long as members are willing to back their holds withactual extended debate, the leaders are faced with an impossible situation when floor time is short. Assuming that the bill is not "must" legislation, calling it up is likely to consume scarce timeunproductively, time for which the leaders have multiple and clamorous requests. (27) Supporters of the Senate's tradition of unlimited debate argue that it is a necessary componentof the chamber's procedures. "Advocates of restrictions on debate rest their case on the cliches ofdemocracy, and transform government by a majority from an imperfect device into an eternalprinciple," wrote Senate historian Lindsay Rogers. "Yet curiously enough, freedom of debate,although sanctioning minority control by avoirdupois rather than by argument, has proved to be avaluable safeguard against executive inefficiency and corruption," he concludes. (28) Senator J.W. Fulbright, in 1957, during Senate debate on a proposal to change its rules tomake it easier to invoke cloture and end debate, defended extended debate this way: The great distinction between the Senate andthe other body of Congress is the power of the Senate to examine and to subject approval ofmeasures to delay, in order that the people themselves may be able to understand controversialissues. I hope Senators will not take seriously the argument that democracy is in some wayequivalent to majority rule, because there is nothing whatsoever to such an argument. There isnothing in our Constitution which in any respect implies, directly or indirectly, that majority ruleshould be the rule of the Senate. (29) Others have argued that the full Senate must be able to act on presidential nominees and notallow one or several Senators to block a confirmation vote. Political scientist Brannon P. Denningput it this way: The notion of "advice and consent" is mutable. It hasevolved from an alleged "rubberstamp" into a right to inquire into the jurisprudential commitmentsof Supreme Court nominees, to a right to disapprove nominees because a particular senator believesthat they are not "ambassadorial quality." Tools for facilitating "consensus" -- said to be the raisond'etre of most Senate rules and procedures -- have, in short order, been fashioned into weapons ofminority rule. [C]ustoms like the "hold" and the prerogative of committee chairs have, lately, beenexercised not for the benefit of the Senate as an institution, or even for the benefit of a particularparty, but for the benefit of individual senators. (30) <3.3. Implementation Requirements> Rules implementing the requirements outlined above would have the main features of anexpedited procedure. Expedited procedures are tools used by the House and Senate that can overridethe normal parliamentary procedure to ensure relatively quick action on a particular measure ormatter. Examples of expedited procedures, also known as "fast track" provisions, include theDefense Base Closure and Realignment Act of 1990 and the Trade Act of 1974, the process by whichCongress considers most trade agreements. (31) Given its call for a deadline-mandated, up or down vote on each nominee in the NationalSecurity Team, the most likely way to implement the 9/11 Commission's recommendation or theHouse-passed provision of S. 2845 would be for the Senate to create a new expeditedprocedure that would apply to this specific set of nominations. Expedited procedures have notpreviously been used in the Senate to consider executive business, so enactment of the 9/11Commission's recommendations would be precedent-setting. That would not necessarily, however,be a barrier to using expedited procedures for executive business. Necessary Elements. An expedited procedurereflecting the 9/11 Commission's recommendation and the House provision would need to includea time limit for action by the committees on nominations referred to them. This provision mightrequire that the committee hold a hearing on the nomination and report it to the full chamber by aset time after receiving it, such as 20 days. (32) An effective expedited procedure would need to include anenforcement mechanism at this stage, so that if the committee did not act, either the nominationwould automatically be discharged from committee and placed on the Executive Calendar , makingit available for consideration by the full chamber, or a motion to do so would be in order. An effective expedited procedure also would need to provide some controls regarding Senatefloor action. Currently, under Senate precedents, a Member may move to go into executive sessionto take up a particular nomination without that motion being subject to debate, and thus a filibuster. The nomination itself, however, is subject to debate and, therefore, to filibuster. The expeditedprocedure would need to foreclose the possibility of filibustering a nomination, probably by placinga limit on the total amount of time the Senate could spend debating the nomination of a member ofthe National Security Team. How much debate time would be required could be a tricky question to decide. The Senatespent no floor time debating the two nominations for Under Secretary of State for Public Diplomacyand Public Affairs it has approved during the Bush Administration. That position is included in the9/11 Commission's definition of the National Security Team. The Senate might, however, want tobe sure it includes sufficient debate time to consider other members of the National Security Team,such as Secretary of Defense, Secretary of State or Attorney General. In general, the Senate does not tend to include in its expedited procedures a provisionautomatically calling a measure to the floor. (33) Usually, the expedited procedure would make it in order for themajority leader or another Member to bring the matter up. If desired, the expedited provision forNational Security Team nominations could include such a provision, requiring that within severaldays after the end of committee consideration, the Senate take it up. This provision would need tospecify when, in the Senate's normal course of daily operations, the nomination would come up. Because this procedure would be designed to apply to nominations, it also would need to providefor a motion that the Senate go into executive session or that the Senate be considered to have goneinto executive session at a specified time. Finally, to implement the 9/11 Commission's recommendation fully, the expedited procedurewould need to require an up or down vote at the end of the debate for each nominee included in theNational Security Team. In spite of all the requirements of an expedited procedure, it is possible that the Senate as abody might refuse to act on a particular nomination. The majority leader might simply decline tocall it up. It is not apparent how any form of procedure could provide effective recourse in thissituation. Expedited procedures in existing statutes often provide that if Congress does not act ona presidential proposal within a specified time, the proposal goes into effect. Permitting anomination to be treated as confirmed without affirmative action by the Senate, however, would notlikely be acceptable to the Senate, and the validity of such an outcome might well be questioned onconstitutional grounds. <3.4. Means of Implementation> The Senate could institute procedures to implement the 9/11 Commission's proposal or theHouse provision in several ways: by enacting an expedited procedures law, by amending the Senate'sstanding rules or its standing orders, through adoption of a unanimous consent agreement, or bypassage of a constitutional amendment. Expedited Procedures Statute. Language to createan expedited procedure for the National Security Team could be included in a larger bill toimplement other elements of the 9/11 Commission' recommendations, such as the creation of aDirector of National Intelligence. If the expedited procedures legislation were subject to a filibuster,60 votes would be required to invoke cloture. (34) Legislation including an expedited procedure, however, couldbe enacted into law only through the constitutional lawmaking process, requiring action by the Houseof Representatives and the President as well as by the Senate. This method of implementation raisesthe question whether the Senate would be willing to involve the House and the President in makingchanges to the confirmation process, a matter which is bound up in with its own rules and specialconstitutional prerogatives. Amending Senate Rules. Similar changes alsocould be implemented by amending the Senate rules. This approach would have the advantage tothe Senate of not having to go through the House or be signed by the President; rather, the changeswould take effect as soon as the Senate adopted them. The difficulty with this approach is that, ifthe changes to the rules were opposed by a filibuster, it would take a two-thirds vote of those present,as many as 67 Senators, to invoke cloture and cut off debate, which is a very high threshold to meet. Constitutional Amendment. The Senate alsocould try to amend the Constitution to redefine the confirmation process along the lines of the 9/11Commission's recommendations. This approach might be considered less promising becauseconstitutional amendments must be passed by two-thirds of those voting, or as many as 67 votes. In addition, once in place, such a change would be extraordinarily difficult to reverse or modify. Unanimous Consent. The Senate also could tryto amend its rules to conform to the 9/11 Commission's recommendations by a unanimous consentagreement. For this approach to succeed, all Senators would have to agree on a plan to implementthe new confirmation procedure -- one objection would prevent the agreement from going into effect. Unanimous consent agreements have been used to structure debate on specific nominations. Thisagreement, however, would be binding into future Congresses, unless it specified otherwise or wasmodified by another unanimous consent agreement. Standing Order. Finally, the Senate could try toamend its rules through adoption of a Standing Order, which would take the form of a simpleresolution. Such a Standing Order would have effects like those of a rule, but the resolution wouldrequire 60 votes for cloture if it was filibustered, not two-thirds of Senators voting. Such a standingorder resolution was used for the creation of the Permanent Select Committee on Intelligence (S.Res.400, 94th Congress). <4. Implications for the Confirmation Process> <4.1. The Balance of Nomination Politics> One impact of the ability of a Senator to filibuster a nominee has been that negotiations overother matters, both with the executive branch and among fellow Senators, have been broadened toinclude all matter of Senate business, a concept known as linkage. For example, a Senator'sobjections to a particular nominee might be disposed of by permitting that Senator to offer anamendment to a bill that is soon to be considered on the Senate floor. Taking nominations out ofthis equation could shift the balance of power between the executive and legislative branches. "The appointments process is deeply contentious, and as legislative policymaking has grownmore difficult in recent decades, the process has increasingly become a venue for pitched battles overthe shape of public policy," wrote appointments expert Mackenzie. He continued: More and more, the contentiousness in the appointmentsprocess is driven not by questions of the fitness of nominees but by policy disagreements. Senatorsvote against nominees, and nominations fail, because the appointments process has become a policybattleground This is not a new phenomenon, this use of the appointments process to wage policybattles. In fact, it has always been a characteristic of the appointments process. (35) Mackenzie noted that President Andrew Johnson fought with the Senate over several of his nomineesto head the national bank and of Roger Taney to be Secretary of the Treasury. What is different now,he said, is the extent to which those connections are made. Political scientists Nolan McCarty and Rose Razaghian studied more than 100 years ofSenate action on nominations. They said: "The thrust of our theory is that the supermajoritarianismof the Senate in general and the confirmation process in particular gives partisan and ideologicalminorities a strategic opportunity to have an impact on public policy by delaying nominations thatwould pass on a simple majority vote." (36) For some, the ability to engage in extended debate on (and effectively block) measures ormatters is what empowers the Senate to deal on equal footing with the President in their fights overboth nominations and legislation. Political scientist Rogers argued that "For the fact of the matteris, as I hope to show, that, as the much vaunted separation of powers now exists, unrestricted debatein the Senate is the only check upon presidential and party autocracy. The devices that the framersof the Constitution so meticulously set up would be ineffective without the safeguard of senatorialminority action." (37) Some also believe that the Senate's opportunity to play a vigorous role in the nomination andconfirmation process is essential to the public's trust in the process. "Nonetheless, the process ofvetting and voting on the president's candidates for high position is an essential balance wheel in ourcomplicated form of government. It lends legitimacy to the whole structure, and it is worth theoccasional loss of a good person," wrote former judge, and former Member of Congress, AbnerMikva. (38) Hecontinued: Neither branch always chooses good people, as historyshows, and frequently the best people don't get appointed. Learned Hand never made it to theSupreme Court. Nonetheless, political involvement, including confirmation by the very politicalSenate, offers a reality check on who gets the power to make very important judicial decisions forlife. The case is a little less compelling for appointments to the executive branch, but it still can bemade. Most of the federal work force come into their positions and are protected in them, by a civilservice system based on meritocracy. For those relatively few policy makers whose appointmentsrequire Senate confirmation, an extra "look see" is justified. (39) Others believe that the delaying strategies being employed by some in the Senate detract fromthat legitimacy. (40) And some contend that it is not right to use nominations as bargaining chips in legislativenegotiations. "The Senate's constitutional and institutional role of advice and consent is beingsupplanted by informal, extra-constitutional customs that allow individual senators to effectivelyveto the President's nominees -- even if only to gain leverage with the executive branch on anunrelated matter," wrote Denning. (41) <4.2. Changing Politics Rather Than Rules> Any change to the confirmation process of the kind proposed by the 9/11 Commission wouldalmost certainly also influence the balance of power between the executive and the legislativebranches. The ability to block a final vote on a nomination has become a critical element in theSenate's power relationship with the President, both for its action, or inaction, on the nominationitself and, frequently, for a Senator or group of Senators to gain leverage in negotiations on othermatters. A vote deadline, for example, could still lead to a defeat, so requiring a vote could lead tomore presidential defeats or to pressure to go along with the President so as to not hand him a defeat. Political scientist Burdett Loomis observed that trying to change the Senate's rules may notbe an effective plan. "Is there any indication that the Senate might smooth the way for futurenominees? Given the profound changes in the chamber over the past twenty-five years -- the greaterlatitude allowed individual members and the intense partisanship that dominates muchdecision-making -- it seems unlikely that reformers would profit much from attempting to reshapeSenate procedures." (42) Instead, he argued, "Striving to "govern together" by bridging the separate institutions may bevaluable than seeking to change an institution that has proved highly resistant to structuralreforms." (43) If the history of the confirmation process is more about practices than rules, perhaps it wouldbe useful to consider informal changes in the dynamics that undergird the process. Instead of settingup timetables for action, this approach would build upon a view that the problem is not procedural,but political. Political scientist Christopher J. Deering wrote that politics has always been a part of theprocess. "The relationship between the executive and legislative branches has been and remainsessentially political. That should not change. The Senate's role in the review of executive personnelis but one example of that political relationship. The Senate's role in the confirmation process wasdesigned not to eliminate politics but to make possible the use of politics as a safeguard. From theoutset the political motivations of the two branches were to be a protection against tyranny." (44) "The one enduring characteristic of the process is that it is as deeply and intensely politicalnow as it has always been," (45) agreed Mackenzie. The process is political, he asserted, becauseits results can have a major impact on policy-making, and therefore, politics. Conflict occurs in the appointment process for a verysimple reason. Appointments matter. Were that not the case, presidential administrations would nothave several dozen White House aides devoting full time to appointment decisions; Senatecommittees would not hold hundreds of hours of confirmation hearings; interest groups, agencies,political parties and members of the House would not spend their time and resources trying to shapeappointments decisions. Yet they do all these things, and they do them because they think it makesa difference who gets appointed to serve in particular federal offices. (46) As a result, when the process has worked, it frequently was because the two branches ofgovernment found a way to make it work. "The appointment power operates in a framework ofstudied ambiguity, its limits established for the most part not by court decisions but by imaginativeaccommodations between the executive and legislative branches," wrote separation-of-powersscholar Fisher. (47) <4.3. Broader Implications> The 9/11 Commission's proposal provides an occasion for the Senate to evaluate the largerquestion of its confirmation process and its role in the presidential appointment process. Adoptionof the recommendation, for example, could open the door to consideration of ever more nominationsthrough expedited procedures. What would a new process mean for other presidential nominations,particularly those to the judiciary? For several years, the Senate has been debating the proper role of the President and Senatorsin the nomination and confirmation of the nation's federal judges. During the ClintonAdministration, critics charged that the Judiciary Committee was not acting on all the nominationsit needed to. During the Bush Administration, the controversy has been over the use of the filibusterto block a final vote on a judicial nominee. (48) Before the 9/11 Commission released its recommendations, Senator Arlen Specter hadintroduced a resolution that would establish a "protocol" for the confirmation of federal judges. Hisplan ( S.Res. 327 ) would establish timetables for action at both the committee andSenate floor stages, and it would effectively prohibit filibusters of judicial nominations. PresidentGeorge W. Bush on October 30, 2002, proposed a similar plan for the Senate's confirmationprocess. (49) S.Res. 138 , introduced by Senate Majority Leader Bill Frist on June 26, 2003, would set up a diminishing threshold for invoking cloture on presidential nominations that aresubject to Senate approval. The threshold necessary for invoking cloture would drop each time theSenate voted on a cloture motion on a particular nominee until it reached 51 Senators, a majority ofthe chamber. Given the interest already expressed, some Senators might want to expand the 9/11Commission's recommendations to include a broader number of presidential nominees. The 30-daytimetable would likely have to be adjusted to allow the Senate to complete its work on a largernumber of nominations. On the one hand, this action could put in place a definitive system for the consideration ofpresidential nominees -- it could bring order and predictability to the entire process. On the otherhand, it might rush the process for some nominees and make it more difficult for Senators to defeata nomination they oppose. <4.4. Alternative Approaches> Existing Rules. Instead of, or in addition to,instituting new procedures to expedite action, the Senate might exercise more control over threatenedfilibusters against nominations by enforcing more stringently its existing rules. Under currentprocedures, debate on nominations and treaties is in some respects easier to limit than on legislativematters. First, the motion to proceed to consider a nomination may be offered in a non-debatableform, whereas the motion to proceed to consider legislation is usually debatable. Second, the "TwoSpeech Rule" of the Senate limits each Senator to two speeches per day on any given question. Withrespect to legislative matters, this rule is not a viable deterrent to extended debate, for each newamendment is viewed as a new question on which each Senator may speak two more times. Onun-amendable matters, such as nominations, the Two Speech Rule could more effectively be usedas a procedure to limit debate indirectly. Under current interpretations, however, the two-speech rule has proved to be an ineffectivedeterrent against extended debates on nominations because it has been interpreted to apply to thecalendar day. On each new calendar day every Senator is able once again to make two speeches onthe pending nominee. As a result, since the late 1980's, the Senate has rarely sought to enforce thisrule. A reinterpretation of the rule in its application to nominations could make it more effective. Given such an interpretation, it would be easier for Senate leaders to overcome filibustersagainst a nominee by forcing opposing Senators to speak at length. In modern practice, mostfilibusters feature delay by means other than debate (quorum calls or agreements to turn to otheritems of business). In effect, the threat of a filibuster is treated as though the Senate is beingprevented, through extended debate, from reaching a final conclusion on the measure or matter athand. Keeping the Senate in continuous executive business session for consideration of anomination could make it more difficult for Senators to sustain a true filibuster, and, perhaps, reducethe incidence of filibuster threats. Expiring Nominations. Another approach mightbe to place a time limit on a presidential nomination. While such a requirement might seemcounterintuitive, it would prevent an endless delay in filling the position in question. If the Senatedid not act on a nomination after a defined period of time, say 60 days, it would automatically bereturned to the President. While the President would have the ability to renominate the individualin question, if he so chose, he could also take the opportunity to reconsider his choice without thepolitically sensitive problem of asking a nominee to step aside. Table 1. Initial Appointments by President George W. Bush to Top Positions at the Departments of Defense,Homeland Security, Justice, and State, andthe Central Intelligence Agency Source: This table was created by [author name scrubbed], Analyst in American National Government, CRS, Aug. 18, 2004. a. The Homeland Security Act of 2002 ( P.L. 107-296 ), which created the Department of Homeland Security, was signed into law on 11/ 25/02. Theposition of Under Secretary of Defense for Intelligence was created by P.L. 107-314 , sec. 901(a), enacted 12/02/02. b. Vacancy information for Mueller's predecessor, Louis J. Freeh, is from the FBI's history page, available at http://www.fbi.gov/libref/directors/freeh.htm . c. Although the first day the new President submitted nominations to the Senate was Inauguration Day, Senate committees held hearings on some topnominations before that time and the Senate was therefore ready to confirm them on the same day they were nominated. d. This position was created by P.L. 107-314 , sec. 901(a), enacted 12/02/02. e. On Jan. 27, 2003, President Bush announced his intention to designate England, Hutchinson, Hale, and one other individual as acting officials in theirintended positions. (U.S. President (George W. Bush), "Digest of Other White House Announcements," Weekly Compilation of PresidentialDocuments , vol. 39, Jan. 27, 2003, p. 145.) These actions were taken under Section 1511(c)(1) of the act. (Information received from Departmentof Homeland Security, Office of the Deputy Secretary, via telephone conversation, Jan. 28, 2003.) England, Hutchinson, and Hale were laterconfirmed as shown. f. According to DHS sources, Brown was appointed under Section 1511(c)(2) of the act, which provides that reconfirmation by the Senate is not requiredby the law for "any officer whose agency is transferred to the Department pursuant to this act and whose duties following such transfer are germaneto those performed before such transfer." (Information received from Department of Homeland Security, Office of Legislative Affairs, viatelephone conversation, Mar. 12, 2003.) He was previously nominated to be deputy director of the Federal Emergency Management Agency(FEMA) on 03/21/02 and confirmed on 08/01/02. g. Technically Beers was nominated twice. She was first nominated on 06/29/01and this nomination was returned to the President on 08/03/01at thebeginning of a 31-day Senate recess under the provisions of Senate Rule XXXI, Paragraph 6 of the Standing Rules of the Senate. She wasnominated again on 09/04/01. The 31 days of the Senate recess are not included in the calculations, in this row, of days elapsed. Table 2. Appointment Information for Four William J. Clinton Appointees Who Continued in Office Under PresidentGeorge W. Bush Source: This table was created by [author name scrubbed], Analyst in American National Government, CRS, Aug. 18, 2004. a. Information on the departure date for Larson's predecessor, Stuart Eizenstat, is from Office of Personnel Management (OPM) records. The departuredate for Tenet's predecessor, John M. Deutch, is noted in R. Jeffrey Smith, "Having Lifted the CIA's Veil, Deutch Sums Up: I Told You So," TheWashington Post , Dec. 26, 1996, p. A25. John Gordon, who preceded McLaughlin, reportedly took a new position as of 06/27/00, but his precisedate of departure from the CIA could not be determined (Associated Press Online, "Clinton Names New No. 2 at CIA, June 29, 2000). Dempseywas the first person to hold the position of Deputy Director of Central Intelligence for Community Management, which was created by P.L.104-293 , sec. 805, enacted 10/11/96. b. The Senate adjourned on 07/27/00 and reconvened on 09/05/00. The 39 days of that recess are not included in the calculations, in this row, of dayselapsed. c. The Senate adjourned on 11/13/97 at the end of the 1st session of the 105th Congress and reconvened on 01/27/98. The 74 days between the 1st and2nd sessions of the 105th Congress are not included in the calculations, in this row, of days elapsed. Table 3. Initial Appointments by President William J. Clinton to Top Positions at the Departments of Defense,Justice,and State, and the Central Intelligence Agency Source: This table was created by the author with extensive assistance from [author name scrubbed], Analyst in American National Government, CRS. a. Although the first day the new President submitted nominations to the Senate was Inauguration Day, Senate committees held hearings on some topnominations before that time and the Senate was therefore ready to confirm them on the same day they were nominated. b. The Senate adjourned on 08/7/93 and reconvened on 09/07/93. The 30 days of that recess are not included in the calculations, in this row, of dayselapsed. c. This position was created by P.L. 103-160 , sec. 903, enacted 11/30/93. d. Freeh's predecessor, William S. Sessions, was fired by President Clinton on July 19, 1993. Ana Puga, "Clinton fires FBI's Sessions, expected to nameN.Y. judge," The Boston Globe , July 20, 1993, p. 1. e. Wirth was confirmed into the position of counselor at the Department of State. After a reorganization, the name of the position became under secretaryof State for global affairs. John M. Goshko, "State Department Reorganizes Ranks; As Many as 40 Deputy Assistant Secretary Job WillDisappear," The Washington Post , Feb. 6, 1993, p. A8. f. This position was created by P.L. 105-277 , sec. 1313, enacted 10/21/98. g. Studeman was a holdover from the previous Bush Administration. Studeman's predecessor, Richard J. Kerr, resigned on Jan. 14, 1992. ElaineSciolino, "No. 2 C.I.A. Official Quits Post," The New York Times , Jan. 14, 1992. h. This position was created by P.L. 104-293 , sec. 805, enacted on 10/11/96. The Senate adjourned on 11/13/97 at the end of the 1st session of the 105thCongress and reconvened on 01/27/98. The 74 days between the 1st and 2nd sessions of the 105th Congress are not included in the calculations,in this row, of days elapsed.

On July 22, 2004, the National Commission on Terrorist Attacks Upon the United States,known as the 9/11 Commission, issued its final report, detailing the events up to and including theSeptember 11, 2001 terrorist attacks upon the United States. The report contained 41recommendations on ways to prevent future catastrophic assaults, including a series of proposalsdesigned to improve the presidential appointments process as it relates to the top national securityofficials at the beginning of a new administration. On October 6, the Senate passed legislation( S. 2845 ) to implement many of the changes recommended by the 9/11 Commission. The House on October 8 passed its version of the legislation ( H.R. 10 ). The Presidentsigned the final version of the bill on December 17, 2004 ( P.L. 108-458 ). Two other measuresdealing with the 9/11 Commission's recommendations ( S. 2774 and H.R. 5040 ) were introduced in early September. The 9/11 Commission recommended that the Senate adopt rules requiring hearings and votesto confirm or reject national security nominees within 30 days of their submission at the start of eachnew presidential administration. Implicit in the proposal is the assumption that there is a problemwith the process for nominating and confirming presidential appointees. Analysis of Senateconsideration of the initial nominations by Presidents William J. Clinton and George W. Bush to theposts covered by the recommendation shows that the commission's proposed timetable was not metin 14 of the 49 cases, suggesting this is an issue in a minority of cases. The Constitution gives the Senate a role in the presidential appointments process, but theparameters of that role have never been clearly defined. The current process is regulated by amixture of formal rules and informal customs, as well as by political interactions between thePresident and Senators. Implementing the commission's proposal would presumably requireinstituting procedures that guarantee committee consideration of each nomination, at least at ahearing, and a final vote on each by the full Senate. Changes of this kind would involve newrestrictions on both the power of committee chairs to control the agenda of their committees and therights of Senators to delay or block nominations through holds and extended debate. These changeswould likely also alter the relationship between the legislative and executive branches, weakeningthe negotiating posture of the Senate in relation to the President, particularly if they were to beextended to additional nominations. Procedures adequate to implement the commission's recommendation would resemble anexpedited procedure, such as those used in resolutions of approval and disapproval of executiveactions. Procedural changes of this kind could be achieved by amending the Standing Rules of theSenate, changing the Standing Orders of the Senate, passing a Constitutional Amendment enactingan expedited procedures statute, or reaching a unanimous consent agreement. This report will be updated as events warrant.

<1. Introduction> The U.S. electric grid consists of over 700,000 miles of transmission lines and over 55,000 substations linking over 7,000 power plants to around 150 million customers. Likewise, the U.S. energy pipeline network is composed of over 2.9 million miles of pipeline transporting natural gas, oil, and hazardous liquids; the natural gas transmission pipelines feed approximately 1,400 local distribution systems serving over 67 million customers. These vast networks comprise the critical backbone of U.S. energy supply, supporting the vast majority of U.S. economic activity and playing a vital role in national defense. Consequently, the secure operation of both the power grid and pipelines are national priorities. While physical threats to the U.S. power grid and pipelines have long worried policymakers, cyber threats to the computer systems that operate this critical infrastructure are an increasing concern. Especially over the past decade, cyber threats against energy infrastructure have grown in frequency and severity. While most of these threats have been against the electric subsector, pipeline systems have also faced growing risk to their information communications technology. Both the Departments of Energy and Homeland Security have been directed to assess impacts of a cyberattack against the energy sector. Furthermore, with ever greater physical interdependency between electricity generators and the natural gas pipelines which supply their fuel, many in Congress recognize that grid and pipeline cybersecurity are intertwined. The Department of Energy (DOE) is the lead agency for the protection of electric power, oil, and natural gas infrastructure cooperating with the Department of Homeland Security (DHS), the lead agency for pipelines. DOE's energy sector cybersecurity activities are led primarily by its Office of Electricity Delivery and Energy Reliability (OE). In 2015, the Fixing America's Surface Transportation Act (the FAST Act) provided the Secretary of Energy with additional authority to order measures to protect or restore the reliability of the power grid during a grid security emergency, including "a malicious act using electronic communication." The 115 th Congress is considering additional legislation to fund and expand DOE's cybersecurity programs, including appropriations in the Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy and Water Development National Security Appropriations Act, 2018 ( H.R. 3219 ) and the Energy and Water Development and Related Agencies Appropriations Act, 2018 ( S. 1609 ). The Energy and Natural Resources Act of 2017 (S. 1460) and the Enhancing State Energy Security Planning and Emergency Preparedness Act of 2017 ( H.R. 3050 ) would authorize additional DOE funding for cybersecurity research and assistance to states, respectively. This report examines the energy sector cybersecurity program administered by DOE's Office of Electricity Delivery and Energy Reliability as it applies to the electric power and pipelines subsectors. The report summarizes risks to the computer-based control systems used in these subsectors, threats to those systems, and recent cyberattacks. The report reviews the legislative authorities and policy guidance that have directed OE's cybersecurity program and its activities, including its relationship to the national laboratories and other federal agencies with cybersecurity roles. The report concludes with a discussion of key policy issues for Congress. <2. Cybersecurity Risks> Federal security officials and industry analysts have long identified the grid and pipelines in the United States as potential targets for intentional disruption, although the nature and degree of cyber risk has been steadily evolving. For example, a 2011 DHS pipeline threat assessment concluded that "terrorist groups have discussed attacks on unspecified [supervisory control and data acquisition] systems, but it is uncertain whether al-Qa'ida or any other group has the capability to conduct a successful cyberattack on these systems." However, in 2016, the President of the Association of Oil Pipe Lines testified before a congressional committee that cybersecurity threats to pipelines were increasing and that "there is a great concern about being prepared for cyber attacks" in the pipeline industry. In January 2017, the DOE similarly concluded that "Cybersecurity is a particular concern for national and homeland security. Malicious cyber activity against the electricity system and its suppliers is growing in sophistication." While the threat of terrorist groups seeking to employ cyber tools against critical infrastructure persists, terrorist organizations have not yet demonstrated a capability to attack U.S. critical infrastructure in this manner. Generally, the electricity grid and energy pipelines are under the same types of cybersecurity risks as other industries, such as financial services or transportation. However, different adversaries may choose to employ similar cyber tools to focus on different targets at different moments in time based on their unique motivations. Cybersecurity risks thus reflect both general threats to the energy sector as a whole and specific threats to industrial control systems as the focus of attack. <2.1. Industrial Control System Security Risks> Software-based industrial control systems (ICS) are used to monitor and control many aspects of network operation for railways, power grids, water and sewer systems, and pipeline networks. One category of ICS widely used in electric grid and pipelines networks supervisory control and data acquisition (SCADA) systems collect data (e.g., voltage, line pressure) in real time from sensors throughout a network, displaying those data to human operators in remote network control rooms. These operators can send computerized commands from SCADA workstations to control geographically dispersed equipment such as electric switches, pipeline valves, pumps, and many other network components. The SCADA system provides continuous feedback about conditions throughout the network, generating safety alarms when operating conditions fall outside prescribed levels. Communications links may employ dedicated telephone landlines, wireless communications (satellite, microwave, and radio), cellular telephone service, Wi-Fi, and the Internet. As SCADA technology has matured, system control has become more intelligent and more automated, requiring less human intervention. Historically, SCADA systems employed highly customized proprietary software and were physically isolated from outside communications and computer networks. Because many of these systems were largely unique to a specific operator, it would have been difficult for malicious individuals outside the company to access a SCADA system and know what to do with it. However, due to advancements in computer technology and the ongoing development of communications and Internet-based control system applications, SCADA systems have become much more vulnerable to outside intrusion and manipulation. Specific SCADA security weaknesses include the adoption of standardized control system technologies with known vulnerabilities, increased connection to external networks, insecure communication connections, and the public availability of sensitive information about control systems and infrastructure. Once accessible to a knowledgeable attacker, a SCADA system can be exploited in a number of specific ways to carry out a cyberattack: issuing unauthorized commands to control equipment; sending false information to a control-system operator that initiates inappropriate actions; disrupting control system operation by delaying or blocking the flow of information through the control network; making unauthorized changes to control system software to modify alarm thresholds or other configuration settings; and rendering resources unavailable by propagating malicious software (e.g., a virus, worm, Trojan horse) through the control network. Depending upon the configuration of a particular system, such cyberattacks could potentially disrupt service, cause a hazardous release into the environment, or damage equipment. An example of the latter was a proof-of-concept attack hosted by the DHS in 2007 known at the Aurora Project. In this experiment, researchers working with DHS sent two sets of commands to a diesel-fueled electric generator. The first set of commands told the generator to repeatedly open and then rapidly close circuits in a manner that would cause failure. The second set of commands sent outputs to the operator-readable control panel that the generator was operating normally. The result was that the generator spun in such a manner that it destroyed itself without the operators knowing. Recently, reports of harmful software (malware) known as CrashOverride emerged as the latest example of destructive malware that can be used against the energy sector. CrashOverride reportedly includes capabilities allowing an attacker to disrupt ICS operations by opening and closing electric circuit breakers (degrading operations), denying access to communication ports on devices, and wiping modules to render devices inert. While there is no reported case of CrashOverride residing on U.S.-based systems, an updated version of the malware reportedly was used in a 2016 attack against the Ukrainian electric grid. Most of the cyberattacks that have been made public in the past few years have been against electricity generation and delivery infrastructure. However, in March 2012, the Industrial Control Systems Cyber Emergency Response Team (ICS-CERT) within DHS identified an ongoing series of cyber intrusions among U.S. natural gas pipeline operators dating back to December 2011. According to the agency, various pipeline companies described targeted spear-phishing attempts and intrusions into multiple natural gas pipeline sector organizations that were "positively identified as related to a single campaign. " In 2010, the Stuxnet computer worm was first identified as a threat to industrial control systems. The Stuxnet software initially spreads indiscriminately, but the software includes a highly specialized industrial process component targeting specific Siemens industrial SCADA systems. Furthermore, the capabilities demonstrated during the Aurora Project and the CrashOverride malware described above are also applicable against other ICS, including those for pipelines. <3. DOE's Authority in Energy Delivery Cybersecurity> DOE has authority and responsibilities for the cybersecurity of energy delivery systems from both presidential action memoranda and law. A chronologic perspective provides some insight on how energy security policy has evolved. <3.1. Federal Actions in Energy Infrastructure Cybersecurity> The Clinton Administration released Presidential Decision Directive 63 (PDD-63) in 1998. For the first time in executive branch operations, PDD-63 established national policy for critical infrastructure protection from both physical and cyber threats. The directive discussed using a public-private partnership to reduce vulnerability to critical infrastructure from attacks, with lead federal agencies responsible for coordinating government efforts for specific sectors. PDD-63 established 15 critical infrastructure sectors and four special functions. DOE was assigned responsibility for (1) the electric power, and (2) the oil and natural gas production and storage sector. The George W. Bush Administration built on the work of PDD-63, superseding it in 2003 with Homeland Security Presidential Directive 7 (HSPD-7) on "Critical Infrastructure Identification, Prioritization, and Protection." HSPD-7 shifted the doctrine by removing "special functions" and expanding the sectors. In some cases, the expansion also included the addition of subsectors, as in transportation and energy. The transportation sector identified pipelines as a subsector; the energy sector identified an electric power subsector, and an oil and natural gas subsector. Lead agencies were replaced by Sector Specific Agencies (SSA), which had to collaborate with other federal agencies in a similar way as in PDD-63, but were also given responsibility for vulnerability assessments and assisting in risk management. In HSPD-7, DHS was named as the SSA for the transportation sector, including pipelines; DOE was assigned responsibility for the energy sector, as well as being the federal coordinator for all critical infrastructure protection efforts. In implementing HSPD-7, DHS pursued a risk-based approach to focus federal resources in areas of greatest risk, based on assessments as well as stakeholder (e.g., companies and state officials) input. Congress passed legislation on the cybersecurity of energy delivery systems during the George W. Bush Administration with the Energy Policy Act of 2005 (EPACT). EPACT included the Electricity Modernization Act of 2005, which directed the Federal Energy Regulatory Commission (FERC) to establish an "Electric Reliability Organization" (ERO, a role which the North American Electric Reliability Corporation [NERC] currently fulfills) to develop "reliability standards" for the "reliable operation" of the bulk power system. The authority allowed for standards to address "cybersecurity protection" and also defined a "cybersecurity incident" as a unique incident which disrupted the "programmable electronic devices and communications networks ... essential to the reliable operations of the bulk power system." FERC's authority under EPACT applies only to the bulk power system, and that authority is limited to review of the ERO's standards. FERC cannot author standards independently, but can remand ERO-drafted standards back for reconsideration. While FERC also has regulatory authority over interstate natural gas pipelines under the Natural Gas Act (P.L. 75-688), its role is limited to siting and rate regulation, not safety or security. The Obama Administration superseded HSPD-7 with Presidential Policy Directive 21 (PPD-21) on "Critical Infrastructure Security and Resilience" in 2013. "Resilience" was a term adopted in the Obama Administration as a way of recognizing that critical infrastructure is inherently vulnerable and will be disrupted at some point (historically, by severe weather, and potentially by an intentional attack), and that the infrastructure's degree of resilience will affect response time and eventual recovery. PPD-21 sought to further integrate cybersecurity as part of critical infrastructure protection by clarifying federal roles for security and resilience; establishing baseline information exchange requirements; and integrating analysis to inform planning, operations, and critical infrastructure decisions. PPD-21 retained the SSAs from HSPD-7, with DOE continuing as the SSA for the energy sector (electric power, and oil and natural gas). DHS was named the co-chair with the Department of Transportation (DOT) on the transportation sector and its subsectors, including pipelines. Congress further legislated on energy sector cybersecurity in 2015 with the Fixing America's Surface Transportation Act (FAST Act). Division F of the FAST Act on "Energy Security" included the designation of DOE as the SSA for cybersecurity for the energy sector. With this authority, DOE was directed to work with DHS in collaboration with electric infrastructure owners and operators for prioritization of activity, incident management, and vulnerability identification. While the law broadly states that DOE has a responsibility for the energy sector, the specific activities for collaboration refer only to the electricity subsector. The Trump Administration has not released a presidential memorandum superseding PPD-21, so that directive remains in effect. However, on May 11, 2017, the Administration issued Executive Order 13800 (E.O. 13800) on "Strengthening the Cybersecurity of Federal Networks and Critical Infrastructure." E.O. 13800 requires DOE and DHS to assess U.S. readiness to manage the consequences of a prolonged power outage as a result of a significant cyber incident. DOE also worked on a similar plan in accordance with a FAST Act directive on strategic transformer reserve options, although that plan is not focused on a specific type of threat, addressing the effects of any disruption on power delivery. <3.2. Key Policy Guidance for Energy Delivery Cybersecurity> In addition to executive action and legislation, numerous federal policy documents over the last two decades from various presidential administrations have addressed cybersecurity for energy infrastructure. This policy guidance, together with the related presidential directives and executive orders discussed above, has resulted in DOE's energy delivery cybersecurity program in its current form. Key guidance documents over this period are briefly discussed below. The comprehensive federal program for cybersecurity in energy delivery originated largely in 2000 under the National Plan for Information Systems Protection , which identified the electric power system and pipelines as critical infrastructure "that could be a target for significant cyber or physical attacks." In particular, the plan stated The cyber nation of our infrastructures has created an intense reliance upon an underlying fabric of telecommunications and information networks. The infrastructures also rely heavily upon the Nation's energy production and distribution networks, especially through the I&C [information and communications] infrastructure's energy requirements. It is noteworthy that this passage refers broadly to "energy distribution networks," although I&C energy requirements imply an emphasis on reliable electricity supply. The plan reiterated DOE's role as the lead agency under PDD-63 for protection of electric power and oil and gas production and storage infrastructure, and DOT as the lead agency for pipelines. In 2003, the National Strategy to Secure Cyberspace also identified the energy sector (electric power, oil and gas production, storage, and pipelines) as critical infrastructures dependent upon computer systems and vulnerable to cyber threats, reaffirming the lead agency roles under PPD-63. The strategy placed a particular emphasis on securing digital control systems (DCS) and SCADA, which are particularly important in the electric power and pipeline sectors. Due to the ubiquity of these systems, the strategy explicitly called for coordination among DHS, DOE, other concerned agencies, and private industry in addressing DCS and SCADA cybersecurity. In 2006, DOE and DHS released their jointly-developed Roadmap to Secure Control Systems in the Energy Sector to provide "a strategic framework for investment and action in industry and government." The Roadmap stated that the agencies were collaborating on energy sector critical infrastructure protection citing specifically "the U.S. electric grid and oil and gas pipeline networks." The overarching energy sector vision stated in the Roadmap was as follows: "In 10 years, control systems for critical applications will be designed, installed, operated, and maintained to survive an intentional cyber assault with no loss of critical function." In 2011, the Roadmap to Achieve Energy Delivery Systems Cybersecurity was published by the Energy Sector Control Systems Working Group (ESCSWG), sponsored by DOE as an update to the 2006 Roadmap . The infrastructure scope of the 2011 Roadmap encompassed the "electricity, oil, and natural gas sectors," specifically including the "production, transmission, distribution, and delivery of energy to consumers." The stated vision of the 2011 Roadmap includes a reference to resiliency similar to that of the 2006 report: "By 2020, resilient energy delivery systems are designed, installed, operated, and maintained to survive a cyber incident while sustaining critical functions." This vision statement also is directed at "energy delivery systems" as a specific type of infrastructure. Appendix D of the Roadmap defines "energy delivery systems" as: A network of processes that produce, transfer, and distribute energy and the interconnected electronic and communication devices that monitor and control those processes. Energy delivery systems include control systems the sensors and actuators that physically monitor and control the energy processes, the computer-based systems that analyze and store data, and the communication networks that interconnect the process and computer systems. The Roadmap includes under this umbrella: generation, transmission, and distribution in the electric power sector, and drilling, processing, refining, and pipelines in the oil and natural gas sector. <3.2.1. Pipeline Cybersecurity at DOE> In 2015, DOE in coordination with DHS released its most recent Energy Sector-Specific Plan (SSP) "to help guide and integrate the sector's continuous effort to improve the security and resilience of its critical infrastructure." The SSP places an "increased emphasis on the Energy- and cross-sector interdependency issues and the integration of cyber and physical security efforts." Notably, the SSP defines the "Energy Sector" as: three interrelated segments or subsectors electricity, oil, and natural gas to include the production, refining, storage, and distribution of oil, gas, and electric power, except for hydroelectric and commercial nuclear power facilities and pipelines. This explicit exclusion of pipelines from the energy sector under the 2015 SSP appears to be a difference from the other DOE cybersecurity policy guidance discussed above. However, this divergence may be specific to the National Infrastructure Protection Plan (NIPP) under which the SSPs are derived, as pipelines are under the purview of the transportation sector in the NIPP. The SSP also states that DOE and DHS, as co-chairs of the Energy Government Coordinating Council, are engaged in the security and resilience efforts of "other" critical infrastructure sectors, including pipeline, maritime, chemical, and dams. The SSP also states that DOE and DHS work together with Canadian agencies "to coordinate matters related to pipeline safety and security." Based on these statements, the degree of DOE attention to pipeline cybersecurity is unclear but appears limited. Among the electricity subsector priorities stated in the SSP are "deploying proprietary government technologies on utility systems that enable machine-to-machine information sharing and improved situational awareness of threats to the grid" and implementing the National Institute of Standards and Technology (NIST) Cybersecurity Framework. <3.3. Other Cybersecurity Authorities> Along with the DOE, two other federal agencies play significant roles in cybersecurity for energy infrastructure. Both FERC and the Transportation Security Administration (TSA) have statutory authority to regulate cybersecurity for energy infrastructure under their relative jurisdictions, but they exercise it differently, due to different requirements underlying their respective authorities. <3.3.1. FERC's Bulk Power Cybersecurity Standards> The bulk electric power system has mandatory and enforceable standards for cybersecurity. As stated earlier, EPACT gave FERC authority over the reliability of the grid, with the power to approve mandatory cybersecurity standards proposed by the Electric Reliability Organization (ERO). The North American Electric Reliability Corporation (NERC) serves as the ERO. NERC therefore proposes reliability standards for critical infrastructure protection, which are updated based on the status of reliability and cybersecurity concerns for the grid. FERC views grid security as a high priority, having separately established the Office of Energy Infrastructure Security (OEIS) to deal with cyber and physical security. OEIS has a mission to provide expertise to FERC to "identify, communicate and seek comprehensive solutions to potential risks to FERC-jurisdictional facilities from cyberattacks and such physical threats as electromagnetic pulses." <3.3.2. TSA Pipeline Security Authority> The federal program for U.S. pipeline security began under DOT immediately after the terror attacks of September 11, 2001. The Aviation and Transportation Security Act of 2001 ( P.L. 107-71 ), which established the Transportation Security Administration within the DOT, authorized the agency "to issue, rescind, and revise such regulations as are necessary" to carry out its functions ( 101). TSA was transferred to DHS, newly created under the Homeland Security Act of 2002 ( P.L. 107-296 ). HSPD-7 maintained DHS as the lead agency for pipeline security, and instructed DOT to "collaborate in regulating the transportation of hazardous materials by all modes (including pipelines)." The Implementing Recommendations of the 9/11 Commission Act of 2007 ( P.L. 110-53 ) directs TSA to promulgate pipeline security regulations and carry out necessary inspection and enforcement if the agency determines that regulations are appropriate ( 1557(d)). Thus, TSA has primary responsibility and regulatory authority for the security of natural gas and hazardous liquid (e.g., oil, refined products, and carbon dioxide) pipelines in the United States. Although DHS has regulatory authority for pipeline security, its activities to date have relied upon voluntary industry compliance with the agency's security guidance and best practice recommendations. Cybersecurity is also an element of voluntary security standards developed by the pipeline industry. <3.3.3. Department of Transportation> The Department of Transportation (DOT) regulates the safety of oil and natural gas pipelines under the Natural Gas Pipeline Safety Act of 1968 (P.L. 90-481) and the Hazardous Liquid Pipeline Act of 1979 ( P.L. 96-129 ). DOT's federal pipeline safety program is administered by the Pipeline and Hazardous Materials Safety Administration (PHMSA). Although DOT regulates safety, some aspects of its regulations, such as facility access requirements, can be related to pipeline security. In particular, the Pipeline Inspection, Protection, Enforcement, and Safety Act of 2006 ( P.L. 109-468 ) mandated new requirements for control room management including human factors, response to SCADA alarms, and review of reportable incidents which could have cybersecurity impacts. <4. DOE's Energy Delivery Security Program> As noted above, the DOE's energy delivery cybersecurity activities are led by its Office of Electricity Delivery and Energy Reliability (OE) within the Office of the Under Secretary for Science and Energy. A 2008 OE report stated that "OE's mission is to advance technology in partnership with industry, government, academia, and the public to meet America's need for a reliable, efficient, and resilient electric power grid." According to the agency's website, a current "top priority" for OE is: to make the nation's electric power grid and oil and natural gas infrastructure resilient to cyber threats. The vision of OE's cybersecurity program is that, by 2020, resilient energy delivery systems are designed, installed, operated, and maintained to survive a cyber incident while sustaining critical functions. This vision and the OE programs supporting it are intended to align closely with the 2011 Roadmap to Achieve Energy Delivery Systems Cybersecurity with an apparent focus on electric power, as discussed below. <4.1. OE Cybersecurity Program Structure> The OE's cybersecurity program for energy delivery systems is structured around three areas: (1) cybersecurity preparedness; (2) cyber incident response and recovery; and (3) research, development, and demonstration. <4.1.1. Cybersecurity Preparedness> OE's activities in cybersecurity preparedness address situational awareness and information sharing (taken together) and risk analysis. For the former, OE works with energy sector companies "to better detect risks and mitigate them more rapidly by fostering industry assessment capabilities, developing operational threat analysis tools, and working with the intelligence community to better share actionable threat and intelligence information." A key component of these efforts is co-funding the Cybersecurity Risk Information Sharing Program (CRISP), a public-private partnership managed by the Electricity Information Sharing and Analysis Center (E-ISAC), to facilitate timely, two-way sharing of threat information and to develop situational awareness tools that enhance the sector's ability to identify, prioritize, and coordinate the protection of critical infrastructure and key resources. Another effort, OE's Cybersecurity for the Operational Technology Environment (CYOTE) pilot program, focuses on two-way data sharing and analysis for energy sector operational technology (OT). OE also supports the National Association of Regulatory Utility Commissioners in producing its cyber security primer for state utility regulators. With OE support, experts from national laboratories have trained over 2,300 employees from over 200 utilities in cybersecurity, including live test bed exercises. OE's risk activities seek to develop better cyber risk analysis tools, practices, and guidelines for energy sector infrastructure. To this end, OE has worked with industry to develop the Cybersecurity Capability Maturity Model (C2M2), which helps infrastructure operators evaluate their cybersecurity capabilities and prioritize improvements. OE has released an initial version for the electricity sector, and a derivative version for the oil and natural gas sector. The latter applies to "the exploration, gathering, production, processing, storage, and transportation of petroleum liquids and natural gas," including pipelines. The C2M2 model has been used for over 40 self-assessments among electricity, oil, and natural gas companies since its release in 2012. In 2015, the agency also published guidance to help energy sector companies align their cyber risk management efforts with the NIST Cybersecurity Framework. The NIST Framework is voluntary guidance (based on existing standards, guidelines, and practices) to reduce critical infrastructure cybersecurity risk. Working with NIST and NERC, OE has also developed a cybersecurity Risk Management Process (RMP) guideline for the electricity sector "to provide a consistent and repeatable approach to managing cybersecurity risk across the electricity subsector." <4.1.2. Cyber Incident Response and Recovery> In the event of a cyber incident, two documents outline the framework under which the federal government will respond. Presidential Policy Directive 41 (PPD-41) on "United States Cyber Incident Coordination" establishes the policy of concurrent lines of effort in response. In these lines of effort, DHS leads asset response, which focuses on restoring the victim entity; the Federal Bureau of Investigation (FBI) leads threat response, which seeks to identify and respond to the culprit of the attack; and the Intelligence Community leads a supporting line of effort to assist DHS and the FBI with intelligence support. PPD-41 provided the policy for the National Cyber Incident Response Plan (NCIRP) along with additional detail for how that response will work following incident response and emergency management doctrine in the National Response Framework. The NCIRP dictates that, in response to a cybersecurity incident, a Cyber Unified Coordination Group (Cyber UCG) will be established at the direction of the National Security Council to manage the incident and coordinate the delivery of federal resources and capabilities to victim entities. The Cyber UCG is a body consisting of federal, state and local, private sector, and other relevant parties with an appropriate role for the specific incident's response activities. The Cyber UCG is to form at DHS's National Cybersecurity and Communications Integration Center (NCCIC) and operate there or virtually, depending on the incident. In the event that such a significant cyber incident occurs in the energy sector, OE is likely to play a large role in the Cyber UCG, given its FAST Act authorities. However, CRS is not aware of any public record of a Cyber UCG standing up and operating for a cyber incident in the energy sector, so the concept of operations prescribed in the NCIRP appears still untested in real-world response. Specific to pipeline security, DOE works with TSA and PHMSA to monitor flows and throughput of pipelines and facilitate information sharing among the federal government and private sector entities. This is in accordance with the "Pipeline Security and Incident Recovery Protocol Plan" which TSA drafted in response to the Implementing Recommendations of the 9/11 Commission Act of 2001. However, the plan is from 2010 and has not been updated to conform to PPD-41 or the NCIRP for cyber incidents. <4.1.3. Research, Development, and Demonstration> OE administers a cybersecurity research, development, and demonstration (RD&D) program aligned with the 2011 Roadmap "to assist the energy sector asset owners by developing cybersecurity solutions for energy delivery systems." One of the program's principal activities is co-funding selected RD&D projects with National Laboratories, universities, and industry partners. The agency has invested over $210 million since 2010 on 35 projects and other efforts related to cybersecurity tools and technology (see Appendix ). These projects span many aspects of cybersecurity, including control system hardening, monitoring, software maintenance, cyber incident response, and overall system design. The OE-funded projects appear to be predominantly focused on electric power applications (based on the specific technologies involved, industry partners, or stated objectives) but a number of them could also involve oil, natural gas, or pipeline-specific applications. In addition to the focused RD&D projects, OE funds the National SCADA Test Bed (NSTB) in partnership with Idaho National Laboratory, Sandia National Laboratories, and other national laboratories to address control system security challenges in the energy sector. Among other things, the NSTB offers testing and research facilities and advanced visualization and modeling tools in facilities that recreate real-world energy delivery control systems, infrastructures, and networks. A key service of the NSTB has been the cyber security assessment of over 30 commercial SCADA systems in the electricity sector since 2003. The NSTB's FY2009 Work Plan listed several pipeline operators among its technical advisors for specific projects, although pipeline company participation more recently is not reported. OE is investing in an expansion of the power grid test bed at Idaho National Laboratory that is to increase its capabilities to support technology research, testing, and demonstration for electric transmission and substation cyber threats. In cooperation with the DHS Science and Technology Directorate (S&T), OE also funds collaborative teams of academic institutions to develop and implement multidisciplinary cybersecurity tools and technologies to be shared with the energy sector through academic outreach. For example, the Trustworthy Cyber Infrastructure for the Power Grid (TCIPG) focuses on the trustworthy operation of low-level devices, communications, and data systems in the power grid. <4.2. OE's Pipeline-Related Cyber Activities> Asset owners across the electricity, oil, natural gas, and pipeline sectors often have similar operational and network communication needs in some cases using the same types of hardware and software systems (e.g., SCADA) to meet them. Thus, cybersecurity programs, tools, and technologies developed in one sector have potential applicability to the others. However, effectively transferring general cyber practices or technology across sectors typically requires consideration or adaptation of cyber capabilities to fit the distinctive needs of a particular sector such as "smart grid" metering requirements in electric power, or providing real-time operating pressure data in refineries and pipelines. Such sector customization, in turn, usually involves program participation by asset owners in a given sector, and pilot projects or demonstration in sector-specific installations. Industry representatives have asserted that natural gas pipeline companies "work closely" in cybersecurity with DOE as the Energy SSA, which "actively engages with government and industry partners to develop cybersecurity practices, tools, and guidelines that address relevant cybersecurity risks and threats." Although OE's cybersecurity focus appears to be primarily on the electric power sector, CRS is aware of some OE-funded projects with explicit pipeline sector participation in development or application. As noted above, OE modified a version of its C2M2 model specifically for use in oil, gas, and pipeline operations. The Safe Active Scanning for Energy Delivery Systems (SASEDS) project included the pipeline sector in its literature survey. Pipeline companies have participated in certain SCADA projects at the NSTB. Other OE-funded projects (e.g., Chess Master , a research and development program to identify next generation cybersecurity tools) have been led by technology developers serving multiple energy delivery sectors or in collaboration with industry partners that own multiple types of assets (e.g., the San Diego Gas & Electric utility company). In such cases, new technology may be transferred from the electric sector to the oil and gas or pipeline sectors by the vendor as a commercial product or service, or could potentially be transferred from the electric side of a utility to its natural gas operations. Because references to pipelines in the OE-related published material are few and anecdotal, CRS is unable to better determine the extent of such transfer to the pipeline sector. <4.3. Cybersecurity Collaboration with Other Agencies> As discussed above, FERC and TSA have statutory authority to regulate cybersecurity in the bulk power and pipeline systems, respectively. Although OE participates in some of the same high-level groups as these two agencies (e.g., Energy Sector Government Coordinating Council), there is little discussion in published materials as to what extent OE collaborates directly with FERC or TSA on specific cybersecurity RD&D programs in their respective infrastructure sectors. OE's statement before FERC's 2016 Reliability Technical Conference does not mention RD&D collaboration, although it does discuss OE's leadership of electric grid emergency preparedness exercises, such as North American Electric Reliability Corporation's Grid Ex III. OE also stated that it views grid reliability standards, including security standards, as "a topic that is not ultimately part of OE's portfolio, and is best addressed by NERC and FERC." Although OE collaborates with DHS S&T on grid cybersecurity, the ongoing level of cooperation between OE and TSA in the area of pipeline security is difficult to determine from published materials. In 2016 testimony before a congressional committee regarding its cybersecurity activities, a TSA official did not specifically mention working with DOE (although the official did mention coordination with FERC). A 2014 presentation by TSA's pipeline security director mentioned coordination "with DHS and DOE to harmonize existing cybersecurity risk management programs" as well as TSA and DOE cooperative participation in security assessments of six cross-border pipelines. A 2010 Government Accountability Office (GAO) report stated that TSA and DOE "worked closely on pipeline security issues, programs, and activities, such as efforts to enhance reliability and resiliency." In 2007, GAO reported that the national laboratories coordinated activities funded through the DHS Control Systems Security Program with those funded by DOE through the NSTB, including vendor SCADA assessments and site assessments. The report states that the DOE-funded assessments were in the electricity sector, but provides no further information about the DHS-funded ones. In 2016, DOT issued an Advisory Bulletin recommending that pipeline companies monitor their SCADA systems for abnormal operations, unauthorized access, or interference with safe operations. DOT stated that it had "coordinated with several components within DHS and the Department of Energy" on the bulletin. CRS has not found more specific documentation of collaboration between OE and DOT. Although DOT administers its own pipeline safety RD&D program, its recent projects do not involve direct work in control systems, SCADA, or cybersecurity. <5. Pending Legislation> On July 27, 2017, the House passed the Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy and Water Development National Security Appropriations Act, 2018 ( H.R. 3219 ), providing appropriations for DOE for the fiscal year ending September 30, 2018. The bill would appropriate $218,500,000 for OE, available until expended, except for $27,500,000 to be available until September 30, 2019 for program direction (Title III). The corresponding Senate bill, the Energy and Water Development and Related Agencies Appropriations Act, 2018 ( S. 1609 ), reported by the Committee on Appropriations on July 20, 2017, would appropriate $213,141,000 for OE, available until expended, except for $27,000,000 to be available until September 30, 2019 for program direction (Title III). Cybersecurity of energy infrastructure is addressed in Title II of S. 1460 , the Energy and Natural Resources Act of 2017. Although titled "Enhanced Grid Security," Section 2002 of the bill also addresses security for other energy infrastructure. It would establish a program for energy sector cybersecurity RD&D to be carried out by DOE, in consultation with other agencies, states, and the energy sector, for advanced applications to identify and mitigate cyber vulnerabilities. A key focus would be on the interdependencies of critical infrastructure sectors. The bill would authorize appropriations of $65 million for each fiscal year from FY2018 through FY2026 for the program. The cybersecurity of devices and third-party control systems in the supply chain would also be a central focus of the proposed RD&D efforts. The bill would authorize appropriations of $65 million for each fiscal year from FY2018 through FY2026 for the program. Additionally, S. 1460 would require DOE to provide operational support for a cyber-resilience program, to enhance and periodically test the emergency response capabilities of DOE and the Electricity Sector Information Sharing and Analysis Center and their ability to monitor the status of the energy sector. The bill would authorize appropriations of $10 million for each fiscal year from FY2018 through FY2026 for this program. DOE would also develop modeling and risk assessment tools for a cyber-resilience program to secure energy networks, including electric, natural gas, and oil exploration, transmission, and delivery. The bill would authorize appropriations of $10 million for each fiscal year from FY2018 through FY2026 for the development of tools to advance energy sector security risk management and resiliency from human threats and natural hazards (including electromagnetic pulse and geomagnetic disturbances) programs. Under the provisions in S. 1460 , the proposed programs would need to leverage existing programs and be consistent with goals of the 2011 Roadmap to Achieve Energy Delivery Systems Cybersecurity for developing a resilient energy sector infrastructure by 2020. On July 18, 2017, the House passed the Enhancing State Energy Security Planning and Emergency Preparedness Act of 2017 ( H.R. 3050 ), which would authorize DOE to provide states $90 million in financial assistance annually through FY2022 to assess cybersecurity threats to energy infrastructure, among other possible uses of funding. The act would offer governors information and technical assistance in the development, implementation, or revision of a state energy security plan. Supporting such plans, especially with respect to cybersecurity, could fall under OE's purview. <6. Possible Issues for Congress> Several key issues related to OE's energy delivery cybersecurity program have been included in legislative proposals or have otherwise been the subject of congressional oversight and debate. These issues are summarized below. <6.1. OE Cybersecurity Funding> The Trump Administration's FY2018 budget request for OE appropriations was $123 million, approximately 41% less than the agency's estimated direct obligations of $208 million in FY2017. Within OE, the budget request would fund Cybersecurity for Energy Delivery Systems at $42 million compared to an estimated $62 million in FY2017, a reduction of approximately 32%. Given recent assertions by federal agencies (including DOE) and the private sector about an increase in energy sector cybersecurity risks, some analysts have expressed concern about this proposed reduction in OE's cybersecurity budget. As noted above, the House and Senate appropriations bills would fund OE at $218.5 million and $213.1 million, respectively, both an increase from FY2017 funding. If OE's appropriation is enacted above its current level, the agency presumably could continue its current cybersecurity program on its current trajectory and potentially fund some additional cybersecurity activities if they emerge as agency priorities. Additional authorizations under S. 1460 and H.R. 3050 , if enacted and funded, would significantly expand resources for DOE's energy delivery cybersecurity initiatives beyond historical levels. Given the ever-changing cybersecurity environment in the energy sector, Congress may continue to examine OE's cybersecurity resources to ensure that they are adequate and being deployed appropriately to address the most important energy delivery risks. <6.2. FAST Act Implementation> As discussed earlier, the FAST Act includes a variety of provisions concerning the general security of energy systems. These provisions include considerations for cyber as well as physical attacks and electromagnetic pulse attacks. The provisions include requirements for the Secretary of Energy to examine the strategic transformer reserve, coordinate energy sector security as the SSA, and prepare for energy supply disruptions. Congress may consider how effectively DOE is implementing the law, and whether additional authorities or changes to the law may be needed. The FAST Act does not require the DOE Inspector General (IG), the Comptroller General, or another agency to review the implementation of DOE's authorities and its progress in carrying out the direction of Congress. However, Congress may still oversee DOE's efforts by holding hearings, requiring new reports from the IG or Comptroller General, or requesting specific reports or information from the agency itself. With DOE-provided or independently provided information, Congress may have a more-informed basis for considering whether to adjust the provisions of the FAST Act or clarify, expand, or contract the authorizations it contains. <6.3. Gas-Electric Cyber Interdependency> The operational interdependency of the electric power and natural gas sectors, especially with respect to reliability and cybersecurity, has been a growing concern among many federal agencies, Members of Congress, and industry groups. The second installment of DOE's Quadrennial Energy Review (QER), published in January 2017, states that the electricity sector's increasing reliance on natural gas raises serious concerns regarding the need to secure natural gas pipelines against emerging cybersecurity threats. Thus, the adequacy of cybersecurity protections for natural gas pipelines directly impacts the reliability and security of the electric system. Among its recommendations, the QER calls for assessment of natural gas and electricity infrastructure interdependencies to cybersecurity protection. Likewise, some Members of Congress have expressed concern about the increased interdependency of electric power and natural gas in the security context. The president of NERC reportedly also has expressed concern about the possibility of multiple natural gas facilities being intentionally disrupted, and the associated effects on the electric system. Executive Order 13636 ( 9) directs DHS, in consultation with the SSAs (e.g., DOE) and other relevant agencies, to examine and identify critical infrastructure at risk of causing a catastrophic impact due to a cybersecurity incident. It is not clear, however, whether the required risk analysis would only account for direct impacts to an infrastructure experiencing a cyberattack, or would include impacts to infrastructure with which it is interdependent. While a single electric or natural gas facility may not meet the criteria to be considered critical and vulnerable to a catastrophic cyber disruption, it is possible that the combination of direct and indirect impacts could elevate the potential risks associated with that facility. How OE's cybersecurity programs and expertise in energy delivery systems could best be used to inform such analysis may be of interest to Congress. <6.4. Energy Cybersecurity Coordination> In addition to DOE, other federal agencies, notably FERC and DHS (particularly TSA), state regulators, and energy companies have roles and responsibilities for the cybersecurity of the energy sector. However, federal coordination for sector cybersecurity appears fragmented among these entities depending on the nature of a given scenario. For instance, DHS is the lead for overall critical infrastructure protection and national cybersecurity incident coordination; it also has statutory authority to regulate pipeline security. However, DOE is the SSA for the energy sector, part of which is regulated by FERC and state agencies. Additionally, it is the private sector which adopts trade practices for ICS technology and contracts with ICS vendors for cybersecurity products and services. The effect of the dispersed cybersecurity responsibility at the federal level has been the subject of congressional interest, but has not been studied to understand the effect on all energy cybersecurity stakeholders. Congress may examine how OE's cybersecurity activities fit in, and coordinate with, the other various roles in energy cybersecurity for electricity, oil and natural gas pipelines, and other related energy infrastructure. In particular, Congress may examine how OE's RD&D programs and other work with the National Labs in electric power sector cybersecurity supports federal and private sector efforts in pipeline cybersecurity. <6.4.1. Appendix. Cybersecurity RD&D Projects>

While physical threats to the U.S. power grid and pipelines have long worried policymakers, cyber threats to the computer systems that operate this critical infrastructure are an increasing concern. Cybersecurity risks against the power and pipeline sectors are similar, as both use similar control systems, and there appears to be a broad consensus that cyber threats to this infrastructure are on the rise. Furthermore, with ever-greater physical interdependency between electricity generators and the natural gas pipelines that supply their fuel, many in Congress recognize that grid and pipeline cybersecurity are intertwined. In 2015, the Fixing America's Surface Transportation Act (the FAST Act) provided the Secretary of Energy with new authority to protect or restore the power grid during a grid security emergency, including a cyber incident. Congress is considering additional legislation to fund and expand the Department of Energy's cybersecurity programs. The Department of Energy (DOE) is the lead agency for the protection of electric power, oil, and natural gas infrastructure—cooperating with the Department of Homeland Security, the lead agency for pipelines. DOE's cybersecurity activities are led by its Office of Electricity Delivery and Energy Reliability (OE) and structured around three areas: (1) cybersecurity preparedness, (2) cyber incident response and recovery, and (3) research, development, and demonstration. Although nominally applicable to energy delivery systems across the electric power, oil and natural gas, and pipeline sectors, OE's cybersecurity activities to date appear to have been focused primarily on the grid. Publicly available examples of DOE-supported activities specifically focused on pipeline cybersecurity are limited. Rather, pipeline cybersecurity efforts appear to be included as part of broader national cybersecurity efforts. Several bills potentially affecting DOE's cybersecurity activities for power grid and pipeline infrastructure have been introduced in the 115th Congress. These include the Defense, Military Construction, Veterans Affairs, Legislative Branch, and Energy and Water Development National Security Appropriations Act, 2018 (H.R. 3219) and the Energy and Water Development and Related Agencies Appropriations Act, 2018 (S. 1609), both of which would modestly increase funding for OE in FY2018. The Energy and Natural Resources Act of 2017 (S. 1460) would establish and fund a DOE program for energy sector cybersecurity research, development, and demonstration (RD&D) to be carried out for advanced applications to identify and mitigate cyber vulnerabilities. The Enhancing State Energy Security Planning and Emergency Preparedness Act of 2017 (H.R. 3050) would authorize DOE to provide financial and technical assistance to states for assessing cybersecurity threats to energy infrastructure. As federal cybersecurity oversight and legislative debate continue, Congress may focus on several key issues. Given the ever-changing cybersecurity environment in the energy sector, Congress may continue to examine OE's cybersecurity resources to ensure that they are adequate and being deployed appropriately to address the most important energy delivery risks. Congress may also seek a more-informed basis for considering whether to adjust the provisions of the FAST Act or clarify the authorizations it contains. How OE's programs and expertise could best be used to inform analysis of electric power and natural gas infrastructure interdependency from a cybersecurity perspective may also be of interest to Congress. Finally, Congress may examine how OE's cybersecurity activities fit in, and coordinate with, the other various roles in energy cybersecurity for electricity, oil and natural gas pipelines. In particular, Congress may examine how OE's RD&D programs and work with the National Labs in electric power sector cybersecurity supports federal and private sector efforts in pipeline cybersecurity.

<1. Overview> Diversity of viewpoint has long been a primary goal of U.S. communications policy. Congress and the Federal Communications Commission (FCC) have a history of supporting programs that foster diversity of broadcast station ownership, in general, and minority and female ownership, in particular, as a means to achieve that goal. The courts have reinforced the notion that minority ownership is a valid concern that should be addressed by the FCC when constructing its media ownership rules, but also have set restrictions on how programs can be structured to foster that goal. The FCC is under judicial mandate to consider how its ownership rules will affect minority ownership of broadcast stations. On May 5, 2009, the FCC issued a Notice of Proposed Rulemaking (NPRM) seeking comment on methods to improve the agency's data regarding minority and female ownership of broadcast properties. The new data may be used to aid the FCC in deciding whether and to what extent programs to increase minority and female ownership should be implemented. Also, two bills were introduced in the 110 th Congress that would have revived a tax incentive to aid certain businesses seeking to acquire telecommunications, including broadcast, properties. Insofar as these proposals define minorities based on race, they will be subject to strict review by the courts. Structuring the programs narrowly may be necessary in order to survive a judicial challenge. <2. Background> From 1978 to 1995, the FCC operated a tax certificate program under 1071 of the Internal Revenue Code (IRC) that was designed, among other goals, to aid minority-owned economically disadvantaged businesses in acquiring broadcast properties in furtherance of the FCC's congressional mandates relating to ownership and control of broadcasting stations. To qualify for a tax certificate, the purchasing business had to be controlled by a minority. At the time, the FCC defined minorities as those of "Black, Hispanic Surnamed, American Eskimo, Aleut, American Indian, or Asiatic American extraction." If the certificate was granted the selling corporation was allowed to defer paying taxes on any capital gain from the sale. In 1995, certain aspects of the program were questioned by Congress when Viacom structured a deal to sell a large portion of its broadcast property to an entity that qualified as a minority-owned business. The deal was conditioned upon receiving the tax certificate under the FCC's program. Some Members of Congress took notice when they learned that the deal could allow Viacom to defer an estimated $440 million to $640 million in taxes. Congress expressed concern that the tax certificate program provided little protection from abuse. There was no limit to the amount of gain on a sale that could be deferred. Furthermore, minority ownership was only required to continue for one year from the date of sale. Members were also concerned that the short holding period requirement rendered the tax incentive ineffective, because properties could quickly transfer from minority ownership without penalty. Amidst these concerns, Congress repealed IRC 1071. The FCC also currently has in place a "distress sale" policy that allows broadcasters whose licenses have been designated for a revocation hearing to sell those licenses to qualified minority-owned buyers before the hearing. Use of the "distress sale" program and other FCC policies that encourage minority ownership of broadcast stations has declined since the Supreme Court announced its opinion in Adarand Construction v. Pe a amidst concerns that the programs, in their current form, could not withstand a legal challenge. On August 1, 2007, the FCC issued a Second Further Notice of Proposed Rulemaking (SFNPR) in its review of the Commission's Broadcast Ownership Rules. The SFNPR contained 14 proposals for the amendment of the FCC's Broadcast Ownership Rules, 10 of which would require a definition for Socially Disadvantaged Businesses (SDBs). The SFNPR invited comment for the definition of SDBs, including how such a definition would comply with constitutional standards. The FCC adopted new rules to promote diversification of broadcast ownership on December 18, 2007. The order was published on March 5, 2008. The new rules define eligible entities as "any entity that would qualify as a small business consistent with Small Business Administration standards for its industry grouping, based on revenue." This definition does not appear to take the race or gender of the owner of the eligible entity into account; the FCC is seeking further comment on whether the definition of "eligible entity" may be expanded. In May of 2009, the FCC issued a Fourth Further Notice of Proposed Rulemaking in this proceeding. The agency is seeking to improve its data on minority and female ownership of broadcast properties by modifying and expanding reporting requirements for broadcasters as well as improving the agency's database. Once the data have been gathered, the FCC may attempt to use the new information to develop programs to encourage broadcast station ownership by minorities and women. However, to the extent that those programs are designed to benefit individuals based on their race, they will likely be subject to the standard of review described below. <3. Judicial Review of Racial Classifications in Broadcast Ownership Policies> In 1995, the Supreme Court decided Adarand Construction v. Pe a , which held that all race-based classifications by the federal government must withstand strict scrutiny, as discussed in the following section. New tax incentives or other broadcast ownership policies that give preference to racial minorities, therefore, would need to withstand close judicial analysis. <3.1. Strict Scrutiny> In Adarand , the Supreme Court declared that any racial classification by government at any level (state, local, or federal) must comply with strict scrutiny. Strict scrutiny is the most exacting review a court will undertake and requires the government to prove the measure is necessary to achieve a compelling government interest and that the program is narrowly tailored to achieve that interest. The Court reasoned that this requirement was in line with the intentions of the Fifth and Fourteenth Amendments, which protect individuals and not groups from discrimination based on race. Government action that distinguishes between individuals based on membership in a racial or ethnic group is inherently suspect and warrants the most exacting review. <3.1.1. Compelling Interest> Law or regulation that would attempt to define SDBs using the race or ethnicity of the business owners as a factor in determining eligibility would have to meet strict scrutiny, as mandated by the Court in Adarand . The first question a reviewing court would ask is whether the interest the legislation or regulation seeks to achieve is "compelling." In the context of tax provisions and FCC programs that encourage SDBs to own broadcast properties, the government interest that has been articulated is to promote broadcast viewpoint diversity. The theory underlying this interest is that diverse ownership creates diversity of voices and viewpoints in the marketplace of ideas, a concept essential to our democracy and embodied within the First Amendment. The Supreme Court has acknowledged that diversity of viewpoint in public discussion benefits the populace and that the government has an interest in encouraging such diversity over the broadcast airwaves; however, whether that interest is sufficiently compelling to survive strict scrutiny remains a matter of debate. Prior to Adarand , the Supreme Court decided Metro Broadcasting v. FCC , and upheld the FCC's minority broadcast ownership policies after applying intermediate scrutiny. Intermediate scrutiny is a less exacting standard than strict scrutiny and requires the government to prove only that the relevant classification is substantially related to an important government interest. The Court, agreeing with Congress and with the FCC, held that enhancing broadcast diversity "is, at the very least, an important government interest." The Metro Broadcasting majority grounded their "important interest" analysis in the scarcity of electromagnetic spectrum and the government's duty to distribute that spectrum to encourage the availability of the widest array of information sources and viewpoints. The Court noted that "it is axiomatic that broadcasting may be regulated in light of the rights of the viewing and listening audience, and that the 'widest possible dissemination of information from diverse and antagonistic sources is essential to the welfare of the public.'" According to the Court, it is the right of the public to receive a diverse array of viewpoints and programming over the publicly owned broadcast airwaves, and it is the duty of Congress and the FCC to safeguard that right. Against this backdrop, the Metro Broadcasting majority concluded that the diversity of viewpoints on the broadcast airwaves serves important First Amendment principles and that this was sufficient basis for the minority ownership policies. Though Metro Broadcasting can provide some guidance as to the arguments that would be advanced in favor of finding that broadcast viewpoint diversity is a compelling government interest, because the Court applied a lower standard of scrutiny to what it termed a "benign racial classification," deeper analysis is required to determine if the interest is sufficiently compelling to withstand strict scrutiny. The Court made clear in Adarand that strict scrutiny is not "strict in theory, but fatal in fact." Justice O'Connor noted, "[t]he unhappy persistence of both the practices and lingering effects of racial discrimination against minorities in this country is an unfortunate reality, and the government is not disqualified from acting in response to it." This language suggested to some that in order to survive strict scrutiny racial classifications would be permissible only to remedy the effects of past discrimination. Such an interpretation probably would have ruled out the legitimacy of all other justifications for classification of individuals based on their race. The dissent in Metro Broadcasting , in fact, would have applied strict scrutiny to the ownership rules at issue in that case. The dissenters would have determined that broadcast ownership diversity was not a compelling interest and noted that only one compelling interest supporting a race-based classification had ever been recognized to remedy past discrimination. In light of recent decisions, however, it is possible that diversity of broadcast viewpoint could be classified as a compelling interest. In Grutter v. Bollinger , the Court made clear that remedial classifications are not the only racial classifications that will survive strict scrutiny. In Grutter , the Court held that diversity within a student body is a compelling interest sufficient to withstand strict scrutiny. The Court relied heavily upon the reasoning of Justice Powell's opinion in Regents of University of California v. Bakke for its determination that student body diversity is a compelling government interest. Underpinning Powell's opinion in Bakke were strongly rooted First Amendment principles and the educational need for diverse viewpoints to enhance the learning experience. Powell argued that in "seeking the right to select those students who will contribute most to the 'robust exchange of ideas,' a university seeks to achieve a goal that is of paramount importance to the fulfillment of its mission." The Grutter majority adopted this analysis, and further justified its determination by according deference to the University administration in the selection of it students. The Court noted that selection of a diverse student body is "at the heart of the" school's "proper institutional mission," and that "good faith" on the part of the university should be presumed. Because the educational benefits that diversity provided were supported by the evidence, the Court accorded the university's judgment of a compelling interest in student body diversity a degree of deference. Arguably, there are a number of similarities between the compelling interest found in creating a diverse student body and that found in creating diversity of broadcast programming. The majority in Metro Broadcasting equated the interest in the creation of a diverse student body with the interest in creating diversity over the broadcast airwaves. Both interests have as their foundation the First Amendment principles encouraging the 'robust exchange of ideas.' Both interests serve the important purposes of public education and freedom of speech. Both interests also serve a wider range of people than the minority groups who would benefit ostensibly from any implemented policy. The entire student body benefits from exposure to diverse people and ideas. Likewise, the entire audience benefits from diverse viewpoints aired over broadcast, regardless of their race or ethnic background. Consequently, it appears that a case could be made based on these similarities for a finding that broadcast diversity is a compelling interest. <3.1.2. Narrow Tailoring> Assuming that viewpoint diversity in broadcasting is a compelling governmental interest, the government then must prove that the program is necessary and narrowly tailored to achieve that interest. The Supreme Court has yet to decide the parameters of a narrowly tailored program in this context, however, examples of narrow tailoring in other contexts and the Court's analysis in Metro Broadcasting may provide guidance. The government must first show that diversity of broadcast ownership is necessary to increase diversity of broadcast viewpoint. The Metro Broadcasting majority gave weight to the findings of Congress and the FCC that minority-owned broadcast stations produced programming that was qualitatively different from their counterparts, and the finding that this programming contributed to broadcast programming diversity. The Court also deferred to the findings of Congress and the FCC that many minority viewpoints were underrepresented in broadcast programming and that race-neutral methods of increasing that representation had failed repeatedly. With these conclusions in mind, the Court found that increased diversity of broadcast property ownership is substantially related to increased diversity of broadcast programming. A conclusion, however, that a policy is substantially related to the achievement of an interest does not mean that the program is "necessary" to achieve that interest. The concerns of the dissenting Justices in Metro Broadcasting could provide guidance for the required nexus between broadcast property ownership and diversity of programming that would support a finding of necessity. The dissenting justices in Metro Broadcasting found no supporting evidence for the concept that increased diversity among owners increased diversity of viewpoint, much less that a policy favoring minority ownership was necessary to increase diversity of viewpoint. The dissenters observed that the ownership policies were based on the assumption that minority-owned stations provide desired viewpoints, and that stations not owned by minorities do not or cannot provide these viewpoints. The dissenters opined that the FCC was barred by Congress from examining the factual basis for the asserted nexus between broadcast programming diversity and diversity among broadcast property owners, and that the evidence purporting the existence of a nexus was too weak to support a finding of necessity. Without stronger evidence that this assumption was correct, the dissenters could not conclude that increased minority ownership was necessary to achieve increased diversity of broadcast programming. The Metro Broadcasting dissenter's opinion could suggest a closer examination by the Court of the factual basis supporting the minority ownership program, than the deference accorded to Congress's fact finding by the Metro Broadcasting majority. Consequently, any future minority ownership policies that use race as a factor may need to be supported by evidence that demonstrates a tighter correlation between diversity of ownership and diversity of viewpoint in programming in order to establish that such policies are necessary to increase diversity of broadcast viewpoint. Not only must the government show that diversity of broadcast station ownership leads to diversity of broadcast viewpoint, the government must also show that other race-neutral methods of achieving the goal of broadcast viewpoint diversity were considered. In Grutter , the Court held that "[n]arrow tailoring does not require exhaustion of every conceivable alternative," but does require "serious, good faith consideration of workable race-neutral alternatives." The government likely would be required, therefore, to consider race-neutral options for fostering diversity before adopting a program that takes race into account. Assuming that a court found that diversity of ownership is necessary to achieve diversity of viewpoint, the government again must then prove that the program encouraging diversity of ownership is narrowly tailored to achieve the stated interest. Again, looking to the higher education cases and the dissent in Metro Broadcasting could inform the analysis of whether a particular minority broadcast ownership program would be narrowly tailored. In Metro Broadcasting , the dissent took particular issue with the fact that the policies at issue in that case were geared solely toward benefitting certain minorities, calling the policies "a 100% set aside," which placed impermissible burdens on non-minorities. The dissenters concluded that the FCC was attempting to allocate certain licenses based on race, an action prohibited by the Constitution. "Quotas" or "set asides" that place rigid numeric goals for inclusion of certain racial groups also fail in the school admissions cases. Whenever a school admissions policy has placed a numeric goal on the numbers or percentages of minorities desired, the policy has been struck down by the Supreme Court as violating the Equal Protection Clause. In Grutter , however, the Court provided guidance for the types of permissible school admissions policies that use race as a factor. The Court held that taking race into account when making graduate school admission decisions is permissible so long as no strict quota system is used. Admissions decisions made on an individualized basis may take race into account, among the many other factors used, when deciding how a particular individual would contribute to the diversity of the educational environment. The Court noted that many other variables were considered when deciding whether or not to admit an individual applicant and that race was only one factor included in determining the extent to which an individual would contribute to student body diversity. The individualized nature of the determination seemed to assuage the Court's constitutional concerns, because the applicants were not evaluated or awarded admission based solely on their membership in a certain group. Furthermore, because the admissions program was based on individual assessments of contributions to diversity, the program did not place an "undue burden" on non-minority applicants. Similarly, when encouraging diversity of broadcast ownership, it appears that a court would be more likely to uphold as narrowly tailored a program that accounts for the race of the owners if the program uses race as but one of a number of factors that could contribute to diversity of viewpoint. In addition, consideration may need to be given to the amount of "diverse" programming already available in individual markets. An additional consideration in designing a narrowly tailored program that uses race as a factor is that the program must have reasonable durational limits. In Grutter the Court indicated that, in the context of admissions preferences, a program could meet the durational requirement for narrow tailoring through sunset provisions or periodic reviews to determine whether the racial preference remained necessary. Similar controls may be required as a component of any new minority ownership programs enacted by Congress or promulgated by the FCC.

Amidst growing media ownership consolidation and a significant decline in minority ownership of telecommunications businesses, there has been renewed interest in programs that foster diversity among telecommunications business owners. One potential avenue under consideration is to revive, in revised fashion, a tax program that would allow current owners who sell their broadcast properties to eligible purchasers to defer taxes on gains from the sale. That program had been available for sales to minority-owned firms, defined as socially and economically disadvantaged businesses (SDBs). It was abolished by Congress in 1995 amidst allegations of abuse. In that same year, the Supreme Court held that all government race-based classifications must meet the most exacting standard of review applied by the Court, meaning that all racial classifications must be narrowly tailored to achieve a compelling government interest. To the extent that legislation or FCC programs seek to increase racial and ethnic minority ownership of broadcast stations, they are likely to be subjected to intense scrutiny if challenged in court. The analysis that may be conducted is discussed in detail in this report.

<1. Introduction> Generally speaking, there are two types of mortgage-backed securities (MBSs). The first are those securities that are packaged and issued by government sponsored entities (GSEs) the Federal National Mortgage Association ("Fannie Mae") and the Federal Home Loan Mortgage Corporation ("Freddie Mac") and a wholly owned government corporation, the Government National Mortgage Association ("Ginnie Mae"). The second are those MBSs that are packaged and issued by private market participants (i.e., mortgage companies, savings and loans, and commercial banks), known as private label MBSs. The laws governing the issuance of these two types of MBSs are different. MBSs offered by the GSEs and Ginnie Mae are exempt from the registration requirements and ongoing disclosure obligations contained in the federal securities laws. Private label MBSs do not enjoy a blanket exemption from the federal securities laws and are classified by the Securities and Exchange Commission as a type of "asset-backed security" (ABS) that must register under the Securities Act of 1933 ('33 Act or Securities Act) or obtain an exemption and provide continuing disclosures required by the Securities Exchange Act of 1934 ('34 Act or Exchange Act). This report will provide an overview of the registration requirements for private label MBSs under the Securities Act. It also highlights the most frequently used exemptions for private label MBSs. It outlines potential liability for fraud and/or material misstatements in the required disclosures and the consequences for failure to register when required by federal securities laws. This report will not discuss reporting requirements or liability for MBSs under the Exchange Act of 1934. <2. Securities Act Registration for Private Label Mortgage-Backed Securities> The Securities Act requires issuers of all types of securities to register the offering with the Securities and Exchange Commission (SEC) or to qualify for an exemption from the registration requirements. A registration statement consists of two parts: a prospectus, which must be delivered with every offer to sell the securities and contain the information outlined in Section 10 of the Securities Act, and other information which need not be provided to potential purchasers but must be on file with the SEC and available for public inspection. Failure to file a registration statement when one is required results in a violation of Section 5 of the '33 Act and strict liability under Section 12(a)(1). <2.1. The Registration Statement for Private Label MBSs> Sections 4 and 5 of the Securities Act require issuers of securities to register the offerings and provide prospectuses for sales that are not exempt. Sections 7 and 10 of the Securities Act prescribe the information required in the registration statements and prospectuses that are issued pursuant to offerings under Sections 4 and 5. Section 7 requires the registration statement to contain the information and documents outlined in Schedule A (15 U.S.C. 77aa), which is the Schedule under which all issuers that are not foreign governments must file. Section 7 grants the Commission the power to prescribe rules and regulations describing the information and documents to be contained in registration statements if the Commission deems them to be "necessary or appropriate in the public interest or for the protection of investors." Pursuant to this authority, the Commission has designed registration statements, which correspond to the various types of securities and types of issuers of securities. For private label MBSs, issuers must use either registration statement Form S-1 or Form S-3. Form S-3 is the preferable registration statement type for most issuers because it is considered to be less burdensome than other types of registration statements. In order to be eligible for Form S-3, in most cases, the registrant must already have a class of securities registered pursuant to Sections 12(b) or 12(g) of the Exchange Act (15 U.S.C. 78 l ), or be required to file reports pursuant to Section 15(d) of the Exchange Act for at least the preceding 12 months (15 U.S.C. 78o). The Commission included this requirement under the theory that information contained in the disclosures required by these sections could be incorporated by reference into the new MBS registration, thereby reducing the work required to prepare a new MBS registration statement. The registrant must also have filed all reports required in a timely manner within the previous 12 months. If the MBS offering qualifies as an offering of investment grade securities, however, the requirements for use of Form S-3 are slightly different. A non-convertible security (such as an MBS) may qualify as an investment grade security if, at the time of sale, "at least one nationally recognized statistical rating organization ... has rated the security in one of its generic rating categories which signifies investment grade; typically, the four highest rating categories (within which there may be sub-categories or gradations indicating relative standing) signify investment grade." An offering of investment grade MBSs occurs when MBSs that qualify as investment grade are offered for cash and delinquent assets within the asset pool do not constitute 20% or more of the pool (measured in dollar volume). If the offering is an offering of investment grade MBSs, the registrant is not required to have securities registered pursuant to Sections 12(b) or 12(g) of the Exchange Act (15 U.S.C. 78 l ) or be subject to the reporting requirements of Section 15(d) of the Exchange Act (15 U.S.C. 78o) in order to register using Form S-3. The issuer of an offering of investment grade MBSs still must have filed all reports required in the previous 12 calendar months in a timely fashion to qualify to use Form S-3. If the MBS offering does not qualify to use Form S-3, then the offering must be registered on Form S-1, which is the form all registrants must use if they do not qualify to register on another form. <2.1.1. Shelf-Registration> Shelf-registration allows an issuer to file a registration statement and, instead of selling the securities immediately following the effective date, place the securities on a "shelf" to be sold when the issuer believes the time to be right. This is a popular method of registration for private label MBSs. Mortgage related securities, a subset of MBSs, automatically qualify for "shelf-registration." Even if the private label MBS offering in question is not a mortgage related security, the private label MBS offering may qualify for shelf-registration nonetheless. For private label MBS offerings, the securities may remain on the "shelf" for up to three years from the initial effective date. Once the company "takes down" the securities for sale, if there has been a change involving the structural features of the MBSs, credit enhancement or other aspects of the MBSs that were not described in the base prospectus, a new registration statement, or post-effective amendment may be required. Some changes do not warrant such labor intensive disclosure, however, and the changes may be described in the final prospectus filed with the SEC. If the securities have not been sold by the end of the original three-year period, another registration statement may be filed. <2.1.2. Regulation AB> Private label MBSs are required to file registration statements that comply with Regulation AB. Regulation AB is tailored specifically to various types of asset-backed securities (like MBSs). The Commission realized that disclosures required by other SEC regulations were not properly tailored to elicit useful information for MBS investors. Other regulations required too much information irrelevant to MBSs and little or no information about other aspects of MBSs that investors needed in order to make informed investment decisions. Therefore, Regulation AB requires more information about the assets in a particular securitized pool, delinquent assets in the pool, the structure of the transaction, the experience of the servicer of the asset pool as well as other parties involved in administering the particular asset pool at issue, and other information unique to offerings of asset-backed securities (like credit enhancements on the asset pool). Information with respect to the registrant (management of the registrant company, performance of the registrant company's stock) may be omitted for MBS offerings because this information does not necessarily inform the investor about the potential performance of the asset pool. <2.2. Exemptions> Certain offerings of private label MBSs may be exempt from registration under the Securities Act. The most common exemptions for MBS offerings are described below. <2.2.1. Private Placement Offerings (Regulation D)> The most common exemption from registration for MBSs is the exemption for so-called "private placement offerings." Section 4(2) of the Securities Act exempts "transactions by an issuer not involving any public offering." Section 3(b) allows the Commission to exempt certain offerings, not in excess of a specified dollar amount, from registration by rule or regulation. Pursuant to its authority in these two sections, the Commission adopted Regulation D. Regulation D, found in Rules 501 through 508 under the Securities Act, provides guidance to issuers regarding which offerings would not be considered "public offerings." The issuer must file notice with the SEC of any sales pursuant to Regulation D. <2.2.1.1. Rule 504> Under Rule 504, an issuer (except an issuer that is an investment company) may sell up to $1 million worth of private label MBSs in any 12-month period to any number of purchasers, regardless of their accreditation. No information is required to be provided to investors purchasing securities pursuant to this exemption. <2.2.1.2. Rule 505> An issuer may sell up $5 million worth of private label MBSs in a 12 month period to any number of accredited investors and up to 35 other purchasers. Accredited investors are defined to include large, frequent market participants that are presumed to have the ability to independently obtain the information that they need. If the securities are offered to unaccredited investors, some disclosure is required under Rule 502, but a full registration statement is not required. <2.2.1.3. Rule 506> Rule 506 is likely the most common exemption from registration for MBSs. Under this rule, an issuer may sell any amount of securities to any number of accredited investors and up to 35 so-called "sophisticated investors." In order for the unaccredited investors to be considered "sophisticated," the issuer must reasonably believe that those investors (or their representatives) are capable of evaluating the merits and risks of the securities offered. If the securities are offered to unaccredited investors, some disclosure is required under Rule 502, but a full registration statement is not required. <2.2.2. Section 4(6) of the Securities Act> This section exempts sales of up to $5 million from registration if the sales are made to accredited investors. To qualify for this exemption, the issuer may not publicly advertise the sale of the securities, nor may the issuer publicly solicit buyers. The issuer must also file notice with the Commission of the sale, a requirement similar to that of Regulation D. <2.2.3. Rule 144A> Rule 144A allows the unlimited resale of securities that were never registered pursuant to the Securities Act so long as the purchaser is a "qualified institutional buyer" (QIB). QIBs are defined as enumerated types of institutional investors (i.e., insurance companies or employee benefit plans) that own over $100 million in securities unaffiliated with the entity making the offering. Because the market for private label MBSs consists primarily of QIBs, Rule 144A is commonly used. <2.2.4. Section 28> Section 28 of the Securities Act gives the Commission the authority to, conditionally or unconditionally, "exempt any person, security, or transaction, or any class of persons, securities, or transactions, from any provision or provisions of this title or of any rule or regulation issued under this title, to the extent that such exemption is necessary or appropriate in the public interest, and is consistent with the protection of investors." The Commission, therefore, has wide discretion to create exemptions from the registration requirements of the Securities Act. <3. Private Rights of Action Under the Securities Act> Sections 11 and 12 of the Securities Act provide private causes of actions for material misstatements or omissions contained in the registration of private label MBS securities. Section 15 of the act creates liability for controlling persons. These causes of action are described in this section. <3.1. Section 11 Civil Liability for a False Registration Statement> Section 11 creates a private right of action for purchasers of securities issued pursuant to a false or materially misleading registration statement. To establish liability, a plaintiff must show that the registration statement, at the time it became effective, contained a material misstatement or omission. A statement is material if "an average prudent investor ought reasonably to be informed [of the information] before purchasing the security registered." For the purposes of Section 11, a statement is material if, had it been stated correctly or disclosed, it "would have deterred or tended to deter the average prudent investor from purchasing the securities in question." Because Section 11 requires an effective registration statement in order to apply, securities that are sold pursuant to an exemption from registration are not subject to liability for violations of Section 11. Liability for violations may include the difference between the amount paid for the security and the value at the time the suit is brought, or the difference between the amount paid for the security and the price at which the security was sold in the market before the suit, or the difference between the amount paid for the security and the price at which it was sold after suit, but before judgment is entered, if that amount is less than the damages representing the difference between the amount paid for the security and the value at the time the suit was brought. <3.1.1. MBS Suits> A number of lawsuits have been filed by investors against issuers of MBSs alleging violations of Section 11 of the Securities Act. Alleged violations include failure to comply with the underwriting standards described in the offering documents, failure to disclose true risks of default on loans, and misrepresentations that the assets backed by the securities were, in fact, "investment grade." As these cases move through the courts, issues facing the causes of action will become more clear. <3.1.2. Defenses> A claim of liability under Section 11 may always be defeated by proof that the purchaser knew of the untruth or omission at the time the security was acquired. Furthermore, if a defendant can prove that "any portion or all [of the damages suffered by the plaintiff] represents other than the depreciation in value of such security resulting from" the misstatement in the registration statement, that portion of the damages is not recoverable. In other words, if a defendant can show that it was not the misstatement or omission in the registration statement that caused the value of the shares to fall, but some other market force, the plaintiff cannot recover the loss of value represented by the extraneous influence. The issuer has absolute liability under Section 11. Section 11 allows other individuals, besides the issuer, to be sued for violations, including corporate executives and others who signed the registration statement. These defendants may assert the "due diligence" defense. For the purposes of this defense, there are two portions of a registration statement: the "expert" portions and the "unexpert" portions. For example, in MBS offerings, the portion describing the pooling and servicing agreement for the underlying asset pool is prepared and signed by experts in accounting and auditing. Defendants, other than the expert that prepared the "expert" section at issue, may assert a due diligence defense to the preparation of the expert portions if the defendants can show that, after a reasonable investigation, they "had no reasonable grounds to believe and did not believe" there to be any material misstatements or omissions in the expert portion of the registration statement. "Reasonable investigation" means that which is required of a reasonable man in the care of his own property. In other words, those who sign the registration statement are entitled to trust the experts paid to prepare the expert portions, absent any red flags. With respect to the unexpert portions (and to the expert portions for the expert charged with preparing and signing those portions), defendants may assert the due diligence defense if they can show that, after a reasonable investigation the defendants had reasonable grounds to believe and did believe that there was no material misstatement or omission. This is a higher standard than the standard described in the preceding paragraph. Those signing the registration statement are not entitled to assume all information in it is correct because they trust those who prepared the statement. The defendants must, at the least, have read the registration statement and taken into account all knowledge available to them to gauge the statements accuracy. <3.2. Section 12 Civil Liability Arising in Connection with Prospectuses and Communications> Section 12 applies to two different scenarios, each of which may apply to the issuance of private label MBSs. Both are briefly described below. <3.2.1. Section 12(a)(1)> Under Section 12(a)(1), a seller is strictly liable for selling securities in violation of Section 5. To establish a claim under this subsection, a plaintiff need only show that he bought securities and that the securities were not registered. The burden is on the defendant to show that there was an exemption for the offering. <3.2.2. Section 12(a)(2)> Section 12(a)(2) creates liability for any person who sells securities pursuant to a prospectus or oral communication that contains a material misstatement or omission. Liability under this section is not strict liability, however. A defendant who can prove that "he did not know, and in the exercise of reasonable care could not have known of such untruth or omission" will not be held liable. A defendant may reduce his liability under 12(a)(2) to the extent that he can show the decrease in the securities' value was caused by factors other than the alleged misstatement or omission in the prospectus or oral communication. Furthermore, this section only applies to public offerings; private placements, such as those accomplished under Rules 506, are not covered. <3.2.3. MBS Suits> Many of the suits filed alleging violations of Section 11 in the registration and sale of MBSs, also allege violations of Section 12(a)(2). As these cases move through the courts, issues facing the causes of action will become more clear. <3.3. Section 15 Liability of Controlling Persons> Section 15 makes those persons or entities that, through stock ownership or other arrangement, control the persons or entities that are liable under Sections 11 and 12 jointly and severably liable for violations of those sections. This provision could become important for the purposes of private label MBS liability. Issuers of MBSs are typically specially created for the purposes of a specific offering. Therefore, in order to recover for violations of Section 11 and 12 in MBS offerings, it may be necessary to sue the persons controlling the entities making the offering. <4. SEC Enforcement of the Securities Act> The Commission has the statutory authority to bring an action for violation of the Securities Act, as well as any violation of the rules and regulations issued by the Commission pursuant to the act. Whenever the Commission believes a person has violated or is about to violate the provisions of the Securities Act, the Commission has the power to issue a cease and desist order. Pursuant to any cease and desist order, the Commission has the authority to order accounting and disgorgement. The Commission may also bring civil or criminal actions for violations of the act. In conjunction with the enforcement described above, the Commission may bring an action for violation of Section 17 of the Securities Act. Section 17 is a general antifraud provision. It prohibits any individual, in the offer or sale of securities, from employing various means or devices of fraud. Some courts have held that there is an implied private right of action under Section 17 (similar to that of Rule 10b-5 of the Exchange Act), but the Supreme Court has yet to rule on this question.

Mortgage-backed securities that are packaged and issued by private industry participants are required to comply with the Securities Act of 1933. Issuers of so-called private label mortgage-backed securities must either register these securities pursuant to the rules the Securities and Exchange Commission has set forth, or obtain an exemption from registration. Failure to register or fall under an exemption could result in liability for the issuer and other parties involved in the offering. Furthermore, material misstatements or omissions in the offering materials may also result in liability under the Securities Act. This report will provide an overview of the Securities Act of 1933 as it may be applied to mortgage-backed securities issued by private industry participants.

In January 2017, the House and Senate adopted a budget resolution for FY2017 ( S.Con.Res. 3 ), which reflects an agreement between the chambers on the FY2017 budget and sets forth budgetary levels for FY2018-FY2026. S.Con.Res. 3 also includes reconciliation instructions directing specific committees to develop and report legislation that would change laws within their respective jurisdictions to reduce the deficit. These instructions trigger the budget reconciliation process, which allows certain legislation to be considered under expedited procedures. The reconciliation instructions included in S.Con.Res. 3 direct two committees in each chamber to report legislation within their jurisdictions that would reduce the deficit by $1 billion over the period FY2017-FY2026. In the House, the Committee on Ways and Means and the Energy and Commerce Committee are directed to report. In the Senate, the Committee on Finance and the Committee on Health, Education, Labor, and Pensions are directed to report. On March 6, 2017, the House Committee on Ways and Means and the House Energy and Commerce Committee independently held markups. Each committee voted to transmit its budget reconciliation legislative recommendations to the House Committee on the Budget. On March 16, 2017, the House Committee on the Budget held a markup and voted to report a reconciliation bill, H.R. 1628 , the American Health Care Act (AHCA) of 2017. The House subsequently passed the AHCA with amendments on May 4, 2017, by a vote of 217 to 213. The House bill was received in the Senate on June 7, 2017, and the next day the Senate majority leader had it placed on the calendar, making it available for floor consideration. The Senate Budget Committee published on its website a "discussion draft" titled, "The Better Care Reconciliation Act of 2017" (BCRA) on June 22, 2017, and updated the discussion draft on June 26 and July 13. On July 19, 2017, the Senate Budget Committee posted the "Obamacare Repeal Reconciliation Act of 2017" (ORRA) on its website as another draft reconciliation bill. The BCRA discussion draft was again amended on July 20. Each of these draft bills is written in the form of an amendment in the nature of a substitute, meaning that it is intended to be considered by the Senate as an amendment to H.R. 1628 , as passed by the House, and that all of the House-passed language would be stricken and the language of the draft would be inserted in its place. ORRA is largely based off the Restoring Americans' Healthcare Freedom Reconciliation Act of 2015 ( H.R. 3762 ), which was vetoed by President Obama on January 8, 2016, and returned to the House. ORRA would repeal several provisions of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended), and it could restrict federal funding for the Planned Parenthood Federation of America (PPFA) and its affiliates and clinics for a period of one year. The bill also would appropriate (1) an additional $422 million for FY2017 to the Community Health Center Fund and (2) $750 million for each of FY2018 and FY2019 to award grants to states to address the substance abuse public health crisis or respond to urgent mental health needs. A number of the provisions in ORRA are also in the AHCA and/or BCRA. However, ORRA does not include the AHCA or BCRA provisions that would substitute the ACA's premium tax credit for premium tax credits with different eligibility rules and calculation requirements. ORRA also does not include the AHCA or BCRA provisions that would establish new programs and requirements that are not related to the ACA, for example, a new fund to provide funding to states for specified activities intended to improve access to health insurance and health care or provisions to convert Medicaid financing to a per capita cap model (i.e., per enrollee limits on federal payments to states) with a block grant option (i.e., a predetermined fixed amount of federal funding) for certain populations. This report provides summaries of each ORRA provision. The Congressional Budget Office (CBO) and the staff of the Joint Committee on Taxation (JCT) issued a cost estimate for ORRA on July 19, 2017. CBO and JCT estimate that ORRA would reduce federal deficits by $473 billion from FY2017 through FY2026, which is $354 billion more than the AHCA and $53 billion more than the July 20, 2017, version of the BCRA. The projections for the number of uninsured individuals under ORRA as compared to current law are higher than the projections under the AHCA and the BCRA. In CY2018, CBO and JCT estimate that 17 million more people would be uninsured under ORRA than under current law, and CBO and JCT estimate that that figure would grow to 32 million in CY2026. In comparison, CBO and JCT project that, in CY2026, 23 million and 22 million more people would be uninsured under the AHCA and the July 20, 2017, version of the BCRA (respectively) than under current law. <1. Title I> <1.1. Section 101. Recapture Excess Advance Payments of Premium Tax Credits and Section 102. Premium Tax Credit> <1.1.1. Current Law> Internal Revenue Code (IRC) Section 36B, as added by Section 1401 of the ACA and related amendments, authorized a premium tax credit to help eligible individuals pay for health insurance. The tax credit applies toward premiums for qualified health plans (QHPs) offered in the individual market through health insurance exchanges. QHPs are allowed to be offered outside of exchanges ( off-exchange plans ), but the premium credit may not be used toward the purchase of such plans. Catastrophic plans may be offered inside and outside of exchanges, but the credit may not be used toward purchasing such plans. The premium credit is refundable, so individuals may claim the full credit amount when filing their taxes, even if they have little or no federal income-tax liability. The credit also is advanceable, so individuals may choose to receive the credit on a monthly basis to coincide with the payment of insurance premiums. ACA Section 1411 generally made the premium tax credit available to U.S. citizens and certain aliens with lawful status who do not have access to subsidized public coverage (e.g., Medicaid) or affordable employer-sponsored coverage that provides minimum value. The amount of the premium tax credit varies from individual to individual. The ACA specified formulas for calculation of the premium tax credit amount and the amount that the individual (or family) must contribute toward the premium. That latter amount the required premium contribution is calculated according to a formula that incorporates a certain percentage (applicable percentage) of a given individual's (or family's) household income (based on modified adjusted gross income, or MAGI) and the premium for the second-lowest-cost silver plan which has an actuarial value of 70% in that individual's (or family's) local area. The required premium contribution is capped according to MAGI, with such income measured relative to the federal poverty level (FPL). An individual whose MAGI is at or above 100% of FPL up to and including 400% of FPL may be eligible to receive premium credits. A smaller cap applies to lower-income individuals compared to the cap applicable to higher-income persons meaning lower-income individuals generally receive greater tax assistance. ACA Section 1412 established an advance payment program to make the credit available during the year. The advanced amounts are reconciled when individuals file income-tax returns for the actual year in which they receive the credits. If a tax-filing unit's income decreases during the tax year and the filer should have received a larger credit, this additional credit amount will be included in the tax refund for the year. By contrast, any excess amount that was overpaid in credits to the filer will have to be repaid to the federal government as a tax payment. IRC Section 36B(f)(2)(B) imposed limits on the excess amounts to be repaid under certain conditions. For households with incomes below 400% of FPL, the specific limits apply to single and joint filers separately. <1.1.2. Explanation of New Provisions> Section 101 would not apply IRC Section 36B(f)(2)(B), relating to limits on the excess amounts to be repaid with respect to the premium tax credits, to taxable years ending after December 31, 2017, and before January 1, 2020. In other words, for tax years 2018 and 2019, any individual who was overpaid in premium tax credits would have to repay the entire excess amount, regardless of income. Section 102 would exclude from the definition of QHP a plan that provides coverage for abortions (except if necessary to save the life of the mother or if the pregnancy is the result of rape or incest) for taxable years beginning in 2018. The section would repeal authorization for the premium tax credit (IRC Section 36B) for taxable years beginning in 2020. Section 102 also would repeal relevant ACA provisions regarding eligibility determinations (generally ACA Section 1411) and receiving the premium credit in advance (ACA Section 1412), effective on January 1, 2020. In addition, the new provision would amend IRC Section 6103(l), related to the disclosure of taxpayer information, by providing that no disclosures may be made after December 31, 2019. <1.2. Section 103. Small Business Tax Credit> <1.2.1. Current Law> IRC Section 45R, as added by ACA Section 1421, provided for a small business health insurance tax credit. The credit is intended to help make the premiums for small-group health insurance coverage more affordable for certain small employers. The credit generally is available to nonprofit and for-profit employers with fewer than 25 full-time-equivalent employees with average annual wages that fall under a statutorily specified cap. To qualify for the credit, employers must cover at least 50% of the cost of each of their employees' self-only health insurance coverage. As of 2014, small employers must buy QHPs through a Small Business Health Options Program (SHOP) exchange to receive the credit and the credit is available for two consecutive tax years only. The two-year period begins with the first year an employer obtains coverage through a SHOP exchange. For example, if an employer first obtains coverage through a SHOP exchange in 2017, the credit will be available to the employer only in 2017 and 2018. <1.2.2. Explanation of New Provision> For taxable years beginning in 2018, Section 103 would amend IRC Section 45R to indicate that the term qualified health plan does not include any health plan that includes coverage for abortions, except abortions necessary to save the life of a mother or abortions for pregnancies that are a result of rape or incest. The section would provide that the small employer health insurance credit would not be available for taxable years beginning in 2020. <1.3. Section 104. Individual Mandate> <1.3.1. Current Law> IRC Section 5000A, as added by ACA Section 1501, created an individual mandate, a requirement for most individuals to maintain health insurance coverage or pay a penalty for noncompliance. To comply with the mandate, most individuals need to obtain minimum essential coverage , which includes most types of private (e.g., employer-sponsored) coverage and public coverage (e.g., Medicare and Medicaid). Certain individuals are exempt from the mandate and its associated penalty. The individual mandate went into effect in 2014. Individuals who are not exempt from the mandate are required to pay a penalty for each month of noncompliance. The annual penalty is the greater of either a percentage of income or a flat dollar amount (but not more than the national average premium of a specified health plan). The percentage of income increased from 1.0% in 2014 to 2.5% in 2016 and beyond. The flat dollar amount increased from $95 in 2014 to $695 in 2016 and is adjusted for inflation thereafter. <1.3.2. Explanation of New Provision> Section 104 would effectively eliminate the annual penalty associated with IRC Section 5000A by reducing the percentage of income to 0% and the flat dollar amount to $0, effective retroactively for months beginning in 2016. <1.4. Section 105. Employer Mandate> <1.4.1. Current Law> IRC Section 4980H, as added by ACA Section 1513, required that employers either provide health coverage or face potential employer tax penalties. The potential employer penalties apply to all types of common-law employers, including government entities (such as federal, state, local, or Indian tribal government entities) and nonprofit organizations that are exempt from federal income taxes. The penalties are imposed on firms with at least 50 full-time-equivalent employees if one or more of their full-time employees obtain a premium tax credit through a health insurance exchange. The total penalty for any applicable large employer is based on the employer's number of full-time employees (averaging 30 hours or more per week) and whether the employer offers affordable health coverage that provides minimum value. <1.4.2. Explanation of New Provision> Section 105 would modify the tax penalty associated with IRC Section 4980H, effectively eliminating it by reducing the penalties to $0, effective retroactively for months beginning in 2016. <1.5. Section 106. Federal Payments to States> <1.5.1. Current Law> The Planned Parenthood Federation of America (PPFA) is an umbrella organization supporting 56 independent affiliates that operate approximately 650 health centers across the United States. Government funding which includes federal, state, and local funds constitutes the PPFA's largest source of revenue, an estimated 41% in the year ending June 30, 2016. CBO estimates that federal funds accounted for about one-third of PPFA's total revenue in 2013. PPFA receives federal grants (either directly or through another entity, such as a state) and reimbursements for providing services to beneficiaries enrolled in federally funded programs (e.g., Medicaid). It does not receive a direct annual appropriation of any kind. CBO and the U.S. Government Accountability Office (GAO) found that PPFA's largest source of federal funding is reimbursements for covered services provided to Medicaid beneficiaries. Specifically, CBO estimated that PPFA's federal Medicaid revenue was approximately $390 million in 2013. GAO examined FY2012 PPFA reimbursements and expenditures and found that PPFA had either received reimbursements or expended funds from discretionary programs and from direct spending (as defined in the Balanced Budget and Emergency Deficit Control Act of 1985, 2 U.S.C. 900(c)(8)). Direct spending refers to budget authority provided by laws other than through appropriations acts, entitlement authority, and the Supplemental Nutrition Assistance Program (SNAP). PPFA's reimbursements or expenditures from direct spending include reimbursements from Medicaid, Medicare, and the State Children's Health Insurance Program (CHIP) (listed in order of the amount of reimbursements received, according to GAO), as well as certain expenditures from the Social Services Block Grant, the Crime Victims Fund (administered by the Department of Justice), the Personal Responsibility Education Program, and SNAP (administered by the Department of Agriculture). PPFA also received funds from a number of discretionary programs, either directly or through another entity (e.g., a state). For example, in FY2012, GAO found that PPFA had expended discretionary funds from the Maternal and Child Health Services Block Grants programs which are provided to states; some states provided these funds to PPFA entities to provide services. Under federal law, federal funds generally are not available to pay for abortions, except in cases of rape, incest, or endangerment of a mother's life. This restriction is the result of statutory and legislative provisions such as the Hyde amendment, which has been added to the annual Department of Health and Human Services (HHS) appropriations measure since 1976. Similar provisions exist in the appropriations measures for foreign operations, the District of Columbia, the Department of the Treasury, and the Department of Justice. Other codified restrictions limit the use of funds made available to the Department of Defense, the Indian Health Service, and the Department of Veterans Affairs. Using nonfederal funding sources (e.g., patient fees), PPFA affiliates and clinics and other entities may perform abortions in instances that do not meet the Hyde amendment exceptions. These entities also may receive federal grants and reimbursements from federal programs for non-abortion services. No comprehensive list exists of all entities that both receive federal funding or reimbursements and provide abortions that do not meet the Hyde amendment exceptions. In addition, there is no comprehensive source that provides the amount and sources of federal funding that these facilities receive. <1.5.2. Explanation of New Provision> Section 106 would prohibit federal funds made available to a state through direct spending from being provided to a prohibited entity (as defined), either directly or through a managed-care organization, for a one-year period beginning upon enactment of the draft bill. The provision specifies that this prohibition would be implemented notwithstanding certain programmatic rules (e.g., the Medicaid freedom of choice of provider requirement, which requires enrollees to be able to receive services from any willing Medicaid-participating provider, and states cannot exclude providers solely on the basis of the range of services they provide). This provision does not explicitly specify that certain federal funds would not be made available to PPFA or its affiliated entities; instead, it refers to and defines a "prohibited entity" as an entity that meets the following criteria at enactment: (1) it is designated as a not-for-profit by the Internal Revenue Service (IRS); (2) it is described as an essential community provider that is primarily engaged in family planning services, reproductive health, and related medical care; (3) it is an abortion provider that provides abortion in cases that do not meet the Hyde amendment exception for federal payment; and (4) it received more than $350 million in Medicaid expenditures (both federal and state) in FY2014. In its July 19, 2017, score of ORRA, CBO stated that CBO expects that this provision would be implemented in a way that the prohibition would apply only if at least one entity, affiliate, subsidiary, successor, or clinic satisfied all of the criteria specified in the legislation; CBO identified only one organization that would be affected: Planned Parenthood Federation of America and its affiliates and clinics. If the provision was implemented in a way that affiliates, subsidiaries, successors, and clinics could satisfy the criteria separately, then the provision could apply to more organizations, perhaps many more. <1.6. Section 107. Medicaid> <1.6.1. Section 107(1)(A): Medicaid ACA Eligibility Provisions> <1.6.1.1. Current Law> Eligibility for Medicaid is determined by federal and state law. States set individual eligibility criteria within federal standards. Individuals must meet both categorical (e.g., elderly, individuals with disabilities, children, pregnant women, parents, certain non-elderly childless adults) and financial (i.e., income and sometimes asset limits) criteria. In addition, individuals must meet federal and state requirements regarding residency, immigration status, and documentation of U.S. citizenship. Some eligibility groups are mandatory, meaning all states with a Medicaid program must cover them; others are optional. States are permitted to apply to the Centers for Medicare & Medicaid Services for a waiver of federal law to expand health coverage beyond the mandatory and optional groups listed in federal statute. The ACA made several changes to Medicaid eligibility, including the following: The ACA Medicaid Expansion. The ACA established 133% of FPL as the new mandatory minimum Medicaid income-eligibility level for most non-elderly individuals beginning January 1, 2014. On June 28, 2012, the U.S. Supreme Court issued its decision in National Federation of Independent Business v. Sebelius , finding that the enforcement mechanism for the ACA Medicaid expansion violated the Constitution, which effectively made the ACA Medicaid expansion optional for states. On January 1, 2014, 24 states and the District of Columbia implemented the ACA Medicaid expansion. Since then, seven additional states have decided to implement the expansion. State Option for Coverage for Individuals with Income T hat Exceeds 133% of FPL. In addition to the ACA Medicaid expansion, the ACA created an optional Medicaid eligibility category for all non-elderly individuals with income above 133% of FPL up to a maximum level specified in the Medicaid state plan (or waiver), effective January 1, 2014. As of January 2017, only the District of Columbia had implemented this option. <1.6.1.2. Explanation of New Provision> Section 107(1)(A) would repeal the ACA Medicaid expansion and state option to extend coverage to adults above 133% of FPL (Section 1902(a)(10)(A)(i)(VIII) and Section 1902(a)(10)(A)(ii)(XX) of the Social Security Act [SSA], respectively) by specifying the end dates of these provisions as December 31, 2019. <1.6.2. Section 107(2) and 107(3): Various Federal Medicaid Matching Rate Provisions> <1.6.2.1. Current Law> Medicaid is jointly financed by the federal government and the states. The federal government's share of a state's expenditures for most Medicaid services is called the federal medical assistance percentage (FMAP) rate, which varies by state and is designed so that the federal government pays a larger portion of Medicaid costs in states with lower per capita incomes relative to the national average (and vice versa for states with higher per capita incomes). Exceptions to the regular FMAP rate have been made for certain states, situations, populations, providers, and services. The ACA added a few FMAP exceptions, including the following: the newly eligible federal matching rate (i.e., the matching rate for individuals who are newly eligible for Medicaid due to the ACA expansion); the expansion state federal matching rate (i.e., the matching rate for expansion enrollees without dependent children in expansion states who would have been eligible for Medicaid under the rules in place in their state on March 23, 2010); and a six-percentage-point increase to the FMAP rate for services covered under the Community First Choice option, which allows states to offer community-based attendant services and supports as an optional Medicaid state plan benefit. In addition, the ACA increased the Medicaid FMAP rate available to all of the territories from 50% to 55% beginning July 1, 2011. <1.6.2.2. Explanation of New Provisions> Section 107(2) and 107(3) would repeal (1) the newly eligible matching rate on January 1, 2020 (SSA Section 1905(y)(1)); (2) the expansion state matching rate on January 1, 2020 (SSA Section 1905(z)(2)); and (3) the increased FMAP rate for the Community First Choice option on January 1, 2020 (SSA Section 1915(k)(2)). Section 107(2)(A) also would change the FMAP rate for the territories back to 50% on or after January 1, 2020 (SSA Section 1905(b)). <1.6.3. Section 107(1)(B), 107(4), and 107(6): Medicaid ACA Enrollment Facilitation Provisions> <1.6.3.1. Current Law> Presumptive Eligibility. Prior to the enactment of the ACA, states were permitted to enroll certain groups (e.g., children, pregnant women, certain women with breast and cervical cancer, and individuals eligible for family planning services) for a limited period of time before completed Medicaid applications were filed and processed, based on a preliminary determination of likely Medicaid eligibility by certain specified Medicaid providers (i.e., qualified entities ). Qualified entities had to be certified by the state Medicaid agency as entities that were capable of making presumptive-eligibility determinations. The type of entity that could make presumptive-eligibility determinations depended on the beneficiary's Medicaid eligibility category. For example, certain providers of clinic and outpatient hospital services could determine presumptive eligibility for pregnant women. Agencies that served low-income children under federal programs, such as the Special Supplemental Nutrition Program for Women, Infants, and Children or school lunch programs (under the Richard B. Russell National School Lunch Act [P.L. 79-396]) could make presumptive-eligibility determinations for children. Individuals who were determined to be presumptively eligible for Medicaid then had to formally apply for coverage within a given time frame to continue receiving Medicaid benefits. The ACA expanded the types of entities that are permitted to make Medicaid presumptive-eligibility determinations as well as the groups of individuals for whom presumptive-eligibility determinations may apply. Specifically, the ACA allowed states to permit all hospitals that participate in Medicaid to elect to make presumptive-eligibility determinations for all Medicaid eligibility groups, beginning January 1, 2014. In addition, states that elected the option to provide a presumptive-eligibility period to children or pregnant women were permitted to provide a presumptive-eligibility period for (1) the ACA Medicaid expansion group, (2) the mandatory coverage group for individuals currently or formerly in foster care who are under the age of 26, (3) low-income families eligible under SSA Section 1931, or (4) the state option for coverage for individuals with income that exceeds 133% of FPL. Streamlined Enrollment System. As a condition of the receipt of federal financial assistance, the ACA required states to coordinate their eligibility and enrollment systems across all of the ACA low-income subsidy programs (including Medicaid, CHIP, and the health insurance exchanges). <1.6.3.2. Explanation of New Provision> Presumptive Eligibility. After January 1, 2020, Section 107(1)(B) would no longer allow hospitals that participate in Medicaid to elect to make presumptive-eligibility determinations. It also would provide that any such election that a hospital had already made would cease to be effective as of that date by modifying SSA Section 1902(a)(47)(B). For states that elected the option to provide a presumptive-eligibility period to children and pregnant women, Section 107(4) would repeal the state option to provide a presumptive-eligibility period any time after December 31, 2019, for (1) the ACA expansion group, (2) the mandatory foster care group through the age of 26, or (3) low-income families (SSA Section 1920(e)). Streamlined Enrollment System. Section 107(6) would repeal the requirement for states to coordinate their eligibility and enrollment systems across all of the ACA low-income subsidy programs as of January 1, 2020 (SSA Section 1943(a)). <1.6.4. Section 107(5): Medicaid Alternative Benefit Plan Coverage> <1.6.4.1. Current Law> As an alternative to providing all the mandatory and selected optional benefits under traditional Medicaid, the Deficit Reduction Act of 2005 ( P.L. 109-171 ) gave states the option to enroll state-specified groups in what previously was referred to as benchmark or benchmark-equivalent coverage but currently is called alternative benefit plans (ABPs). States that choose to implement the ACA Medicaid expansion are required to provide ABP coverage (with exceptions for selected special-needs subgroups), rather than traditional Medicaid, to the individuals eligible for Medicaid through the expansion. In addition, states have the option to provide ABP coverage to other subgroups. The ACA made significant changes to ABP design and ABP requirements. The ACA required such packages provide at least the 10 essential health benefits, which are (1) ambulatory patient services; (2) emergency services; (3) hospitalization; (4) maternity and newborn care; (5) mental health and substance use disorder services, including behavioral health treatment; (6) prescription drugs; (7) rehabilitative and habilitative services and devices; (8) laboratory services; (9) preventive and wellness services and chronic disease management; and (10) pediatric services, including oral and vision care. <1.6.4.2. Explanation of New Provision> Under Section 107(5), SSA Section 1937(b)(5) would not apply after December 31, 2019. As a result, Medicaid ABP coverage would no longer be required to include the essential health benefits after that date. <1.7. Section 108. Repeal of Disproportionate Share Hospital Allotment Reductions> <1.7.1. Current Law> SSA Section 1923 required states to make Medicaid disproportionate share hospital (DSH) payments to hospitals treating large numbers of low-income patients. This provision was intended to recognize the disadvantaged financial situation of those hospitals because low-income patients are more likely to be uninsured or Medicaid enrollees. Hospitals often do not receive payment for services rendered to uninsured patients, and Medicaid provider payment rates generally are lower than the rates paid by Medicare and private insurance. Whereas most federal Medicaid funding is provided on an open-ended basis, federal Medicaid DSH funding is capped. Each state receives an annual DSH allotment, which is the maximum amount of federal matching funds that each state is permitted to claim for Medicaid DSH payments. Each state's Medicaid DSH allotment increases annually by the percentage change in the Consumer Price Index for All Urban Consumers for the prior fiscal year. The ACA reduced the number of uninsured individuals in the United States through its health insurance coverage provisions. Built on the premise that with fewer uninsured individuals there should be less need for Medicaid DSH payments, the ACA included a provision directing the HHS Secretary to make aggregate reductions in Medicaid DSH allotments for FY2014 through FY2020. However, multiple subsequent laws have amended these reductions. Under current law, the aggregate reductions to the Medicaid DSH allotments are to impact FY2018 through FY2025. After FY2025, allotments will be calculated as though the reductions never occurred, which means the allotments will include the inflation adjustments for the years during the reductions. <1.7.2. Explanation of New Provision> Section 108 would repeal the Medicaid DSH allotment reductions. <1.8. Section 109. Repeal of the Tax on Employee Health Insurance Premiums and Health Plan Benefits> <1.8.1. Current Law> IRC Section 4980I, as added by ACA Section 9001, created a new excise tax on high-cost employer-sponsored coverage (the so-called Cadillac tax) under Chapter 43 of the IRC. Under the ACA, the tax was scheduled to take effect in 2018; however, the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), delayed implementation of the tax until 2020. When it is implemented, the tax is to be imposed at a 40% rate on the aggregate cost of employer-sponsored health coverage that exceeds a specified dollar limit. If a tax is owed, it is to be levied on the entity providing the coverage (e.g., the health insurance issuer or the employer). <1.8.2. Explanation of New Provision> Section 109 would delay implementation of IRC Section 4980I (the so-called Cadillac tax) until taxable periods beginning January 1, 2026. <1.9. Section 110. Repeal of the Tax on Over-the-Counter Medications> <1.9.1. Current Law> Under the IRC, taxpayers may use several different types of tax-advantaged health accounts to pay or be reimbursed for qualified medical expenses: health flexible spending accounts (health FSAs), health reimbursement accounts (HRAs), Archer Medical Savings Accounts (MSAs), and health savings accounts (HSAs). ACA Section 9003 amended the relevant IRC provisions (IRC Sections 106, 220, and 223) to provide that, for each of these accounts, amounts paid for medicine or drugs are qualified expenses only in the case of prescribed drugs and insulin. <1.9.2. Explanation of New Provision> Section 110 would repeal the language in IRC Sections 106, 220, and 223 stipulating that a medicine or drug must be a prescribed drug or insulin to be considered a qualified expense in terms of spending from a tax-advantaged health account. The provision would be generally effective for taxable years beginning in 2017. <1.10. Section 111. Repeal of the Tax on Health Savings Accounts> <1.10.1. Current Law> ACA Section 9004 amended IRC Sections 220 and 223 to impose a 20% tax on distributions from Archer MSAs and HSAs that are used for purposes other than paying for qualified medical expenses. Prior to the ACA, IRC Section 220 applied a 15% rate on such distributions if made from an Archer MSA and IRC Section 223 applied a 10% rate on such distributions if made from an HSA. <1.10.2. Explanation of New Provision> Section 111 would amend IRC Sections 220 and 223 to reduce the applicable rate to 15% and 10% for Archer MSAs and HSAs, respectively. The lower rates would apply to distributions made after December 31, 2016. <1.11. Section 112. Repeal of Limitations on Contributions to Flexible Spending Accounts> <1.11.1. Current Law> IRC Section 125 allowed employers to establish cafeteria plans, benefit plans under which employees may choose between receiving cash (typically additional take-home pay) and certain nontaxable benefits (such as employer-paid health insurance) without being taxed on the value of the benefits if they select the latter. (A general rule of taxation is that when given a choice between taxable and nontaxable benefits, taxpayers will be taxed on whichever they choose because they are deemed to be in constructive receipt of the cash.) ACA Section 9005 amended IRC Section 125(i) to provide that a health FSA cannot be a nontaxable benefit under a cafeteria plan unless the cafeteria plan provides that an employee may not elect for any taxable year to have a salary reduction contribution in excess of $2,500 made to such arrangement. Also, the $2,500 limit is indexed for cost-of-living adjustments for plan years beginning after December 31, 2013. <1.11.2. Explanation of New Provision> Section 112 would repeal IRC Section 125(i), the $2,500 contribution limit to health FSAs, effective for plan years beginning in 2018. <1.12. Section 113. Repeal of Tax on Prescription Medications> <1.12.1. Current Law> ACA Section 9008 imposed an annual tax on covered entities engaged in the business of manufacturing or importing branded prescription drugs. In general, the tax is imposed on covered manufacturers and importers with aggregated branded prescription drug sales of more than $5 million to specified government programs or pursuant to coverage under these programs. <1.12.2. Explanation of New Provision> Section 113 would amend ACA Section 9008(j) to provide that the tax would not be imposed effective 2018. <1.13. Section 114. Repeal of Medical Device Excise Tax> <1.13.1. Current Law> Section 1405 of the Health Care and Education Reconciliation Act of 2010 (HCERA; P.L. 111-152 ) created a new excise tax that is imposed on the sale of certain medical devices. The tax is codified in IRC Section 4191. The tax is equal to 2.3% of the device's sales price and generally is imposed on the manufacturer or importer of the device. The tax took effect on January 1, 2013. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), provided a two-year moratorium on the tax. The tax does not apply to sales in the period beginning January 1, 2016, and ending December 31, 2017. <1.13.2. Explanation of New Provision> Section 114 would amend IRC Section 4191 to provide that the medical device excise tax would not apply to sales after December 31, 2017. <1.14. Section 115. Repeal of Health Insurance Tax> <1.14.1. Current Law> ACA Section 9010 imposed an annual fee on certain health insurers beginning in 2014. The ACA fee is based on net health care premiums written by covered issuers during the year prior to the year that payment is due. The aggregate ACA fee is set at $8.0 billion in 2014, $11.3 billion in 2015 and 2016, $13.9 billion in 2017, and $14.3 billion in 2018. After 2018, the fee is indexed to the annual rate of U.S. health insurance premium growth. Each year, the IRS apportions the fee among affected insurers based on (1) their net premiums written in the previous calendar year as a share of total net premiums written by all covered insurers and (2) their dollar value of business. Covered insurers are not subject to the fee on their first $25 million of net premiums written. The fee is imposed on 50% of net premiums above $25 million and up to $50 million, and it is imposed on 100% of net premiums in excess of $50 million. Certain types of health insurers or insurance arrangements are not subject to the fee, including self-insured plans; voluntary employees' beneficiary associations; and federal, state, or other governmental entities, including Indian tribal governments and nonprofit entities incorporated under state law that receive more than 80% of their gross revenues from government programs that target low-income, elderly, or disabled populations. In addition, only 50% of net premiums written by tax-exempt entities are included in determining an entity's market share. ACA Section 9010(j) made these provisions effective for calendar years beginning after December 31, 2013. The Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), provided a one-year moratorium on the tax for 2017. <1.14.2. Explanation of New Provision> Section 115 would amend ACA Section 9010(j) to provide that the annual fee would not be imposed, effective 2017. <1.15. Section 116. Repeal of Elimination of Deduction for Expenses Allocable to Medicare Part D Subsidy> <1.15.1. Current Law> Employers that provide Medicare-eligible retirees with prescription drug coverage that meets or exceeds set federal standards are eligible for federal subsidy payments. The subsidies are equal to 28% of plans' actual spending for prescription drug costs in excess of $400 and not to exceed $8,250 (for 2017). The subsidies were created as part of the Medicare Part D prescription drug program (Medicare Modernization Act of 2003; P.L. 108-173 ) to provide employers with an incentive to maintain drug coverage for their retirees. Under IRC Section 139A, employers are allowed to exclude qualified retiree prescription drug plan subsidies from gross income for the purposes of corporate income tax. Prior to implementation of the ACA, employers also were allowed to claim a business deduction for their qualifying retiree prescription drug expenses, even if they also received the federal subsidy to cover a portion of those expenses. ACA Section 9012 amended IRC Section 139A, beginning in 2013, to effectively require employers to coordinate the subsidy and the deduction for retiree prescription drug coverage. The amount allowable as a deduction for the costs of providing retiree prescription drug coverage is reduced by the amount of the federal subsidy received. <1.15.2. Explanation of New Provision> Section 116 would amend IRC Section 139A to reinstate prior law so that business-expense deductions for retiree prescription drug costs would be allowable without reduction by the amount of any federal subsidy. The change would be effective for taxable years beginning after December 31, 2016. <1.16. Section 117. Repeal of Chronic Care Tax> <1.16.1. Current Law> Under IRC Section 213, taxpayers who itemize their deductions may deduct qualifying medical expenses. The medical-expense deduction may be claimed only for expenses that exceed 10% of the taxpayer's adjusted gross income (AGI), a threshold that was reduced for taxable years ending before January 1, 2017, to 7.5% if the taxpayer or spouse was aged 65 or older. The 10% threshold was imposed by ACA Section 9013. Prior to the ACA, the AGI threshold was 7.5% for all taxpayers. <1.16.2. Explanation of New Provision> Section 117 would amend IRC Section 213(a) to reduce the AGI threshold to 7.5% for all taxpayers, effective tax year 2017. <1.17. Section 118. Repeal of Medicare Tax Increase> <1.17.1. Current Law> ACA Sections 9015 and 10906 imposed a Medicare Hospital Insurance (HI) surtax at a rate equal to 0.9% of an employee's wages or a self-employed individual's self-employment income. The surtax, which is found in IRC Sections 1401 and 3101, applies only to taxpayers with taxable income in excess of $250,000 if married filing jointly; $125,000 if married filing separately; and $200,000 for all other taxpayers. The tax is in addition to the regular Federal Insurance Contributions Act and Self-Employment Contributions Act taxes that generally apply (i.e., Social Security and Medicare taxes). <1.17.2. Explanation of New Provision> Section 118 would amend IRC Sections 1401(b) and 3101(b) to repeal the 0.9% Medicare surtax, effective for remuneration received and taxable years beginning after December 31, 2017. <1.18. Section 119. Repeal of Tanning Tax> <1.18.1. Current Law> ACA Section 10907 created a new excise tax on indoor tanning services. The tax is equal to 10% of the amount paid for such services. The provision is codified in Chapter 49 of the IRC. <1.18.2. Explanation of New Provision> Section 119 would repeal the tax on indoor tanning services (IRC Chapter 49), effective for services performed after September 30, 2017. <1.19. Section 120. Repeal of Net Investment Tax> <1.19.1. Current Law> HCERA Section 1402 imposed a net investment tax on high-income taxpayers. The tax, which is codified in Chapter 2A of Subtitle A of the IRC, applies at a rate of 3.8% to certain net investment income of individuals, estates, and trusts with income above amounts specified in the statute. <1.19.2. Explanation of New Provision> Section 120 would repeal the net investment tax (Chapter 2A of IRC Subtitle A), effective beginning tax year 2017. <1.20. Section 121. Remuneration> <1.20.1. Current Law> Generally, employers may deduct the remuneration paid to employees as "ordinary and necessary" business expenses under IRC Section 162, subject to any statutory limitations. ACA Section 9014(b) added a statutory limitation for certain health insurance providers. Under the provision, which is codified at IRC Section 162(m)(6), covered health insurance providers may not deduct the remuneration paid to an officer, director, or employee in excess of $500,000. <1.20.2. Explanation of New Provision> Section 121 would terminate IRC Section 162(m)(6), effective beginning tax year 2017. <2. Title II> <2.1. Section 201. Prevention and Public Health Fund> <2.1.1. Current Law> ACA Section 4002 established the Prevention and Public Health Fund (PPHF), to be administered by the HHS Secretary, and provided it with a permanent annual appropriation. The PPHF is intended to support an "expanded and sustained national investment in prevention and public health programs. " In general, PPHF funds have been distributed to HHS agencies in the Public Health Service, in particular the Centers for Disease Control and Prevention. Amounts for each fiscal year are available to the HHS Secretary beginning October 1, the start of the respective fiscal year. Congress may explicitly direct the distribution of PPHF funds and did so for FY2014 through FY2017. Under the ACA, the PPHF's annual appropriation would increase from $500 million for FY2010 to $2 billion for FY2015 and each subsequent fiscal year. Congress has amended the provision two times, using a portion of PPHF funds as an offset for the costs of other activities. Annual appropriations to the PPHF in current law are as follows: 1. $500 million for FY2010; 2. $1.0 billion for each of FY2012 through FY2017; 3. $900 million for each of FY2018 and FY2019; 4. $1.0 billion for each of FY2020 and FY2021; 5. $1.5 billion for FY2022; 6. $1.0 billion for FY2023; 7. $1.7 billion for FY2024; and 8. $2.0 billion for FY2025 and each fiscal year thereafter. <2.1.2. Explanation of New Provision> Section 201 would amend ACA Section 4002(b) by repealing all PPHF appropriations for FY2019 and subsequent fiscal years. <2.2. Section 202. Support for State Response to Substance Abuse Public Health Crisis and Urgent Mental Health Needs> <2.2.1. Current Law> The Substance Abuse and Mental Health Services Administration (SAMHSA) supports community-based substance abuse and mental health treatment and prevention services through formula grants to the states and U.S. territories and through competitive grant programs to states, territories, tribal organizations, local communities, and private entities. SAMHSA and most of its programs and activities are authorized under Public Health Service Act (PHSA) Title V; SAMHSA's two largest grant programs, the Substance Abuse Prevention and Treatment Block Grant and the Community Mental Health Services Block Grant, are authorized under PHSA Title XIX. PHSA Section 399O required the HHS Secretary to award formula grants to states to support state prescription drug monitoring programs, but this grant program has not received funding since FY2010. Other agencies within HHS also support substance abuse or mental health prevention and treatment under more general authorities. <2.2.2. Explanation of New Provision> Section 202 would authorize to be appropriated and would appropriate, out of monies in the Treasury not otherwise obligated, $750 million for each of FY2018 and FY2019 to the HHS Secretary to award grants to states to address the substance abuse public health crisis or respond to urgent mental health needs by (1) improving state prescription drug monitoring programs, (2) implementing and evaluating substance abuse prevention activities, (3) training health care practitioners in topics related to substance abuse, (4) supporting access to substance abuse or mental health services, and/or (5) other public health-related activities related to substance abuse or mental health. Funds appropriated pursuant to this authority would remain available until expended. <2.3. Section 203. Community Health Center Program> <2.3.1. Current Law> ACA Section 10503 created the Community Health Center Fund, which provided mandatory appropriations to the Health Center Program from FY2011 through FY2015. The Health Center Program provides grants to outpatient primary care facilities that provide health services to underserved populations in health professional shortage areas. These appropriations were subsequently extended through FY2017 by Section 221(a) of the Medicare Access and CHIP Reauthorization Act of 2015 ( P.L. 114-10 ), which provided $3.6 billion for each of FY2016-FY2017. Prior to the ACA, the Health Center Program had received only discretionary appropriations, which made up the entirety of the program's appropriated funds. Since the Community Health Center Fund's creation, the fund has made up an increasing percentage of the Health Center Program's appropriation, ranging from 39% for FY2011 to 70% for FY2017. Under current law, for FY2018, the Community Health Center Fund will not receive a mandatory appropriation. <2.3.2. Explanation of New Provision> Section 203 would provide $422 million to the Community Health Center Fund for FY2017 in addition to the $3.6 billion appropriated under current law. <2.4. Section 204. Funding for Cost-Sharing Payments and Section 205. Repeal of Cost-Sharing Subsidy Program> <2.4.1. Current Law> ACA Section 1402 authorized subsidies to eligible individuals to reduce the cost-sharing expenses for health insurance plans offered in the individual market through health insurance exchanges. Cost-sharing assistance is provided in two forms. The first form of assistance reduces the out-of-pocket limit applicable for a given exchange plan; the second reduces actual cost-sharing requirements (e.g., lowers the deductible or reduces a co-payment) applicable to a given exchange plan. Both types of assistance provide greater subsidy amounts to individuals with lower household incomes. Individuals who meet applicable eligibility requirements may receive both types of cost-sharing subsidies. The ACA directed the HHS and the Treasury Secretaries to make payments to reimburse insurers for the required reductions but did not expressly address the source of funds to be used for these payments. The Obama Administration made cost-sharing reduction payments to insurers using an appropriation that covered premium subsidies. The House of Representatives filed suit, claiming that the payments violated the appropriations clause of the U.S. Constitution. After holding that the House has standing to sue the Obama Administration, the U.S. District Court for the District of Columbia concluded that the Secretaries' payment of the cost-sharing reimbursements was unconstitutional for lack of a valid appropriation enacted by Congress. The court barred the Obama Administration from making the cost-sharing payments but stayed its decision pending appeal of the case. Should the appeal of the case not go forward, the district court's decision apparently could take effect, likely preventing the federal government from reimbursing insurers for these required cost-sharing reductions absent a subsequent appropriation of funds or other action by Congress. <2.4.2. Explanation of New Provisions> Section 204 would appropriate to the HHS Secretary such sums as may be necessary for cost-sharing subsidies (including adjustments to prior obligations for such payments) for the period beginning the date of enactment through December 31, 2019. Payments incurred and other actions for adjustments to obligations for plan years 2018 and 2019 could be available through December 31, 2020. Section 205 would repeal ACA Section 1402, terminating the cost-sharing subsidies (and payments to issuers for such reductions), effective for plan years beginning in 2020.

Per the reconciliation instructions in the budget resolution for FY2017 (S.Con.Res. 3), the House passed its reconciliation bill, H.R. 1628—the American Health Care Act (AHCA)—with amendments on May 4, 2017. The House bill was received in the Senate on June 7, 2017, and the next day the Senate majority leader had it placed on the calendar, making it available for floor consideration. The Senate Budget Committee published on its website a "discussion draft" titled, "The Better Care Reconciliation Act of 2017" (BCRA) on June 22, 2017, and subsequently updated the discussion draft on June 26, July 13, and July 20. The Senate's draft legislation is written in the form of an amendment in the nature of a substitute, meaning that it is intended to be considered by the Senate as an amendment to H.R. 1628, as passed by the House, and that all of the House-passed language would be stricken and the language of the BCRA would be inserted in its place. On July 19, 2017, the Senate Budget Committee posted the "Obamacare Repeal Reconciliation Act of 2017" (ORRA) on its website as another draft reconciliation bill. ORRA is largely based off the Restoring Americans' Healthcare Freedom Reconciliation Act of 2015 (H.R. 3762), which was vetoed by President Obama on January 8, 2016, and returned to the House. ORRA would repeal several provisions of the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended), and it could restrict federal funding for the Planned Parenthood Federation of America (PPFA) and its affiliates and clinics for a period of one year. The bill also would appropriate (1) an additional $422 million for FY2017 to the Community Health Center Fund and (2) $750 million for each of FY2018 and FY2019 to award grants to states to address the substance abuse public health crisis or respond to urgent mental health needs. The Congressional Budget Office and the Joint Committee on Taxation estimate that ORRA would reduce federal deficits by $473 billion from FY2017 through FY2026, and they estimate that 17 million more people would be uninsured under ORRA than under current law in FY2018, with that figure growing to 32 million in CY2026. A number of the provisions in ORRA are also in the AHCA and/or BCRA. However, ORRA does not include the AHCA or BCRA provisions that would substitute the ACA's premium tax credit for premium tax credits with different eligibility rules and calculation requirements. ORRA also does not include the AHCA or BCRA provisions that would establish new programs and requirements that are not related to the ACA, for example, a new fund to provide funding to states for specified activities intended to improve access to health insurance and health care or provisions to convert Medicaid financing to a per capita cap model (i.e., per enrollee limits on federal payments to states) with a block grant option (i.e., a predetermined fixed amount of federal funding) for certain populations. This report provides summaries of each ORRA provision.

<1. Introduction> The 115 th Congress states that tax reform is a priority. In recent years, the focus of individual income tax reform has been on reducing the number of statutory tax brackets as part of a base broadening, rate reducin g tax reform. On June 24, 2016, Republicans released a tax reform blueprint, "A Better Way for Tax Reform." This blueprint proposes to consolidate the seven individual income tax brackets under current law into three, and to eliminate the alternative minimum tax (AMT). Tax reform legislation introduced in the 113 th Congress, the Tax Reform Act of 2014 ( H.R. 1 ), also proposed to reduce the number of individual income tax brackets, and repeal the AMT. Tax reform debates often highlight statutory rates. As is illustrated in this report, however, under the current tax system, statutory rates provide limited information on tax burden. Statutory rates also provide limited information on the economic incentives created by the tax code. When evaluating the equity and economic efficiency (behavioral) effects of tax reform proposals, it is important to look beyond the statutory rate. This report highlights two other tax rate measures: average tax rates and effective marginal tax rates. A taxpayer's average tax rate is the share of total income that is paid in taxes. A taxpayer's effective marginal tax rate is the portion of an additional dollar in earnings that is paid in individual income tax. The analysis in this report relies on the 2010 Internal Revenue Service (IRS) Statistics of Income (SOI) individual public use file. The individual public use file is a microdata file designed to provide a representative sample of individual income tax filers in a given year. The 2010 file contains 159,791 records designed to provide statistical information for the 142.9 million individual income tax returns filed. The report uses the National Bureau of Economic Research's TAXSIM model to compute tax liability, for the purposes of calculating average tax rates, and effective marginal tax rates. The focus of this report is on the federal individual income tax. Thus, the tax rates reported here do not include payroll taxes, corporate income taxes, excise taxes, or estate taxes at the federal level. Nor do the tax rates in this report include any state tax liability. The report also does not include any analysis of the effect of transfer payments on effective marginal tax rates. Not all individuals or households file income tax returns. For example, in 2016, an estimated 83% of "tax units" are expected to file individual income tax returns. The other 17% of tax units are not expected to file returns and have no federal individual income tax liability. Overall, roughly 44% of tax units are expected to have zero or negative income tax liability in 2016. But, many taxpayers that have zero or negative income tax liability have positive payroll tax liability. When both income and payroll taxes are considered, an estimated 18% of tax units are expected to have no income or payroll tax liability in 2016. Since this report relies on data from the IRS SOI public use file, only individuals and households (or tax units) that filed individual income tax returns are included in the analysis. This report provides an overview of the three types of tax rates commonly considered in tax reform debates: statutory, average, and effective marginal tax rates. The first part of the report defines these concepts, and discusses them in the context of the current federal individual income tax system. The report also includes an analysis of how these tax rates vary across the income distribution. The report also looks at variation in average and effective marginal tax rates across taxpayers with similar levels of income. The report concludes with a discussion of potential implications of the analysis for tax reform. <2. Statutory, Average, and Effective Marginal Tax Rates> Many tax policy debates focus on the statutory tax rates, or the tax rates applied to taxable income. However, in practice, statutory rates do not necessarily reflect a taxpayer's tax burden. Other measures of tax rates that provide more information on tax burdens include average tax rates and effective marginal tax rates. Average tax rates provide a good measure for comparing the burden of taxes across different taxpayers, while both average and effective marginal tax rates provide information on potential economic distortions caused by taxation. <2.1. Defining Tax Rates> The following sections define and describe three common tax rate metrics statutory, average, and effective marginal rates. Statistics are provided to show how these rates vary for taxpayers at different income levels. A case study is also included to illustrate how statutory, average, and effective marginal tax rates differ for a hypothetical taxpayer. <2.1.1. Statutory Tax Rates> Statutory rates are the tax rates applied to taxable income that falls within a given range or tax bracket. The federal income tax system is designed to be progressive, meaning that higher tax rates are applied at higher income levels. By design, only income that falls within each tax bracket is taxed at that tax rate. For example, if a single filer has taxable income of $10,000 in 2016, that taxpayer would fall in the 15% statutory tax bracket (see Table 1 ). However, only $725 would be taxed at a rate of 15%. For all single filers, income up to $9,275 is taxed at 10%, regardless of the taxpayer's total taxable income. Most tax returns filed fall into one of the lower tax brackets. Figure 1 classifies returns according to the highest statutory tax rate applied to each return. In 2014, the most recent year for which these data are available, 43% of tax returns filed were either non-taxed or in the 10% tax bracket. These returns contained 9% of all adjusted gross income (AGI) reported on 2014 tax returns. Less than 1% of returns filed in 2014 were in the top tax bracket (39.6% in 2014). These returns, however, accounted for 16% of all AGI. Another way to look at the distribution of income across statutory tax rates is to look at the amount of taxable income taxed at a particular rate. In 2014, 29% of taxable income at the marginal rate was taxed at the 39.6% rate. However, less than half of the AGI reported on tax returns falling in the 39.6% bracket was taxed at that rate. The remaining income was taxed at lower rates, per the progressive tax structure. Much of the analysis below examines tax returns filed for 2010. In 2010, the top statutory tax rate was 35% (the 2010 statutory tax rates and brackets are shown in Table A-3 ). The top rate increased to 39.6% following the enactment of the American Taxpayer Relief Act (ATRA; P.L. 112-240 ). As noted above, very few returns filed fell into the top statutory rate bracket (less than 1% in 2014). However, because the top statutory rate is higher now than it was in 2010, the very highest income taxpayers may face higher average and effective marginal tax rates than in 2010. This is important to keep in mind when considering the results of the analysis presented below. <2.1.2. Average Tax Rates> A taxpayer's average tax rate is the percentage of total income that is paid in taxes. For the purposes of this report, the average tax rate is calculated as income tax liability divided by cash income. Since the analysis only looks at individual income taxes, payroll taxes, for example, are excluded. The progressive nature of the tax system, coupled with a variety of tax preference items (credits, deductions, exclusions, exemptions, etc.), makes it so that for nearly all taxpayers, average tax rates are less than statutory tax rates. Further, many taxpayers, particularly lower-income taxpayers, have negative average tax rates. Refundable tax credits, such as the earned income tax credit (EITC), can lead to negative average tax rates. Taxpayers that have average individual income tax rates that are negative often have positive payroll tax liability. In 2010, average tax rates were negative for taxpayers in the bottom four income deciles (or the bottom 40% of taxpayers, in terms of income) (see Figure 2 ). The average of average tax rates (or mean average tax rate) for taxpayers in the second income decile is less than the mean average tax rate for taxpayers in the lowest 10% of the income distribution, reflecting the phase-in of certain refundable credits (e.g., the EITC). As illustrated in Figure 2 , average tax rates tend to rise with income. For taxpayers in the top income decile, or those with incomes above $123,230 in 2010, the mean average tax rate was 13.6%. Average tax rates continue to rise towards the very top of the income distribution. For taxpayers in the top 1% in 2010, or those with incomes above $421,340, the mean average tax rate was 19.8% (see Table B-1 in Appendix A ). While the top statutory rate in 2010 was 35%, average tax rates, even for the highest-income taxpayers, were less. For the income tax system as a whole, average tax rates have fluctuated over time (see Figure 3 and the related discussion). Between 1960 and 2016, the average tax rate for the U.S. income tax system generally fluctuated between 10% and 16%. Over this time period, the individual income tax system-wide average tax rate was highest in the period immediately preceding the 1986 tax reform, and before the tax cuts of the early 2000s. System-wide average individual income tax rates in the 2000s tended to be lower than the historical average. Beginning in 2009, the system-wide average tax rate began increasing. As of 2016, the system-wide average tax rate approached levels seen before the 1986 tax reform and tax cuts of the early 2000s. <2.1.3. Effective Marginal Tax Rates> Effective marginal tax rates are the amount paid in tax on the next dollar of income. A taxpayer's effective marginal tax rate can affect work and savings decisions. Higher effective marginal tax rates make non-taxable forms of compensation, such as non-taxable fringe benefits, more attractive. When taxes distort taxpayer choices, society's economic resources may not be put to their most productive use. Effective marginal tax rates are determined by (1) a taxpayer's statutory tax bracket; and (2) interactions with other credits, deductions, exemptions, and special provisions in the tax code. For the purposes of this report, effective marginal tax rates include only changes to individual income taxes paid from increased earnings. The effective marginal tax rates in this report do not include payroll taxes or reductions in benefits from other government programs. Effective marginal tax rates are computed using the National Bureau of Economic Research's (NBER's) full TAXSIM program. In an uncomplicated tax system, the effective marginal rate would equal the statutory rate. Both phase-ins and phaseouts of various tax provisions affect a taxpayer's effective marginal tax rate. For example, the earned income tax credit (EITC) can increase or decrease a taxpayer's effective marginal tax rate depending on their level of earnings. In 2016, an unmarried tax filer with one child claiming the EITC would get an EITC of $0.34 for each dollar in earnings, up to $9,920. In other words, in the phase-in range, the EITC reduced the effective marginal tax rate by 34%. The EITC is the primary reason why many lower-income taxpayers have negative average and effective marginal tax rates. The phaseout range for an unmarried taxpayer with one child started at $18,190 in 2016. For every dollar earned beyond $18,190, until earnings reached $39,296, the EITC was reduced by $0.1598. In other words, in the phaseout range, the EITC increased the effective marginal tax rate by 15.98%. The effect of the EITC phaseout on marginal tax rates is also illustrated in the shaded text box ("Case Study") below. Effective marginal tax rates tend to rise with income (see Figure 4 ). On average, taxpayers in the first two income deciles face negative effective marginal tax rates. These taxpayers tend to be in the phase-in range of the EITC. On average, taxpayers in the top income decile faced an effective marginal tax rate of 28.5%. Marginal tax rates tend to be higher than average tax rates, reflecting the progressive nature of the income tax system. Further, phaseouts of tax benefits for higher-income taxpayers contribute to enhanced progressivity, making marginal tax rates higher for certain higher-income taxpayers. While effective marginal tax rates tend to rise with income, there is substantial variation in the effective marginal tax rates faced by taxpayers within income groups. This observation is discussed further below (see " Tax Rates Vary Across and Within Income Groups "). <2.1.3.1. The Importance of Weights: Taxpayer-Weighted versus Earnings-Weighted Tax Rate Statistics> When looking at average marginal tax rates for a group of taxpayers, or for the tax system as a whole, it is important to distinguish between averages that are taxpayer-weighted (or return-weighted) as opposed to earnings-weighted. Taxpayer-weighted (or return-weighted) summary statistics average the marginal tax rates paid by each taxpayer. Earnings-weighted summary statistics, by contrast, weight each return by the amount of earnings reported, or the earnings reported at the marginal rate. Recall that most taxpayers file returns in the lower statutory rate brackets, but that a larger share of income is reported in the higher statutory rate brackets. As a result, earnings-weighted measures of average effective marginal tax rates tend to be higher than taxpayer-weighted measures. Mean average tax rates and mean effective marginal tax rates reported in Figure 2 and Figure 4 above are taxpayer weighted. However, since the taxpayers are grouped according to income, means calculated on a taxpayer-weighted basis should be similar to earnings-weighted means. The mean average and effective marginal tax rates in Figure 3 are earnings-weighted, such that the means better reflect tax rates applied to income in the economy. When considering how marginal tax rates might affect economic output, earnings-weighted marginal tax rates are more appropriate. <2.2. Observations Using Individual Taxpayer Data> The following sections take a closer look at average and effective marginal tax rates. Specifically, the analysis highlights the variation in tax rates within income groups, and how family composition affects tax burden. Findings are discussed in greater detail below and include the following: In 2010, 46% of taxpayers faced an effective marginal tax rate that was different than their statutory rate. Average tax rates tend to rise across income groups. Effective marginal tax rates, however, are higher for many low- and middle-income taxpayers, particularly those with children, than they are for higher-income taxpayers. For low- and middle-income taxpayers, family composition explains much of the variation in average tax rates within income groups. For higher-income taxpayers, controlling for family composition does less to reduce variation in average tax rates. <2.2.1. Statutory Tax Rates Do Not Necessarily Reflect Tax Burden> While statutory tax rates are often highlighted in tax reform debates, statutory tax rates are often not a good measure of either taxes paid on additional earnings or overall tax burden. In 2010, 54% of tax filers had an effective marginal tax rate that was the same as the statutory tax rate. For 29% of taxpayers, the effective marginal tax rate was higher than the statutory rate. For 16% of taxpayers, the effective marginal tax rate was less than the statutory rate. The reasons why effective marginal rates differ from statutory rates are discussed in more detail below. In 2010, taxpayers in the 28% and 33% brackets were most likely to face effective marginal rates higher than their statutory rate (see Figure 5 ). Many taxpayers with little or no income face negative effective marginal tax rates. Thus, taxpayers in the zero statutory rate bracket are among those most likely to face effective marginal tax rates that are below their statutory rate. Taxpayers in the highest tax bracket, 35% in 2010, are also among the most likely to have an effective marginal rate that is less than the statutory rate. <2.2.1.1. How Much Do Effective Marginal Rates and Average Rates Differ from Statutory Rates?> For many taxpayers, not only do effective marginal and average tax rates differ from statutory rates, but they differ by a sizable amount. Table 4 provides more information on the magnitude of differences between effective marginal and statutory rates, as well as average and statutory rates. In the lower tax brackets, when taxpayers faced an effective marginal tax rate above their statutory rate, the difference in the two rates tended to be substantial. In 2010, approximately 41% of taxpayers in the 10% statutory rate bracket had an effective marginal tax rates that was higher than their statutory rate. Approximately 36% of taxpayers in the 10% bracket in 2010 faced effective marginal tax rates that were at least 5 percentage points higher than 10% (faced an effective marginal tax rate of at least 15%), while 20% of taxpayers in the 10% bracket faced effective marginal tax rates that were at least 10 percentage points higher than 10% (faced an effective marginal tax rate of at least 20%). Taxpayers in higher tax brackets are also more likely to face an effective marginal tax rate that is above their statutory rate. However, the difference between the effective marginal rate and statutory rate tends to be smaller. In 2010, more than half of taxpayers in the 28% bracket, and more than three-quarters of taxpayers in the 33% bracket, faced effective marginal tax rates higher than their statutory rate. Looking at magnitude, nearly 10% of taxpayers in the 28% bracket faced an effective marginal tax rate that was at least 5 percentage points higher than their statutory rate. However, less than 1% of taxpayers in the 28% bracket faced an effective marginal tax rate that was at least 10 percentage points higher than their statutory rate. Very few taxpayers in the 33% bracket faced an effective marginal tax rate that was more than 5 percentage points above their statutory rate. Average tax rates are at least 5 percentage points less than statutory tax rates for nearly all taxpayers. For many taxpayers, average tax rates are less than statutory rates by 10 percentage points. In the 25% bracket, an estimated 94% of taxpayers had an average tax rate of 15% or less in 2010. In the 35% tax bracket, an estimated 44% of taxpayers had an average tax rate of 25% or less. <2.2.1.2. Why Do Effective Marginal Tax Rates Differ from Statutory Rates> The U.S. individual income tax system is complex. There are many provisions with phase-ins, phaseouts, floors, or other features that cause effective marginal tax rates to differ from statutory rates. A survey of all provisions that cause effective marginal tax rates to differ from statutory rates is beyond the scope of this report. However, some of the provisions that cause effective marginal tax rates to differ from statutory rates are briefly discussed below. For lower- and moderate-income families, the earned income tax credit (EITC) and child tax credit (CTC) cause effective marginal tax rates to differ from statutory rates. In 2010, the phase-in rate for the EITC was 40% for a married couple with two children. Thus, for married couples with two children with up to $12,590 in income in 2010, the EITC reduced effective marginal tax rates by 40 percentage points. The EITC phased out at a rate of 21.06% for married couples with two children in 2010, causing effective tax rates to rise by this amount for taxpayers with incomes between $16,450 and $40,363. Thus, the EITC helps explain effective marginal tax rates that are less than statutory rates for many low-income families. The EITC also helps explain effective marginal tax rates that exceed statutory rates for some middle-income families (e.g., married couples with two children in the 15% statutory rate bracket in 2010). In 2010, the child tax credit affected marginal tax rates for many families with children. Families with earnings of a least $3,000 could receive a refundable credit of up to $1,000 per qualifying child. The credit was phased in at a rate of 15%, therefore reducing effective marginal tax rates by 15 percentage points in the phase-in range. The child tax credit phases out at a rate of 5% for joint filers with incomes above $110,000 ($75,000 for head of household filers). Thus, the CTC decreases effective marginal tax rates for those in the very lowest tax bracket, but increases effective marginal tax rates for those in higher brackets, the 25% statutory bracket in particular. Phaseouts for the EITC and the CTC ensure that the benefits of these provisions are targeted towards the lower and middle portions of the income distribution. In 2010, the making work pay credit and its associated phaseout increased effective marginal tax rates for many taxpayers in the 25% and 28% tax brackets. The making work pay credit provided a tax credit of up to $400 for single filers, or $800 for married couples filing jointly. The credit was designed to phase out at a rate of 2% of income. The phaseout range for single filers began at $75,000, such that those with income above $95,000 would not receive the credit. For married couples filing joint returns, the phaseout range began at $150,000, and the credit was fully phased out for couples with income above $190,000. The 2% of income phaseout increases effective marginal tax rates for taxpayers in the phaseout range by 2 percentage points. The alternative minimum tax (AMT) affects effective marginal tax rates for many higher-income taxpayers. Broadly, the AMT has a two-tiered rate structure, with rates set at 26% and 28%. In 2010, the AMT had exemption amounts of $72,450 for joint filers, and $47,450 for non-joint filers. These exemption amounts, however, are phased out above certain income thresholds (in 2010, the phaseout started at $150,000 for joint filers, and $112,500 for single or head of household filers). The exemption amount is phased out at a rate of 25%, making the effective AMT rates 32.5% and 35% in the exemption phaseout range. In 2010, 85% of returns filed in the 33% bracket were returns with alternative minimum tax. The AMT and the associated exemption phaseout explain why most returns filed in the 33% statutory bracket face an effective marginal tax rate of 35% (see Table B-3 ). Of returns filed in the top bracket, or the 35% bracket in 2010, 53% were returns with alternative minimum tax. Thus, for a large proportion of taxpayers in the top statutory tax brackets, the relevant marginal rate is not the statutory rate of the ordinary individual income tax, but instead the effective marginal rate under the AMT. Most of the 16% of taxpayers with effective marginal tax rates below their statutory rate either do not pay income taxes (are in the 0% bracket) or were in the top tax bracket, the 35% bracket, in 2010. For tax filers with a 0% rate, effective marginal tax rates are the result of phased-in refundable tax credits (e.g., the EITC, child tax credit, or, in 2010, the making work pay tax credit). The AMT, with a top effective rate of 28%, explains why approximately 45% of tax filers in the top statutory tax bracket have a marginal effective tax rate that is less than the statutory rate. Of the less than 1% of taxpayers in 2010 that filed returns that placed them in the top statutory bracket (the 35% bracket), nearly half of those taxpayers face an effective marginal tax rate that is less than the statutory rate, and for most of those taxpayers, the effective marginal tax rate was 30% or less. Effective marginal tax rates can fluctuate from year to year, as policy changes mean that phase-ins and phaseouts come in and out of the code. For example, in 2010, effective marginal tax rates were affected by the making work pay tax credit. This temporary policy was only available during 2009 and 2010. Other provisions that increase effective marginal tax rates on higher-income taxpayers are the personal exemption phaseout (PEP) and limitation on itemized deductions (Pease). Notably, these provisions were repealed for 2010, and thus did not affect the effective marginal tax rates summarized in this report. PEP reduces personal exemptions by 2% for each $2,500 that income exceeds phaseout thresholds (in 2016, the phaseout begins at $259,400 for single filers, $311,300 for joint filers). The Pease limitation on itemized deductions is triggered by income, and is not a function of the amount of deductions claimed. For taxpayers above the Pease earnings threshold in a given tax year (same as the PEP threshold noted above for 2016), the Pease limitation increases tax liability by $0.03 for each dollar of earnings. Thus, for tax years when Pease is in effect, the Pease limitation serves to increase effective marginal tax rates by 3%. <2.2.2. Tax Rates Vary Across and Within Income Groups> There is substantial variation in average tax rates within income groups. As a result, some higher-income taxpayers have average tax rates that are less than the average tax rate faced by lower-income taxpayers. For example, taxpayers in the 90 th percentile of the 4 th income decile (cash income between $24,160 and $31,310) had an average tax rate of 5.6% in 2010 (see Figure 6 ). In contrast, taxpayers in the 10 th percentile of the 9 th income decile ($84,970 - $123,230) had an average tax rate of 3.6% in 2010. Various features of the U.S. tax system make it so that some taxpayers with higher income have average tax rates that are less than average rates paid by some lower-income taxpayers. While there is variation in tax rates within income groups, median average tax rates rise across income groups, reflecting the generally progressive nature of the individual income tax system. The dispersion of tax rates within income groups tends to be widest for taxpayers in the lower-income deciles. Much of this dispersion is due to family composition (discussed more below). That is, lower-income taxpayers with children qualify for refundable credits that reduce average tax rates. As these credits phase-out, there is less dispersion in average tax rates within income groups. Dispersion of average tax rates rises towards the top of the income distribution, after declining in the middle of the income distribution. There is also a substantial amount of variation in effective marginal tax rates within income deciles (see Figure 7 ). Most taxpayers in the first two income deciles (those with incomes up to $17,610) face negative effective marginal tax rates. Thus, each dollar in earnings results in more than a dollar of after-tax income. Negative effective marginal tax rates are the result of phase-ins of refundable tax credits. The median effective marginal tax rate holds steady at 15% through the middle of the income distribution (the 4 th through 8 th income deciles). This is consistent with the observations above that (1) approximately two-thirds of taxpayers in the 15% statutory tax bracket face an effective marginal tax rate of 15%; and (2) a plurality of tax returns filed fall in the 15% bracket (a plurality of taxable income is also taxed at the 15% rate). Some taxpayers in the middle of the income distribution face higher effective marginal tax rates than most taxpayers with higher incomes. These relatively high effective marginal tax rates reflect phaseouts of tax credits. <2.2.3. Family Composition and Tax Rates> Family composition is a key factor explaining much of the variation in average and effective marginal tax rates across the income distribution. Figure 8 illustrates average tax rate by income group for six family types: (1) single, with no dependents; (2) head of household, with one child; (3) head of household, with two children; (4) married, with no dependents; (5) married, with one child; and (6) married, with two children. An estimated 80% of tax filers fell into one of these six family type categories in 2010. In Figure 8 , income deciles are calculated separately for each family type. For example, for single tax filers in 2010, the top income decile starts at $76,010 (see Table B-4 for the income ranges associated with the decile break points for the six family types). For married filers, the top income decile starts at $176,160. Looking at Figure 8 , the distribution of average tax rates for single filers in the top income decile appears roughly similar to the distribution of average tax rates for married filers without children that are in the top 10% of that family type group. The incomes of taxpayers in these two groups, however, are very different. For low- and moderate-income taxpayers, controlling for family type tends to reduce the variation in average tax rates within income groups. This is less true, however, at the top of the income distribution. In 2010, for the entire sample, tax filers in the 10 th percentile of the top income decile faced an average tax rate of 3.8%. Tax filers in the 90 th percentile of the top income decile faced an average tax rate of 23.3%. Similar differences between the 10 th and 90 th percentiles can be observed in Figure 8 for tax filers in different family type groups in the top income decile. This suggests that for higher-income taxpayers, variation in average tax rates is generally driven by factors other than family composition. There are several other trends that can be observed in Figure 8 . For head of household taxpayers, average tax rates tend to decrease across the lowest income deciles, before increasing. This reflects the phase-in of family-related tax benefits, and that married taxpayers' incomes tend to be higher. For head of household taxpayers with one child, the median average tax rate is negative across the first six income deciles (or the first eight income deciles for head of household filers with two children). For married tax filers with two children, the median average tax rate in the 10 th decile is higher than the median average tax rate for other married filers. The 10 th income decile also starts at a higher value for married filers with two dependents ($200,890) than for married filers with one dependent ($180,310) or married filers without children ($176,160). For head of household filers, in contrast, the 10 th income decile starts at a lower level for head of household filers with two children ($63,410) as opposed to one child ($72,710) or single filers without children ($76,610). Evaluating effective marginal tax rates by family type also reveals some broad trends (see Figure 9 ). In the lowest income deciles, there is less variation in effective marginal tax rates for taxpayers without children (either single or married), than for taxpayers with children. For taxpayers with children, there is still substantial variation in effective marginal tax rates within income groups for lower-income deciles. The variation is driven by eligibility for child- and family-related tax benefits. While average tax rates tend to rise across the income distribution, a different trend appears for effective marginal tax rates for taxpayers with children. Median effective marginal tax rates rise initially, but then tend to decline as incomes increase, before increasing again at the top of the income distribution. This trend is most pronounced for head of household taxpayers with children. Tax credit phaseouts for taxpayers with children cause effective marginal tax rates to be higher for some lower income taxpayers than for higher income counterparts. In the lower and middle parts of the income distribution, households with children tend to have average tax rates and effective marginal tax rates that differ from households without children. These differences, however, largely disappear at the top of the income distribution, as tax benefits for families with children phase out. <3. Discussion> The differences between statutory, average, and effective marginal tax rates are important when analyzing tax policy and considering matters of equity and efficiency. Since statutory tax rates provide limited information about tax burdens, questions of equity are often better addressed by using average rates. Since effective marginal tax rates do not equal statutory tax rates for a large proportion of taxpayers, statutory rates provide limited information on the incentives created by the tax code. <3.1. Measuring Tax Burden> In the current tax system, statutory tax rates do not provide much information about individual taxpayers' overall tax burden. Average tax rates provide better information about how much taxpayers are paying in income tax. For that reason, analysis of tax policy proposals tends to focus on average tax rates, rather than statutory rates. In a progressive tax system, average tax rates rise with income. Taxpayers with a greater ability to pay contribute a larger share of their income to taxes, consistent with the notion of vertical equity. A progressive tax system also means that average tax rates tend to be less than statutory tax rates. In 2010, taxpayers in the top 1% of the income distribution had an average tax rate of 19.8%, even though the top statutory rate was 35%. Summarizing average tax rates for different income groups can also mask variation in average tax rates within income groups. Exemptions, deductions, exclusions, credits, and other features of the tax code mean that, even for taxpayers with similar incomes, average tax rates can vary substantially. Thus, there can be (and are) taxpayers in the 35% statutory rate bracket with average tax rates below taxpayers in the 10% or 15% statutory bracket. Efforts to address horizontal equity may result in average tax rates that differ for taxpayers with similar levels of income. Horizontal equity suggests that taxpayers who are equal before paying taxes should face a similar tax burden. Horizontal equity also provides that some allowance could be made for family size or composition. In the existing tax system, controlling for differences in family composition reduces, but does not eliminate, variations in tax burden across the income distribution. Further, controlling for family composition tends to expose differences in average tax burdens and effective marginal tax rates between taxpayers with and without children in the lower and middle parts of the income distribution. However, towards the top of the income distribution, average and effective marginal tax rates tend to be more similar across family types. This suggests that how the tax system adjusts for horizontal equity depends where a taxpayer is on the income distribution. <3.2. The Tax Code and Taxpayer Behavior> Marginal tax rates can affect taxpayers' work and savings decisions. Increases in marginal tax rates reduce the after-tax returns to work, and tend to cause taxpayers to work less (economists call this the "substitution effect"). With higher tax rates, however, taxpayers may work more to maintain their standard of living (economists call this the "income effect"). Theoretically, the income effect might offset some of the reduction in labor supply following tax increases, or increases in labor supply following tax cuts. Empirical evidence suggests that increases in marginal tax rates reduce labor supply, but that the effects are small. A 2012 survey of the literature found that a policy that reduced after-tax income by 1% would lead to a 0 to 0.2% decrease in hours worked (or a 0 to 0.2% decrease in labor force participation). There are also questions about the extent to which taxpayers know their marginal tax rate, or understand how and when it changes. Analysis of taxpayer behavior regarding effective marginal tax rates has shown that while some taxpayers do report income to maximize tax credits and avoid high effective marginal tax rates, these patterns are not observed consistently in response to various phase-ins and phaseouts in the tax code. Broadly, however, there is agreement that taxes distort behavior, and result in taxpayers making decisions that are different than they would have made in the absence of taxes. To the extent that effective marginal tax rates lead to taxpayers changing behavior whether it be changes in labor supply, changes in the form of compensation received (un-taxed fringe benefits as opposed to wages), or non-reporting of income effective marginal tax rates are the metric that can be used to measure the efficiency cost of taxation. The notion that an economically efficient tax system is one with a broad base, allowing for low tax rates, is based on the belief that higher rates impose a larger efficiency cost. As illustrated above, for many taxpayers, effective marginal tax rates differ from statutory rates. A tax system with low statutory rates, but high effective marginal tax rates, could cause more distortions than a system with higher statutory rates, but lower effective marginal rates or effective marginal rates closer to statutory rates. While marginal tax rates can distort taxpayer behavior, for these tax rates to drive changes in behavior, taxpayers need to understand what they are. In the current system, complexity and a lack of transparency regarding effective marginal tax rates makes it hard for taxpayers to understand the economic incentives created by the tax code. In other words, if taxpayers are not aware that they face a high effective marginal tax rate, then they would not be expected to respond by reducing work hours or changing behavior in some other way. <3.3. Considerations for Tax Policy Design> Policymakers engaged in tax reform efforts may seek to make the tax system simpler, fairer, and more efficient. With respect to statutory, average, and effective marginal tax rates, there are several considerations for policymakers designing a tax reform plan that achieves these goals. First, the number of statutory tax brackets has little impact on complexity. Instead, complexity comes from defining the tax base, or what is treated as taxable income. For example, are employee-provided fringe benefits taxable? The rules created in response to this and similar questions make for a complex tax system. Other sources of complexity include various tax incentives designed to address social and economic issues, including but not limited to tax benefits for families, children, education, housing, and charitable giving. Temporary tax provisions, as well as frequent changes in tax policy, also contribute to a complicated individual income tax system. While there is ample room for simplification in tax reform, consolidating and reducing the number of tax brackets alone does little to achieve this objective. Second, evaluations of equity should consider differences in tax burdens both across and within income groups. The extent to which the tax system is proportional, progressive, or regressive can be evaluated by looking at the average tax burden across income groups. However, as illustrated in this report, under the current individual income tax system, there is substantial variation in tax burdens within income groups. Policymakers might consider whether this variation is desirable, perhaps because it makes adjustments for family size or other ability-to-pay considerations (in other words, makes adjustments to enhance horizontal equity). Third, low effective marginal tax rates do more than low statutory rates to promote economic efficiency (that is, they introduce fewer distortions in real economic activity). In an uncomplicated tax system, effective marginal rates are equal to statutory rates. Under the current system, however, a taxpayer's effective marginal tax rate often differs from the statutory rate. Phaseouts of various tax benefits, limiting the benefits of certain provisions to low- and moderate-income taxpayers, results in marginal tax rates that exceed the statutory rate. Thus, there is a tradeoff between equity and efficiency objectives. If a reformed tax system includes provisions to reduce the tax burden for low- and moderate-income taxpayers without extending those benefits to higher-income taxpayers, policymakers might consider the marginal tax rate effects of phaseouts associated with those policies. Finally, it is helpful to remember the primary goal of taxation: raising revenue. That said, the individual income tax can, and often is, used to achieve social, regulatory, and other policy objectives. Doing so, however, introduces complexity, and can involve trade-offs between other objectives. For example, refundable tax credits enhance the progressivity of the tax system, increasing after-tax income for those with little or no tax liability. With a fixed revenue target, refundable tax credits might be compensated for elsewhere in the system with higher rates. These higher rates could distort taxpayer behavior, possibly creating a disincentive to work. The need to raise revenues can constrain the extent to which the tax code can be used to achieve other policy objectives. Appendix A. The 2010 Public Use File and the Individual Income Tax System in 2010 Much of the analysis in this report relies on data from the IRS SOI public use file. The most recent public use file available at the time this report was written was for tax year 2010. This appendix provides additional information on the IRS SOI public use file and the individual income tax system in 2010, highlighting differences between the system in 2010 and the current system. The 2010 IRS SOI public use file contains 159,791 records designed to provide statistical information for the 142.9 million individual income tax returns filed in 2010. The focus of this report is on the 2010 tax year. Thus, records pertaining to previous tax years (5,117 records in total) are dropped, leaving a file that represents 138.3 million returns. Information on the filing status of taxpayers filing 2010 returns in the IRS SOI public use file can be found in Table A-1 . An estimated 45.1% of returns filed for 2010 were for single taxpayers. An estimated 38.0% were for married filers filing joint returns. The remainder of returns were filed using the married filing separately or head of household filing status. Table A-2 provides information on returns filed, categorized according to adjusted gross income (AGI). In 2010, 57.6% of returns filed reported an AGI of less than $40,000, while 87.1% of returns filed reported an AGI for less than $100,000. Statutory tax rates applied in 2010 appear in Table 1 . In 2010, the top statutory tax rate was 35%. In 2010, less than 1% of tax returns filed had income taxed at the top marginal statutory rate (see Figure A-1 ). These returns accounted for 14% of AGI in 2010. Just over 27% of taxable income was taxes at the 35% rate in 2010. The proportion of taxpayers taxed at the top rate and the share of income taxed at the top rate were similar between 2010 and 2014. However, the top rate increased from 35% to 39.6% between these two years. Overall, given the current statutory rate bracket structure, changes in the top statutory rate would affect few taxpayers, but would affect a larger proportion of income. There are several features of the 2010 tax code that differ from the tax code in 2016 that affect effective marginal tax rates. For example, the making work pay tax credit was available in 2010, providing up to $800 for joint returns, or $400 for single returns. This credit phased out for higher-income taxpayers. Some taxpayers may have claimed the first-time homebuyer tax credit for property purchased in 2010. Like the making work pay tax credit, this provision phased out for higher-income taxpayers. Both of these provisions generated increased effective marginal tax rates for taxpayers in the phaseout range. Under current law, the Pease itemized deduction limit and the personal exemption phaseout (PEP) raise effective marginal tax rates for higher-income taxpayers. These provisions were not in effect in 2010. Appendix B. Supplemental Tables and Data This appendix contains charts and figures to supplement the analysis presented in the body of the report. Table B-1 contains data underlying Figure 2 and Figure 6 in the body of the report. Table B-2 contains data underlying Figure 4 and Figure 7 in the body of the report. Table B-3 contains data underlying Figure 5 , as well as additional information on the distribution of effective marginal tax rates within statutory tax brackets. Table B-4 contains information on the income levels in the income deciles for each of the family types included in Figure 8 and Figure 9 in the body of the report. The final two figures presented in this appendix, Figure B-1 and Figure B-2 , reproduce Figure 8 and Figure 9 using the income decile break points for the entire sample of taxpayers (as opposed to break points determined for each individual family type).

Tax reform is a stated priority of the 115th Congress. In June 2016, Ways and Means Committee Republicans released the "Better Way" tax reform blueprint. The proposal seeks to make the individual income tax system "simpler, flatter, and fairer" by consolidating the number of individual income tax brackets. Looking at statutory tax rates alone, however, provides limited information regarding the simplicity or fairness of the tax system. Average tax rates and effective marginal tax rates are frequently used by economists and policy analysts to evaluate the fairness of the tax system, as well as various economic incentives created by the system. This report provides background information on alternative tax rate metrics, and discusses how these measures of the tax burden inform the tax reform debate. Under current law, there are seven statutory tax rate brackets in the federal individual income tax system. Very few taxpayers, less than 1% in 2014, face the top statutory rate. A taxpayer's average tax rate is the percentage of total income that is paid in taxes. This metric is useful when comparing tax burdens across taxpayers, as well as certain economic incentives created by the tax system. For nearly every taxpayer, average tax rates are less than the statutory rate. A taxpayer's effective marginal tax rate is the amount of income tax paid on the next dollar of earnings. Effective marginal tax rates are determined by statutory rates, as well as various other provisions. Effective marginal tax rates also provide information on the economic incentives created by the tax code for different taxpayers. As illustrated in this report, under the current system, statutory, average, and effective marginal tax rates can differ substantially for any given taxpayer. Since statutory tax rates provide limited information about tax burdens, questions of equity are often better addressed by using average rates. Since effective marginal tax rates do not equal statutory tax rates for a large proportion of taxpayers, statutory rates provide limited information on the incentives created by the tax code. One way to evaluate average tax rates is to examine them across the income distribution. This report uses the 2010 Internal Revenue Service (IRS) Statistics of Income (SOI) public use file, the most recent publicly available sample of individual taxpayer returns available when this report was written, to complete this analysis. When taxpayers are divided into income deciles (grouped such that there are 10 equal-sized groups of taxpayers, ranked by income), average tax rates are negative for the first four income deciles. Negative average tax rates are the result of refundable tax credits, generally provided to working families with children. For the top income decile, taxpayers with income above $123,210 in 2010, the average of the average tax rates was 13.6%. In an uncomplicated tax system, marginal tax rates would generally equal the statutory tax rate. For 46% of taxpayers in 2010, effective marginal tax rates differed from the statutory rate. Twenty-nine percent of taxpayers had an effective marginal tax rate that exceeded their statutory rate, while 16% had an effective marginal tax rate that was less than the statutory rate. Both average and effective marginal tax rates vary both across and within income groups. Average tax rates tend to rise with income, reflecting the overall progressivity of the tax system. However, the substantial variation of average tax rates within income groups illustrates that higher-income taxpayers do not necessarily face higher average tax rates. For lower- and middle-income taxpayers, family composition explains much of the difference in average tax rates for taxpayers with similar incomes. Unlike average tax rates, effective marginal tax rates do not always rise with income. The phase-ins and phaseouts associated with tax benefits for families with children mean that for these family types, effective marginal tax rates in the lower and middle parts of the income distribution are similar to those faced by taxpayers near the top of the income distribution.

<1. Introduction> Energy tax policy involves the use of the government's main fiscal instruments taxes (financial disincentives) and tax subsidies (or incentives) to alter the allocation or configuration of energy resources. In theory, energy taxes and subsidies, like tax policy instruments in general, are intended either to correct a problem or distortion in the energy markets or to achieve some social, economic (efficiency, equity, or even macroeconomic), environmental, or fiscal objective. In practice, however, energy tax policy in the United States is made in a political setting, being determined by the views and interests of the key players in this setting: politicians, special interest groups, bureaucrats, and academic scholars. This implies that the policy does not generally, if ever, adhere to the principles of economic or public finance theory alone; that more often than not, energy tax policy may compound existing distortions, rather than correct them. The idea of applying tax policy instruments to the energy markets is not new, but until the 1970s, energy tax policy had been little used, except for the oil and gas industry. Recurrent energy-related problems since the 1970s oil embargoes, oil price and supply shocks, wide petroleum price variations and price spikes, large geographical price disparities, tight energy supplies, and rising oil import dependence, as well as increased concern for the environment have caused policymakers to look toward energy taxes and subsidies with greater frequency. Comprehensive energy policy legislation containing numerous tax incentives, and some tax increases on the oil industry, was signed on August 8, 2005 ( P.L. 109-58 ). The law, the Energy Policy Act of 2005, contained about $15 billion in energy tax incentives over 11 years, including numerous tax incentives for the supply of conventional fuels. However, record oil industry profits, due primarily to high crude oil and refined oil product prices, and the 2006 mid-term elections, which gave the control of the Congress to the Democratic Party, has changed the mood of policymakers. Instead of stimulating the traditional fuels industry oil, gas, and electricity from coal in addition to incentivizing alternative fuels and energy conservation, the mood now is to take away, or rescind, the 2005 tax incentives and use the money to further stimulate alternative fuels and energy conservation. A minor step in this direction was made, on May 17, 2006, when President Bush signed a $70 billion tax reconciliation bill ( P.L. 109-222 ). This bill included a provision that further increased taxes on major integrated oil companies by extending the depreciation recovery period for geological and geophysical costs from two to five years (thus taking back some of the benefits enacted under the 2005 law). And currently, the major tax writing committees in both Houses are considering further, but more significant, tax increases on the oil and gas industry to fund additional tax cuts for the alternative fuels and energy conservation industries. These bills are being considered as part of the debate over new versions of comprehensive energy policy legislation in the 110 th Congress ( H.R. 6 ). This report discusses the history, current posture, and outlook for federal energy tax policy. It also discusses current energy tax proposals and major energy tax provisions enacted in the 109 th Congress. (For a general economic analysis of energy tax policy, see CRS Report RL30406, Energy Tax Policy: An Economic Analysis , by [author name scrubbed].) <2. Background> The history of federal energy tax policy can be divided into four eras: the oil and gas period from 1916 to 1970, the energy crisis period of the 1970s, the free-market era of the Reagan Administration, and the post-Reagan era including the period since 1998, which has witnessed a plethora of energy tax proposals to address recurring energy market problems. <2.1. Energy Tax Policy from 1918 to 1970: Promoting Oil and Gas> Historically, federal energy tax policy was focused on increasing domestic oil and gas reserves and production; there were no tax incentives for energy conservation or for alternative fuels. Two oil/gas tax code preferences embodied this policy: (1) expensing of intangible drilling costs (IDCs) and dry hole costs, which was introduced in 1916, and (2) the percentage depletion allowance, first enacted in 1926 (coal was added in 1932). Expensing of IDCs (such as labor costs, material costs, supplies, and repairs associated with drilling a well) gave oil and gas producers the benefit of fully deducting from the first year's income ("writing off") a significant portion of the total costs of bringing a well into production, costs that would otherwise (i.e., in theory and under standard, accepted tax accounting methods) be capitalized (i.e., written off during the life of the well as income is earned). For dry holes, which comprised on average about 80% of all the wells drilled, the costs were also allowed to be deducted in the year drilled (expensed) and deducted against other types of income, which led to many tax shelters that benefitted primarily high-income taxpayers. Expensing accelerates tax deductions, defers tax liability, and encourages oil and gas prospecting, drilling, and the development of reserves. The oil and gas percentage depletion allowance permitted oil and gas producers to claim 27.5% of revenue as a deduction for the cost of exhaustion or depletion of the deposit, allowing deductions in excess of capital investment (i.e, in excess of adjusted cost depletion) the economically neutral method of capital recovery for the extractive industries. Percentage depletion encourages faster mineral development than cost depletion (the equivalent of depreciation of plants and equipment). These and other tax subsidies discussed later (e.g., capital gains treatment of the sale of successful properties, the special exemption from the passive loss limitation rules, and special tax credits) reduced marginal effective tax rates in the oil and gas industries, reduced production costs, and increased investments in locating reserves (increased exploration). They also led to more profitable production and some acceleration of oil and gas production (increased rate of extraction), and more rapid depletion of energy resources than would otherwise occur. Such subsidies tend to channel resources into these activities that otherwise would be used for oil and gas activities abroad or for other economic activities in the United States. Relatively low oil prices encouraged petroleum consumption (as opposed to conservation) and inhibited the development of alternatives to fossil fuels, such as unconventional fuels and renewable forms of energy. Oil and gas production increased from 16% of total U.S. energy production in 1920 to 71.1% of total energy production in 1970 (the peak year). <2.2. Energy Tax Policy During the 1970s: Conservation and Alternative Fuels> Three developments during the 1970s caused a dramatic shift in the focus of federal energy tax policy. First, the large revenue losses associated with the oil and gas tax preferences became increasingly hard to justify in the face of increasing federal budget deficits and in view of the longstanding economic arguments against the special tax treatment for oil and gas, as noted in the above paragraph. Second, heightened awareness of environmental pollution and concern for environmental degradation, and the increased importance of distributional issues in policy formulation (i.e., equity and fairness), lost the domestic oil and gas industry much political support. Thus, it became more difficult to justify percentage depletion and other subsidies, largely claimed by wealthy individuals and big vertically integrated oil companies. More importantly, during the 1970s there were two energy crises: the oil embargo of 1973, also known as the first oil shock, and the Iranian Revolution in 1978-1979, which focused policymakers' attention on the problems (alleged "failures") in the energy markets and how these problems reverberated throughout the economy, causing stagflation, shortages, productivity problems, rising import dependence, and other economic and social problems. These developments caused federal energy tax policy to shift from oil and gas supply toward energy conservation (reduced energy demand) and alternative energy sources. Three broad actions were taken through the tax code to implement the new energy tax policy during the 1970s. First, the oil industry's two major tax preferences expensing of IDCs and percentage depletion were significantly reduced, particularly the percentage depletion allowance, which was eliminated for the major integrated oil companies and reduced for the remaining producers. Other oil and gas tax benefits were also cut back during this period. For example, oil- and gas-fired boilers used in steam generation (e.g., to generate electricity) could no longer qualify for accelerated depreciation as a result of the Energy Tax Act of 1978 (as discussed below). The second broad policy action was the imposition of several new excise taxes penalizing the use of conventional fossil fuels, particularly oil and gas (and later coal). The Energy Tax Act of 1978 (ETA, P.L. 95-618 ) created a federal "gas guzzler" excise tax on the sale of automobiles with relatively low fuel economy ratings. This tax, which is still in effect, currently ranges from $1,000 for an automobile rated between 21.5 and 22.5 miles per gallon (mpg) to $7,700 for an automobile rated at less than 12.5 mpg. Chief among the taxes on oil was the windfall profit tax (WPT) enacted in 1980 ( P.L. 96-223 ). The WPT imposed an excise tax of 15% to 70% on the difference between the market price of oil and a predetermined (adjusted) base price. This tax, which was repealed in 1988, was part of a political compromise that decontrolled oil prices. (Between 1971 and 1980, oil prices were controlled under President Nixon's Economic Stabilization Act of 1970 the so-called "wage-price freeze.") (For more detail on the windfall profit tax on crude oil that was imposed from 1980 until its repeal in 1988, see CRS Report RL33305, The Crude Oil Windfall Profit Tax of the 1980s: Implications for Current Energy Policy , by [author name scrubbed].) Another, but relatively small, excise tax on petroleum was instituted in 1980: the environmental excise tax on crude oil received at a U.S. refinery. This tax, part of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ( P.L. 96-510 ), otherwise known as the "Superfund" program, was designed to charge oil refineries for the cost of releasing any hazardous materials that resulted from the refining of crude oil. The tax rate was set initially at 0.79 ($0.0079) per barrel and was subsequently raised to 9.70 per barrel. This tax expired at the end of 1995, but legislation has been proposed since then to reinstate it as part of Superfund reauthorization. The third broad action taken during the 1970s to implement the new and refocused energy tax policy was the introduction of numerous tax incentives or subsidies (e.g., special tax credits, deductions, exclusions) for energy conservation, the development of alternative fuels (renewable and nonconventional fuels), and the commercialization of energy efficiency and alternative fuels technologies. Most of these new tax subsidies were introduced as part of the Energy Tax Act of 1978 and expanded under the WPT, which also introduced additional new energy tax subsidies. The following list describes these: Residential and Business Energy Tax Credits. The ETA provided income tax credits for homeowners and businesses that invested in a variety of energy conservation products (e.g., insulation and other energy-conserving components) and for solar and wind energy equipment installed in a principal home or a business. The business energy tax credits were 10% to 15% of the investment in conservation or alternative fuels technologies, such as synthetic fuels, solar, wind, geothermal, and biomass. These tax credits were also expanded as part of the WPT, but they generally expired (except for business use of solar and geothermal technologies) as scheduled either in 1982 or 1985. A 15% investment tax credit for business use of solar and geothermal energy, which was made permanent, is all that remains of these tax credits. Tax Subsidies for Alcohol Fuels. The ETA also introduced the excise tax exemption for gasohol, recently at 5.2 per gallon out of a gasoline tax of 18.4 /gal. Subsequent legislation extended the exemption and converted it into an immediate tax credit (currently at 51 /gallon of ethanol ). Percentage Depletion for Geothermal . The ETA made geothermal deposits eligible for the percentage depletion allowance, at the rate of 22%. Currently the rate is 15%. 29 Tax Credit for Unconventional Fuels. The 1980 WPT included a $3.00 (in 1979 dollars) production tax credit to stimulate the supply of selected unconventional fuels: oil from shale or tar sands, gas produced from geo-pressurized brine, Devonian shale, tight formations, or coalbed methane, gas from biomass, and synthetic fuels from coal. In current dollars this credit, which is still in effect for certain types of fuels, was $6.56 per barrel of liquid fuels and about $1.16 per thousand cubic feet (mcf) of gas in 2004. Tax-Exempt Interest on Industrial Development Bonds. The WPT made facilities for producing fuels from solid waste exempt from federal taxation of interest on industrial development bonds (IDBs). This exemption was for the benefit of the development of alcohol fuels produced from biomass, for solid-waste-to-energy facilities, for hydroelectric facilities, and for facilities for producing renewable energy. IDBs, which provide significant benefits to state and local electric utilities (public power), had become a popular source of financing for renewable energy projects. Some of these incentives for example, the residential energy tax credits have since expired, but others remain and still new ones have been introduced, such as the 45 renewable electricity tax credit, which was introduced in 1992 and expanded under the American Jobs Creation Act of 2004 ( P.L. 108-357 ). This approach toward energy tax policy subsidizing a plethora of different forms of energy (both conventional and renewable) and providing incentives for diverse energy conservation (efficiency) technologies in as many sectors as possible has been the paradigm followed by policymakers since the 1970s. A significant increase in nontax interventions in the energy markets laws and regulations, such as the Corporate Average Fuel Economy (CAFE) standards to reduce transportation fuel use, and other interventions through the budget and the credit markets has also been a significant feature of energy policy since the 1970s. This included some of the most extensive energy legislation ever enacted. <2.3. Energy Tax Policy in the 1980s: The "Free-Market Approach"> The Reagan Administration opposed using the tax law to promote oil and gas development, energy conservation, or the supply of alternative fuels. The idea was to have a more neutral and less distortionary energy tax policy, which economic theory predicts would make energy markets work more efficiently and generate benefits to the general economy. The Reagan Administration believed that the responsibility for commercializing conservation and alternative energy technologies rested with the private sector and that high oil prices real oil prices (corrected for inflation) were at historically high levels in 1981 and 1982 would be ample encouragement for the development of alternative energy resources. High oil prices in themselves create conservation incentives and stimulate oil and gas production. President Reagan's free-market views were well known prior to his election. During the 1980 presidential campaign, he proposed repealing the WPT, deregulating oil and natural gas prices, and minimizing government intervention in the energy markets. The Reagan Administration's energy tax policy was professed more formally in several energy and tax policy studies, including its 1981 National Energy Policy Plan and the 1983 update to this plan; it culminated in a 1984 Treasury study on general tax reform, which also proposed fundamental reforms of federal energy tax policy. In terms of actual legislation, many of the Reagan Administration's objectives were realized, although as discussed below there were unintended effects. In 1982, the business energy tax credits on most types of nonrenewable technologies those enacted under the ETA of 1978 were allowed to expire as scheduled; other business credits and the residential energy tax credits were allowed to expire at the end of 1985, also as scheduled. Only the tax credits for business solar, geothermal, ocean thermal, and biomass technologies were extended. As mentioned above, today the tax credit for business investment in solar and geothermal technologies, which has since been reduced to 10%, is all that remains of these tax credits. A final accomplishment was the repeal of the WPT, but not until 1988, the end of Reagan's second term. The Reagan Administration's other energy tax policy proposals, however, were not adopted. The tax incentives for oil and gas were not eliminated, although they were pared back as part of the Tax Reform Act (TRA) of 1986. Although the Reagan Administration's objective was to create a free-market energy policy, significant liberalization of the depreciation system and reduction in marginal tax rates both the result of the Economic Recovery Tax Act of 1981 (ERTA, P.L. 97-34 ) combined with the regular investment tax credit and the business energy investment tax credits, resulted in negative effective tax rates for many investments, including alternative energy investments, such as solar and synthetic fuels. Also, the retention of percentage depletion and expensing of IDCs (even at the reduced rates) rendered oil and gas investments still favored relative to investments in general. <2.4. Energy Tax Policy After 1988> After the Reagan Administration, several major energy and non-energy laws were enacted that amended the energy tax laws in several ways, some major. Revenue Provisions of the Omnibus Reconciliation Act of 1990. President George H.W. Bush's first major tax law included numerous energy tax incentives: (1) for conservation (and deficit reduction), the law increased the gasoline tax by 5 /gallon and doubled the gas-guzzler tax; (2) for oil and gas, the law introduced a 10% tax credit for enhanced oil recovery expenditures, liberalized some of the restrictions on the percentage depletion allowance, and reduced the impact of the alternative minimum tax on oil and gas investments; and (3) for alternative fuels, the law expanded the 29 tax credit for unconventional fuels and introduced the tax credit for small producers of ethanol used as a motor fuel. Energy Policy Act of 1992 ( P.L. 102-486 ). This broad energy measure introduced the 45 tax credit, at 1.5 per kilowatt hour, for electricity generated from wind and "closed-loop" biomass systems. (Poultry litter was added later.) For new facilities, this tax credit expired at the end of 2001 and again in 2003 but has been retroactively extended by recent tax legislation (as discussed below). In addition, the 1992 law (1) added an income tax deduction for the costs, up to $2,000, of clean-fuel powered vehicles; (2) liberalized the alcohol fuels tax exemption; (3) expanded the 29 production tax credit for nonconventional energy resources; and (4) liberalized the tax breaks for oil and gas. Omnibus Budget Reconciliation Act of 1993 ( P.L. 103-66 ). President Clinton proposed a differential Btu tax on fossil fuels (a broadly based general tax primarily on oil, gas, and coal based on the British thermal units of heat output), which was dropped in favor of a broadly applied 4.3 /gallon increase in the excise taxes on motor fuels, with revenues allocated for deficit reduction rather than the various trust funds. Taxpayer Relief Act of 1997 ( P.L. 105-34 ) . This law included a variety of excise tax provisions for motor fuels, of which some involved tax reductions on alternative transportation fuels, and some involved increases, such as on kerosene, which on balance further tilted energy tax policy toward alternative fuels. Tax Relief and Extension Act. Enacted as Title V of the Ticket to Work and Work Incentives Improvement Act of 1999 ( P.L. 106-170 ), it extended and liberalized the 1.5 /kWh renewable electricity production tax credit, and renewed the suspension of the net income limit on the percentage depletion allowance for marginal oil and gas wells. As this list suggests, the post-Reagan energy tax policy returned more to the interventionist course established during the 1970s and primarily was directed at energy conservation and alternative fuels, mostly for the purpose of reducing oil import dependence and enhancing energy security. However, there is an environmental twist to energy tax policy during this period, particularly in the Clinton years. Fiscal concerns, which for most of that period created a perennial search for more revenues to reduce budget deficits, have also driven energy tax policy proposals during the post-Reagan era. This is underscored by proposals, which have not been enacted, to impose broad-based energy taxes such as the Btu tax or the carbon tax to mitigate greenhouse gas emissions. Another interesting feature of the post-Reagan energy tax policy is that while the primary focus continues to be energy conservation and alternative fuels, no energy tax legislation has been enacted during this period that does not also include some, relatively minor, tax relief for the oil and gas industry, either in the form of new tax incentives or liberalization of existing tax breaks (or both). <3. Energy Tax Incentives in Comprehensive Energy Legislation Since 1998> Several negative energy market developments since about 1998, characterized by some as an "energy crisis," have led to congressional action on comprehensive energy proposals, which included numerous energy tax incentives. <3.1. Brief History of Comprehensive Energy Policy Proposals> Although the primary rationale for comprehensive energy legislation has historically been spiking petroleum prices, and to a lesser extent spiking natural gas and electricity prices, the origin of bills introduced in the late 1990s was the very low crude oil prices of that period. Domestic crude oil prices reached a low of just over $10 per barrel in the winter of 1998-1999, among the lowest crude oil prices in history after correcting for inflation. From 1986 to 1999, oil prices averaged about $17 per barrel, fluctuating between $12 and $20 per barrel. These low oil prices hurt oil producers, benefitted oil refiners, and encouraged consumption. They also served as a disincentive to conservation and investment in energy efficiency technologies and discouraged production of alternative fuels and renewable technologies. To address the low oil prices, there were many tax bills in the first session of the 106 th Congress (1999) focused on production tax credits for marginal or stripper wells, but they also included carryback provisions for net operating losses, and other fossil fuels supply provisions. By summer 1999, crude oil prices rose to about $20 per barrel, and peaked at more than $30 per barrel by summer 2000, causing higher gasoline, diesel, and heating oil prices. To address the effects of rising crude oil prices, legislative proposals again focused on production tax credits and other supply incentives. The rationale was not tax relief for a depressed industry but tax incentives to increase output, reduce prices, and provide price relief to consumers. In addition to higher petroleum prices there were forces some of which were understood (factors such as environmental regulations and pipeline breaks) and others that are still are not so clearly understood that caused the prices of refined petroleum products to spike. In response, there were proposals in 2000 to either temporarily reduce or eliminate the federal excise tax on gasoline, diesel, and other special motor fuels. The proposals aimed to help consumers (including truckers) cushion the financial effect of the price spikes. The Midwest gasoline price spike in summer 2000 kept interest in these excise tax moratoria alive and generated interest in proposals for a windfall profit tax on oil companies, which, by then, were earning substantial profits from high prices. Despite numerous bills to address these issues, no major energy tax bill was enacted in the 106 th Congress. However, some minor amendments to energy tax provisions were enacted as part of non-energy tax bills. This includes Title V of the Ticket to Work and Work Incentives Improvement Act of 1999 ( P.L. 106-170 ). Also, the 106 th Congress did enact a package of $500 million in loan guarantees for small independent oil and gas producers ( P.L. 106-51 ). <3.2. Energy Tax Action in the 107th Congress> In early 2001, the 107 th Congress faced a combination of fluctuating oil prices, an electricity crisis in California, and spiking natural gas prices. The gas prices had increased steadily in 2000 and reached $9 per thousand cubic feet (mcf) at the outset of the 107 th Congress. At one point, spot market prices reached about $30 per mcf, the energy equivalent of $175 per barrel of oil. The combination of energy problems had developed into an "energy crisis," which prompted congressional action on a comprehensive energy policy bill the first since 1992 that included a significant expansion of energy tax incentives and subsidies and other energy policy measures. In 2002, the House and Senate approved two distinct versions of an omnibus energy bill, H.R. 4 . While there were substantial differences in the nontax provisions of the bill, the energy tax measures also differed significantly. The House bill proposed larger energy tax cuts, with some energy tax increases. It would have reduced energy taxes by about $36.5 billion over 10 years, in contrast to the Senate bill, which cut about $18.3 billion over 10 years, including about $5.1 billion in tax credits over 10 years for two mandates: a renewable energy portfolio standard ($0.3 billion) and a renewable fuel standard ($4.8 billion). The House version emphasized conventional fuels supply, including capital investment incentives to stimulate production and distribution of oil, natural gas, and electricity. This focus assumed that recent energy problems were due mainly to supply and capacity shortages driven by economic growth and low energy prices. In comparison, the Senate bill would have provided a much smaller amount of tax incentives for fossil fuels and nuclear power and somewhat fewer incentives for energy efficiency, but provided more incentives for alternative and renewable fuels. The conference committee on H.R. 4 could not resolve differences, so the bills were dropped on November 13, 2002. <3.3. Energy Tax Action in the 108th Congress> On the House side, on April 3, 2003, the Ways and Means Committee (WMC) voted 24-12 for an energy tax incentives bill ( H.R. 1531 ) that was incorporated into H.R. 6 and approved by the House on April 11, 2003, by a vote of 247-175. The House version of H.R. 6 provided about $17.1 billion of energy tax incentives and included $83 million of non-energy tax increases, or offsets. This bill was a substantially scaled-down version of the House energy tax bill, H.R. 2511 (107 th Congress), which was incorporated into H.R. 4 , the House energy bill of the 107 th Congress that never became law. After returning from the August 2003 recess, a House and Senate conference committee negotiated differences among provisions in three energy policy bills: the House and Senate versions of H.R. 6 , and a substitute to the Senate Finance Committee (SFC) bill a modified (or amended) version of S. 1149 substituted for Senate H.R. 6 in conference as S.Amdt. 1424 and S.Amdt. 1431 . On November 14, 2003, House and Senate conferees reconciled the few remaining differences over the two conference versions of H.R. 6 , which primarily centered on several energy tax issues ethanol tax subsidies, the 29 unconventional fuels tax credit, tax incentives for nuclear power, and clean coal. On November 18, 2003, the House approved, by a fairly wide margin (246-180), the conference report containing about $23.5 billion of energy tax incentives. However, the proposed ethanol mandate would further reduce energy tax receipts the 10-year revenue loss was projected to be around $26 billion. On November 24, Senate Republicans put aside attempts to enact H.R. 6 . A number of uneasy alliances pieced together to bridge contentious divides over regional issues as varied as electricity, fuel additives (MTBE), and natural gas subsidies, failed to secure the necessary 60 votes to overcome a Democratic filibuster before Congress's adjournment for the holiday season. This represented the third attempt to pass comprehensive energy legislation, a top priority for many Republicans in Congress and for President Bush. Senator Domenici introduced a smaller energy bill as S. 2095 on February 12, 2004. S. 2095 included a slightly modified version of the amended energy tax bill S. 1149 ; the tax provisions of S. 2095 were added to the export tax repeal bill S. 1637 , on April 5, 2004. The Senate approved S. 1637 , with the energy tax measures, on May 11. H.R. 4520 , the House version of the export tax repeal legislation, did not contain energy tax measures; they were incorporated into H.R. 6 . Some energy tax incentives were enacted on October 4, 2004, as part of the Working Families Tax Relief Act of 2004 ( P.L. 108-311 ), a $146 billion package of middle class and business tax breaks. This legislation, which was signed into law on October 4, 2004, retroactively extended four energy tax subsidies: the 45 renewable tax credit, suspension of the 100% net income limitation for the oil and gas percentage depletion allowance, the $4,000 tax credit for electric vehicles, and the deduction for clean fuel vehicles (which ranges from $2,000 to $50,000). The 45 tax credit and the suspension of the 100% net income limitation had each expired on January 1, 2004; they were retroactively extended through December 31, 2005. The electric vehicle credit and the clean-vehicle income tax deduction were being phased out gradually beginning on January 1, 2004. P.L. 108-311 arrested the phase-down providing 100% of the tax breaks through 2005, but resumed it beginning on January 1, 2006, when only 25% of the tax break was available. (For more information, see CRS Report RL32265, Expired and Expiring Energy Tax Incentives , by [author name scrubbed].) The American Jobs Creation Act of 2004 ( P.L. 108-357 ), commonly referred to as the "FSC-ETI" or "jobs" bill, was enacted on October 22, 2004. It included about $5 billion in energy tax incentives. <4. Energy Action in the 109th Congress> The 109 th Congress enacted the Energy Policy Act of 2005 ( P.L. 109-58 ), which included the most extensive amendments to U.S. energy tax laws since 1992, and the Tax Relief and Health Care Act of 2006, which extended the energy tax subsidies enacted under the 2005 Energy Policy Act (EPACT05). <4.1. The Energy Policy Act of 2005 (P.L. 109-58)> On June 28, 2005, the Senate approved by an 85-12 vote a broadly based energy bill ( H.R. 6 ) with an 11-year, $18.6 billion package of energy tax breaks tilted toward renewable energy resources and conservation. Joint Committee on Taxation figures released on June 28 show that the bill included about $0.2 billion in non-energy tax cuts and more than $4.7 billion in revenue offsets, meaning the bill had a total tax cut of $18.8 billion over 11 years, offset by the $4.7 billion in tax increases. The House energy bill, which included energy tax incentives totaling about $8.1 billion over 11 years, and no tax increases, was approved in April. This bill was weighted almost entirely toward fossil fuels and electricity supply. On July 27, 2005, the conference committee on H.R. 6 reached agreement on $11.1 billion of energy tax incentives, including $3 billion in tax increases (both energy and non-energy). The distribution of the cuts by type of fuel for each of the three versions of H.R. 6 is shown in Table 1 . One way to briefly compare the two measures is to compare revenue losses from the energy tax incentives alone and the percentage distribution by type of incentive as a percent of the net energy tax cuts (i.e., the columns marked "%" divided by the dollar figures in row 11). The net revenue losses over an 11-year time frame from FY2005 to FY2015 were estimated by the Joint Committee on Taxation. The total revenue losses are reported in two ways. The absolute dollar value of tax cuts over 11 years and the percentage distribution of total revenue losses by type of incentive for each measure. Table 1 shows that the conference report provided about $1.3 billion for energy efficiency and conservation, including a deduction for energy-efficient commercial property, fuel cells, and micro-turbines, and $4.5 billion in renewables incentives, including a two-year extension of the tax code 45 credit, renewable energy bonds, and business credits for solar. A $2.6 billion package of oil and gas incentives included seven-year depreciation for natural gas gathering lines, a refinery expensing provision, and a small refiner definition for refiner depletion. A nearly $3 billion coal package provided for an 84-month amortization for pollution control facilities and treatment of 29 as a general business credit. More than $3 billion in electricity incentives leaned more toward the House version, including provisions providing 15-year depreciation for transmission property, nuclear decommissioning provisions, and a nuclear electricity production tax credit. It also provided for the five-year carryback of net operating losses of certain electric utility companies. A Senate-passed tax credit to encourage the recycling of a variety of items, including paper, glass, plastics, and electronic products, was dropped from the final version of the energy bill ( H.R. 6 ). Instead, conferees included a provision requiring the Treasury and Energy departments to conduct a study on recycling. The House approved the conference report on July 28, 2005; the Senate on June 28, 2005, one month later on July 28, 2005, clearing it for the President's signature on August 8 ( P.L. 109-58 ). Four revenue offsets were retained in the conference report: reinstatement of the Oil Spill Liability Trust Fund; extension of the Leaking Underground Storage Tank (LUST) trust fund rate, which would be expanded to all fuels; modification of the 197 amortization, and a small increase in the excise taxes on tires. The offsets total roughly $3 billion compared with nearly $5 billion in the Senate-approved H.R. 6 . Because the oil spill liability tax and the Leaking Underground Storage Tank financing taxes are imposed on oil refineries, the oil and gas refinery and distribution sector (row 2 of Table 1 ) received a net tax increase of $1,769 ($2,857-$1,088). <4.2. The Tax Increase Prevention and Reconciliation Act (P.L. 109-222)> After expanding energy tax incentives in the EPACT05, the 109 th Congress moved to rescind oil and gas incentives, and even to raise energy taxes on oil and gas, in response to the high energy prices and resulting record oil and gas industry profits. Many bills were introduced in the 109 th Congress to pare back or repeal the oil and gas industry tax subsidies and other loopholes, both those enacted under EPACT05 as well as those that preexisted EPACT05. Many of the bills focused on the oil and gas exploration and development (E&D) subsidy expensing of intangible drilling costs (IDCs). This subsidy, which has been in existence since the early days of the income tax, is available to integrated and independent oil and gas companies, both large and small alike. It is an exploration and development incentive, which allows the immediate tax write-off of what economically are capital costs, that is, the costs of creating a capital asset (the oil and gas well). Public and congressional outcry over high crude oil and product prices, and the oil and gas industry's record profits, did lead to a paring back of one of EPACT05's tax subsidies: two-year amortization, rather than capitalization, of geological and geophysical (G&G) costs, including those associated with abandoned wells (dry holes). Prior to the EPACT05, G&G costs for dry holes were expensed in the first year and for successful wells they were capitalized, which is consistent with economic theory and accounting principles. The Tax Increase Prevention and Reconciliation Act, ( P.L. 109-222 ), signed into law May 2006, reduced the value of the subsidy by raising the amortization period from two years to five years, still faster than the capitalization treatment before the 2005 act, but slower than the treatment under that act. The higher amortization period applies only to the major integrated oil companies independent (unintegrated) oil companies may continue to amortize all G&G costs over two years and it applies to abandoned as well as successful properties. This change increased taxes on major integrated oil companies by an estimated $189 million over 10 years, effectively rescinding about 20% of the nearly $1.1 billion 11-year tax for oil and gas production under EPACT05. <4.3. The Tax Relief and Health Care Act of 2006 (P.L. 109-432)> At the end of 2006, the 109 th Congress enacted a tax extenders package that included extension of numerous renewable energy and excise tax provisions. Many of the renewable energy provision in this bill had already been extended under the Energy Policy Act of 2005 and were not set to expire until the end of 2007 or later. The Tax Relief and Health Care Act of 2006 provided for one-year extensions of these provisions. <5. Current Posture of Energy Tax Policy> The above background discussion of energy tax policy may be conveniently summarized in Table 2 , which shows current energy tax provisions both special (or targeted) energy tax subsidies and targeted energy taxes and related revenue effects. A minus sign ("-") indicates revenue losses, which means that the provision is a tax subsidy or incentive, intended to increase the subsidized activity (energy conservation measures or the supply of some alternative and renewable fuel or technology); no minus sign means that the provision is a tax, which means that it should reduce supply of, or demand for, the taxed activity (either conventional fuel supply, energy demand, or the demand for energy-using technologies, such as cars). Note that the table defines those special or targeted tax subsidies or incentives as those that are due to provisions in the tax law that apply only to that particular industry and not to others. Thus, for example, in the case of the oil and gas industry, the table excludes tax subsidies and incentives of current law that may apply generally to all businesses but that may also confer tax benefits to it. There are numerous such provisions in the tax code; a complete listing of them is beyond the scope of this report. However, the following example illustrates the point: The current system of depreciation allows the writeoff of equipment and structures somewhat faster than would be the case under both general accounting principles and economic theory; the Joint Committee on Taxation treats the excess of depreciation deductions over the alternative depreciation system as a tax subsidy (or "tax expenditure"). In FY2006, the JCT estimates that the aggregate revenue loss from this accelerated depreciation deduction (including the expensing under IRC 179) is $6.7 billion. A certain, but unknown, fraction of this revenue loss or tax benefits accrues to the domestic oil and gas industry, but separate estimates are unavailable. This point applies to all the industries reflected in Table 2 . <6. Energy Tax Policy in the 110th Congress> Continued high crude oil and petroleum product prices and oil and gas industry profits, and the political realignment of the Congress resulting from the 2006 Congressional elections continued the energy policy shift toward increased taxes on the oil and gas industry, and the emphasis on energy conservation and alternative and renewable fuels rather than conventional hydrocarbons. In the 110 th Congress, the shift became reflected in proposals to reduce oil and gas production incentives or subsidies, which were initially incorporated into, but ultimately dropped from comprehensive energy policy legislation. In the debate over these two comprehensive energy bills, raising taxes on the oil and gas industry, by either repealing tax incentives enacted under EPACT05, by introducing new taxes on the industry, or by other means was a key objective, motivated by the feeling that additional tax incentives were unnecessary record crude oil and gasoline prices and industry profits provides sufficient (if not excessive) incentives. In early December 2007, it appeared that the congressional conferees had reached agreement on another comprehensive energy bill, the Energy Independence and Security Act ( H.R. 6 ), and particularly on the controversial energy tax provisions. The Democratic leadership in the 110 th Congress proposed to eliminate or reduce tax subsidies for oil and gas and use the additional revenues to increase funding for their energy policy priorities: energy efficiency and alternative and renewable fuels (i.e., reducing fossil fuel demand) rather than an energy (oil and gas) supply increase. In addition, congressional leaders wanted to extend many of the energy efficiency and renewable fuels tax incentives that either had expired or were about to expire. The compromise on the energy tax title in H.R. 6 proposed to raise taxes by about $21 billion to fund extensions and liberalization of existing energy tax incentives. However, the Senate stripped the controversial tax title from its version of the comprehensive energy bill ( H.R. 6 ) and then passed the bill (86-8) on December 13, 2007, leading to the President's signing of the Energy Independence and Security Act of 2007 ( P.L. 110-140 ), on December 19, 2007. The only tax-related provisions that survived were (1) an extension of the Federal Unemployment Tax Act surtax for one year, raising about $1.5 billion, (2) higher penalties for failure to file partnership returns, increasing revenues by $655 million, and (3) an extension of the amortization period for geological and geophysical expenditures from five to seven years, raising $103 million in revenues. The latter provision was the only tax increase on the oil and gas industry in the final bill. Those three provisions would offset the $2.1 billion in lost excise tax revenues going into the federal Highway Trust Fund as a result of the implementation of the revised Corporate Average Fuel Economy standards. The decision to strip the much larger $21 billion tax title stemmed from a White House veto threat and the Senate's inability to get the votes required to end debate on the bill earlier in the day. Senate Majority Leader Harry Reid's (D-Nev.) effort to invoke cloture fell short by one vote, in a 59-40 tally. Since then, the Congress had tried several times to pass energy tax legislation, and thus avoid the impending expiration of several popular energy tax incentives, such as the "wind" energy tax credit under Internal Revenue Code (IRC) 45, which, since its enactment in 1992, had lapsed three times only to be reinstated. Several energy tax bills have passed the House but not the Senate, where on several occasions, the failure to invoke cloture failed to bring up the legislation for consideration. Senate Republicans objected to the idea of raising taxes to offset extension of expiring energy tax provisions, which they consider to be an extension of current tax policy rather than new tax policy. In addition, Senate Republicans objected to raising taxes on the oil and gas industry, such as by repealing the (IRC) 199 deduction, and by streamlining the foreign tax credit for oil companies. The Bush administration repeatedly threatened to veto these types of energy tax bills, in part because of their proposed increased taxes on the oil and gas industry. <6.1. H.R. 5351> Frustrated with the lack of action on energy tax legislation over the last two years, House Democrats introduced and approved several such bills, such as H.R. 5351 , which was approved by the House on February 27, 2008. House Speaker Pelosi and other Democrats sent President Bush a letter February 28, 2008, urging him to reconsider his opposition to the Democratic renewable energy plan, arguing that their energy tax plan would "correct an imbalance in the tax code." <6.2. H.R. 6049> As noted, several times the House had approved energy tax legislation, and several times in the Senate such legislation failed a cloture vote and thus could not be brought to the floor for debate. The latest was H.R. 6049 , the House tax extenders bill, which was approved by the House on May 21, 2008, but failed three cloture votes in the Senate. <6.3. H.R. 6899> In the House, energy tax provisions were part of H.R. 6899 , House Democratic leadership's draft of broad-based energy policy legislation, the Comprehensive American Energy Security and Consumer Protection Act. Passed on September 16, 2008, the bill reverses the long-standing opposition of Democratic leaders to expanding oil and gas drilling offshore by allowing oil and gas exploration and production in areas of the outer continental shelf that are currently off limits, except for waters in the Gulf of Mexico off the Florida coast. Under the bill, states could allow such drilling between 50 and 100 miles offshore, while the federal government could permit drilling from 100 to 200 miles offshore. Revenue from the new offshore leases would be used to assist the development of alternative energy, and would not be shared by the adjacent coastal states. The bill also repeals the current ban on leasing federal lands for oil shale production if states enact laws providing for such leases and production. H.R. 6899 also enacts a renewable portfolio standard, a mandate or requirement that power companies must generate 15% of their energy from renewable sources by 2020. The energy tax provisions in H.R. 6899 (Title XIII, the Energy Tax Incentives Act of 2008) are largely the same as those in H.R. 5351 <6.4. Substitute Amendment of S. 3478> In the Senate, legislative efforts on energy tax incentives and energy tax extenders had centered around S. 3478 , the Energy Independence and Investment Act of 2008, a $40 billion energy tax bill offered by Finance Committee Chairman Max Baucus and ranking Republican Charles Grassley. Senate Majority Leader Harry Reid said on September 12 that S. 3478 was "must-pass" legislation. Reid told reporters the energy tax package, which includes extensions of tax incentives for renewable energy, should be prioritized even ahead of the broader energy policy bills being considered, and the rest of the non-energy tax extenders package. Reid said he hopes to bring the bill to the floor during the week of September 15, but noted that the schedule depends on whether Senate Republicans will agree to move to the legislation. Although most of the tax incentives in the bill are extensions of existing policy and are not controversial, the legislation would need to be paid for through new sources of revenue. One proposed offset which had been previously blocked by some Republicans would have completely repealed the IRC 199 manufacturing deduction for the five major oil and gas producers, raising $13.9 billion over 10 years. The bill also would have included a new 13% excise tax on oil and natural gas pumped from the Outer Continental Shelf, a proposal to eliminate the distinction between foreign oil-and-gas extraction income and foreign oil-related income, and an extension and increase in the oil spill tax through the end of 2017. In total, tax increases on the oil and gas industry would account for $31 billion of the $40 billion total cost of the legislation. The final major offset would have come from a requirement on securities brokers to report on the cost basis for transactions they handle to the Internal Revenue Service, a provision expected to raise about $8 billion in new revenues over 10 years. <6.5. The Economic Stabilization Act of 2008 (P.L. 110-343)> As noted above, some Republicans had, in the past, objected to the idea of raising taxes to offset extension of expiring energy tax provisions, which they consider to be an extension of current tax policy rather than new tax policy. In addition, some Senate Republicans have objected to raising taxes on the oil and gas industry, particularly by repealing the IRC 199 deduction. The Bush Administration threatened also to veto any energy tax bill that would increase taxes on the oil and gas industry. At this writing, it appears that inclusion of the 199 deduction repeal as an offset might preclude the energy tax bill from coming to the Senate floor some believe that it would fail another cloture vote so this provision might not survive the process. Given continued Republican opposition (including a possible Presidential veto), and to avoid another legislative impasse a failed cloture vote Senators Baucus and Grassley released a scaled-down version of S. 3478 . This energy tax extenders package (i.e., the substitute of S. 3478 ) is a substitute amendment to the previously House-approved energy tax extenders bill H.R. 6049 ; is valued at nearly $17 billion, less than half the size of S. 3478 ; and is fully offset. The modified draft bill would also raise revenue by increasing the tax burden on the oil industry. Unlike the original version of S. 3478 , however, which would have repealed the 199 for major integrated oil companies completely, the substitute bill would freeze the value of the manufacturing deduction for all oil companies at 6%, the current rate. This modification is estimated to raise $4.9 billion over 10 years, about 2/3 less than complete repeal. Because of smaller tax increases, the bill's remaining provisions measures to increase tax subsidies for renewable fuels and for energy efficiency had to be cut back. Thus, the scaled-down bill drops the nuclear electricity production tax credit provision, scales back the 45 renewable electricity tax credit, and generally shortens the extension periods. The substitute amendment of S. 3478 ( S.Amdt. 5633 ) was added to H.R. 6049 , which also includes an AMT patch, disaster tax relief, and extensions of (non-energy) individual and business tax provisions. It was passed by the Senate on September 23, by a vote of 93-2. There was only one change to the original Baucus/Grassley substitute version: Language extending a 10 per-gallon credit for small producers of alcohol fuels was eliminated in the final bill. Finally, H.R. 6049 , including the energy tax amendments approved by the Senate, were added to the economic stabilization legislation ( H.R. 1424 ) as Subdivision B, the Energy Improvement and Extension Act of 2008. On October 3, President Bush signed this legislation, the Economic Stabilization Act of 2008 ( P.L. 110-343 ), which includes $17 billion in energy tax incentives, primarily extensions of pre-existing provisions, but also including several new energy tax incentives: $10.9 billion in renewable energy tax incentives aimed at clean energy production, $2.6 billion in incentives targeted toward cleaner vehicles and fuels, and $3.5 billion in tax breaks to promote energy conservation and energy efficiency. The cost of the energy tax extenders legislation is fully financed, or paid for, by raising taxes on the oil and gas industry (mostly by reducing oil and gas tax breaks) and by other tax increases. The oil and gas tax increases comprise cutbacks in the IRC 199 manufacturing deduction for income attributable to oil and gas production, which will be frozen at 6% (rather than increasing to 9% as scheduled), reforming the foreign tax credit provisions, and by increasing the per-barrel tax rate on refinery crude oil under the Oil Spill Liability Trust Fund provisions. <6.6. Windfall Profit Tax Legislation> Over the past ten years, surging crude oil and petroleum product prices have increased oil and gas industry revenues and generated record profits particularly for the top five major integrated companies (also known as the "super-majors"): Exxon-Mobil, Royal Dutch Shell, BP, Chevron, and Conoco/Phillips. These companies, which reported a predominate share of those profits, generated over $100 billion dollars in profits on nearly $1.5 trillion of revenues in 2007. From 2003 to 2007, revenues increased by 51%; net income (profits) increased by 85%. Oil output for the five majors over this time period declined by over 2%, from 9.85 to 9.63 million barrels per day. Since oil industry income has been largely price driven, with no increase in output, and with little new production resulting from increased oil industry investment, many believe that a portion of the increased income over this period represents a windfall and unearned gain, i.e., income not earned by any additional effort on the part of the firms, but due primarily to record crude oil prices, which are set in the world oil marketplace. Numerous bills have been introduced in the Congress over this period to impose a windfall profit tax (WPT) on oil. Most of the bills were introduced in the 109 th and 110 th Congresses, after the enactment of the Energy Policy Act of 2005, which provided additional oil and gas industry tax incentives, on top of the industry's traditional tax subsidies. S. 3044 , for instance, would roll back $17 billion in existing tax breaks over 10 years for the largest oil companies and impose a 25% windfall profit tax on major oil companies; revenues would be earmarked to expanding renewable energy development. In general, an excise-tax based WPT, like the one in effect from 1980-1988, would increase marginal oil production costs, reduce domestic oil supply, and raise petroleum imports, making the United States more dependent on foreign oil, undermining goals of energy independence and energy security. By contrast, the income-tax based WPT would be more economically neutral (less distortionary) in the short-run: sizeable revenues could be raised without reducing domestic oil supplies, which means oil imports would not tend to increase. Neither the excise-tax based or income-tax based WPT are expected to have significant price effects: neither tax would increase the price of crude oil, which means that refined petroleum product prices, such as pump prices, would likely not tend to increase. In lieu of these two types of WPT, an administratively simple way of increasing the tax burden on the oil industry, and therefore recouping some of the excess or windfall profits, particularly from major integrated producers, would raise the corporate tax rate, by, for instance repealing or reducing the domestic manufacturing activities deduction under IRC 199. This deduction is presently 6% of a firm's net income and is available generally to all domestic manufacturing businesses (service firms are excluded), including almost all oil firms. Repealing this deduction for the major integrated oil companies, and freezing it at 6% for the remaining qualifying oil companies is estimated by the Joint Committee on Taxation to generate about $10 billion over 10 years. For an analysis of windfall profit legislation, see CRS Report RL34689, Oil Industry Financial Performance and the Windfall Profits Tax , by [author name scrubbed] and [author name scrubbed]. <6.7. Energy Tax Provisions in the Farm Bill (P.L. 110-234)> It should also be mentioned that there are several, relatively small, energy tax provisions in the farm bill ( H.R. 2419 ), which was just recently enacted ( P.L. 110-234 ). These provisions, all intended to promote alternative and renewable fuels from agricultural resources. <7. For Additional Reading> U.S. Congress, Senate Budget Committee, Tax Expenditures: Compendium of Background Material on Individual Provision , Committee Print, December 2006, 109 th Cong., 2 nd sess. U.S. Congress, Joint Tax Committee, " Description of the Tax Provisions in H.R. 2776 , The Renewable Energy and Energy Conservation Tax Act of 2007, " June 19, 2007 (JCX-35-07). U.S. Congress, Joint Tax Committee, " Description of the Chairman ' s Modification to the Provisions of the Energy Advancement and Investment Act of 2007, " June 19, 2007 (JCX-33-07). U.S. Congress, Joint Tax Committee, Description And Technical Explanation of the Conference Agreement of H.R. 6 , Title XIII, " Energy Tax Policy Tax Incentives Act of 2005, " July 27, 2005. CRS Report RS21935, The Black Lung Excise Tax on Coal , by [author name scrubbed]. CRS Report RL33302, Energy Policy Act of 2005: Summary and Analysis of Enacted Provisions , by [author name scrubbed] et al. (pdf) CRS Report RL30406, Energy Tax Policy: An Economic Analysis , by [author name scrubbed]. CRS Report RL30406, Energy Tax Policy: An Economic Analysis , by [author name scrubbed]. CRS Report RL33763, Oil and Gas Tax Subsidies: Current Status and Analysis , by [author name scrubbed]. CRS Report RS22558, Tax Credits for Hybrid Vehicles , by [author name scrubbed]. CRS Report RS22322, Taxes and Fiscal Year 2006 Budget Reconciliation: A Brief Summary , by David L. Brumbaugh. CRS Report RL33305, The Crude Oil Windfall Profit Tax of the 1980s: Implications for Current Energy Policy , by [author name scrubbed]. CRS Report RL34669, Side-by-Side Comparison of Energy Tax Bills in the House ( H.R. 6049 ) and Senate ( S. 3478 ), by [author name scrubbed]. CRS Report RL34676, Side-by-Side Comparison of the Energy Tax Provisions of H.R. 6899 and the Proposed Substitute of S. 3478 , by [author name scrubbed]. CRS Report RL34689, Oil Industry Financial Performance and the Windfall Profits Tax , by [author name scrubbed] and [author name scrubbed].

Historically, U.S. federal energy tax policy promoted the supply of oil and gas. However, the 1970s witnessed (1) a significant cutback in the oil and gas industry's tax preferences, (2) the imposition of new excise taxes on oil, and (3) the introduction of numerous tax preferences for energy conservation, the development of alternative fuels, and the commercialization of the technologies for producing these fuels (renewables such as solar, wind, and biomass, and nonconventional fossil fuels such as shale oil and coalbed methane). The Reagan Administration, using a free-market approach, advocated repeal of the windfall profit tax on oil and the repeal or phase-out of most energy tax preferences—for oil and gas, as well as alternative fuels. Due to the combined effects of the Economic Recovery Tax Act and the energy tax subsidies that had not been repealed, which together created negative effective tax rates in some cases, the actual energy tax policy differed from the stated policy. The George H. W. Bush and Bill Clinton years witnessed a return to a much more activist energy tax policy, with an emphasis on energy conservation and alternative fuels. While the original aim was to reduce demand for imported oil, energy tax policy was also increasingly viewed as a tool for achieving environmental and fiscal objectives. The Clinton Administration's energy tax policy emphasized the environmental benefits of reducing greenhouse gases and global climate change, but it will also be remembered for its failed proposal to enact a broadly based energy tax on Btus (British thermal units) and its 1993 across-the-board increase in motor fuels taxes of 4.3¢/gallon. The 109th Congress enacted the Energy Policy Act of 2005 (P.L. 109-58), signed by President Bush on August 8, 2005, provided a net energy tax cut of $11.5 billion ($14.5 billion gross energy tax cuts, less $3 billion of energy tax increases) for fossil fuels and electricity, as well as for energy efficiency, and for several types of alternative and renewable resources, such as solar and geothermal. The Tax Relief and Health Care Act of 2006 (P.L. 109-432), enacted in December 2006, provided for one-year extensions of these provisions. The current energy tax structure favors tax incentives for alternative and renewable fuels supply relative to energy from conventional fossil fuels, and this posture was accentuated under the Energy Policy Act of 2005. On October 3, President Bush signed the Economic Stabilization Act of 2008 (P.L. 110-343), which includes $17 billion in energy tax incentives, primarily extensions of pre-existing provisions, but also including several new energy tax incentives: $10.9 billion in renewable energy tax incentives aimed at clean energy production, $2.6 billion in incentives targeted toward cleaner vehicles and fuels, and $3.5 billion in tax breaks to promote energy conservation and energy efficiency. The cost of the energy tax extenders legislation is fully financed, or paid for, by raising taxes on the oil and gas industry (mostly by reducing oil and gas tax breaks) and by other tax increases. The oil and gas tax increases comprise cutbacks in the IRC §199 manufacturing deduction for income attributable to oil and gas production, which will be frozen at 6% (rather than increasing to 9% as scheduled), reforming the foreign tax credit provisions, and by increasing the per-barrel tax rate on refinery crude oil under the Oil Spill Liability Trust Fund provisions.

<1. Introduction> In June 2008, the Supreme Court issued its decision in District of Columbia v. Heller , holding by a 5-4 vote that the Second Amendment to the Constitution of the United States protects an individual right to possess a firearm, unconnected with service in a militia, and to use that firearm for traditionally lawful purposes such as self-defense within the home. In Heller , the Court affirmed the lower court's holding that declared three provisions of the District of Columbia's Firearms Control Regulation Act to be unconstitutional. The decision in Heller marked the first time in almost 70 years that the Supreme Court addressed the nature of the right conferred by the Second Amendment. Although the Court conducted an extensive analysis of the Second Amendment to interpret its meaning, the decision left unanswered other significant constitutional questions, including the standard of scrutiny that should be applied to laws regulating the possession and use of firearms, and whether the Second Amendment applies to the states. This latter issue was subsequently addressed by the Supreme Court in McDonald v. City of Chicago . Accordingly, this report first provides a historical overview of judicial treatment of the Second Amendment and a discussion of the Court's decision in Heller . It then examines the issue of incorporation, which was the focus of the McDonald decision. Lastly, this report concludes with an analysis that focuses on the potential impact of the Court's decisions in Heller and McDonald on such legislation pertaining to the use and possession of firearms at the federal, state, and local levels. <2. The Second Amendment An Individual or Collective Right?> The Second Amendment to the Constitution states that "A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed." Despite its brevity, the nature of the right conferred by the language of the Second Amendment has been the subject of great debate in the political, academic, and legal spheres for decades. Generally, it can be said that there are two opposing models that govern Second Amendment interpretation. On one side of the debate, there is the "individual right model," which maintains that the text and underlying history of the Second Amendment clearly establishes that the right to keep and bear arms is committed to the people, that is, an individual, as opposed to the states or the federal government. On the other end of the spectrum is the "collective right model," which interprets the Second Amendment as protecting the authority of the states to maintain a formal organized militia. A related interpretation, commonly called the "sophisticated collective right model," posits that individuals have a right under the Second Amendment to own and possess firearms, but only to the extent that such ownership and possession is connected to service in a state militia. The text of the amendment is often raised to both support and contravene the argument that there is an individual right to keep and bear arms. The individual right model places great weight on the operative clause of the amendment that states "the right of the people to keep and bear arms shall not be infringed." Accordingly, it is argued that this command language clearly affords a right to the people, and not simply to states. To support this notion, it is argued that the text of the Tenth Amendment, which clearly distinguishes between "the states" and "the people," makes it evident that the two terms are, in fact, different, and that the Founders knew to say "state" when they meant it. Under this reading, it may be argued that if the Second Amendment did not confer an individual right, it simply would have read that the right of the states to organize the militia shall not be infringed. Supporters of the collective right model, by contrast, often counter with the argument that the dependent clause, which refers to "a well regulated militia," qualifies the rest of the amendment, thereby limiting the right of the people to keep and bear arms and investing the states with the authority to control the manner in which weapons are kept, and to require that any person who possesses a weapon be a member of the militia. An outgrowth of the rationale used by the collective right proponents has been the argument that the militia, in modern times, is embodied by the National Guard, and that the realities of modern warfare have negated the need for the citizenry to be armed. Individual right theorists have countered these arguments by noting that the militia of the Founders' era consisted of every able-bodied male, who was required to supply his own weapon. These theorists also point to 10 U.S.C. 311, which as part of its express definition of the different classes of militia states that in addition to the National Guard, there is an "unorganized militia" that is composed of all able-bodied males between the ages of 17 and 45 who are not members of the National Guard or naval militia. Moreover, proponents of the individual right model deride the notion that an individual right to keep and bear arms can be read out of the Constitution as a result of technological advancements or shifting societal mores. As illustrated below, various federal appellate courts gave effect to each of these interpretive models, contributing to the uncertainty that characterized the debate over the meaning of the Second Amendment prior to the Court's decision in Heller . <2.1. The Second Amendment in the Supreme Court: United States v. Miller> Despite the heated debate regarding the meaning of the Second Amendment, the Supreme Court had decided only one case touching upon its scope prior to the decision in Heller . That case, United States v. Miller , considered the validity of a provision of the National Firearms Act in relation to the Second Amendment. An interesting aspect of the decision in Miller , as illustrated below, is that it was commonly cited in subsequent lower court decisions as supportive of the proposition that the Second Amendment confers a collective right to keep and bear arms. However, the Court's discussion and actual holding, while giving effect to the dependent clause, could nonetheless be taken to indicate that the Second Amendment confers an individual right limited to the context of the maintenance of the militia. In Miller , the Court upheld a provision of the National Firearms Act that required the registration of sawed-off shotguns. In discussing the Second Amendment, the Court noted that the term "militia" was traditionally understood to refer to "all males physically capable of acting in concert for the common defense," and that members of the militia were primarily civilians and, on occasion, soldiers too, who when called upon "were expected to appear bearing arms supplied by themselves and of the kind in common use at the time." This kind of language throughout the Miller Court's brief discussion of the meaning and expectations of those in a militia during the Founding-era, though subsequently cited as supporting a collective right interpretation, also lent itself to the possible interpretation that the Second Amendment confers an individual right to keep and bear arms limited to the context of the maintenance of a militia. Despite this language, the Court in Miller held: In absence of any evidence tending to show that possession or use of a "shotgun having a barrel of less than 18 inches in length" at this time has some reasonable relationship to the preservation or efficiency of a well regulated militia, we cannot say that the Second Amendment guarantees the right to keep and bear such an instrument. Certainly it is not within judicial notice that this weapon is any part of the ordinary military equipment or that its use could contribute to the common defense. The Miller holding focuses on and appears to suggest that the applicability of the Second Amendment depends upon the type of weapon possessed by an individual and that the weapon, in order to be protected under the amendment, must have some reasonable relationship to the preservation or efficiency of a well-regulated militia. Yet, the decision in Miller is perplexing because while it indicated a connection between the right to keep and bear arms and the militia, the Court did not explore the logical conclusions of its holding; thus the question remained as to what point the regulation or prohibition of firearms would violate the strictures of the amendment. After Miller , the cases decided in the following decades departed from this rather undefined test, with each succeeding decision arguably becoming more attenuated such that judicial treatment of the Second Amendment for the remainder of the 20 th century almost summarily concluded that the amendment conferred only a collective right to keep and bear arms. <2.2. The Second Amendment in Federal Court: Appellate Decisions Since Miller> The process of departure from, and the attenuation of, Miller began with the 1942 decision in Cases v. United States . The U.S. Court of Appeals for the First Circuit (First Circuit) stated its view on the holding in Miller and found it to suggest that "the federal government can limit the keeping and bearing of arms by a single individual as well as by a group of individuals but it cannot prohibit the possession or use of any weapon which has any reasonable relationship to the preservation or efficiency of a well regulated militia." The First Circuit pointed out that a general application of the test in Miller could, as a consequence, prevent the government from regulating the possession or use by private persons, not connected with a militia, of machine guns and similar weapons, which clearly serve military purposes. Beginning its departure from Miller , the court in Cases simply stated that it doubted the Founders intended for citizens to be able to possess weapons like machine guns, and further declared that Miller did not formulate any sort of general test to determine the limits of the Second Amendment. The court then applied a new test of its own formulation, focusing on whether the individual in question could be said to have possessed the prohibited weapon in his capacity as a militiaman. Applying that rationale to the case at hand, the First Circuit declared that the defendant possessed the firearm "purely and simply on a frolic of his own and without any thought or intention of contributing to the efficiency of [a] well regulated militia." While Cases acknowledged that the Federal Firearms Act "undoubtedly curtails to some extent the right of individuals to keep and bear arms," the court upheld its constitutionality, stating that the act "does not conflict with the Second Amendment" because as suggested by the court's new test, the government can regulate individuals from possessing a weapon (that could be viewed as a weapon of common militia use) if such an individual is not in fact using that weapon in his capacity as a militiaman or for the purpose of common militia use. The court in Cases further cited the Supreme Court's decision in United States v. Cruikshank and Presser v. Illinois , (both of which were decided prior to the advent of modern incorporation doctrine principles) as support for the proposition that the Second Amendment does not confer an individual right: "The right of the people to keep and bear arms is not a right conferred upon the people by the federal constitution. Whatever rights the people may have depend upon local legislation; the only function of the Second Amendment being to prevent the federal government and the federal government only from infringing that right." The concept of the Second Amendment as a collective protective mechanism rather than a conferral of an individual right was reinforced by the U.S. Court of Appeals for the Third Circuit's (Third Circuit) decision that same year in United States v. Tot . In that case, the Third Circuit declared that it was "abundantly clear" that the right to keep and bear arms was not adopted with individual rights in mind. The court's support for this statement was brief and conclusory, and did not address any of the relevant, competing arguments. It was this type of holding that became the norm for the remainder of the century in cases addressing the Second Amendment, with courts increasingly referring to others' holdings to support the determination that there is no individual right conferred under the Second Amendment, without engaging in any appreciable substantive legal analysis of the issue. <2.2.1. United States v. Emerson> The traditional, albeit highly undefined, balance among the federal appellate courts with regard to judicial treatment of the Second Amendment changed with the 2001 decision in United States v. Emerson . In Emerson , the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit) became the first federal appellate court to hold that the Second Amendment confers an individual right to keep and bear arms. The court in Emerson specifically addressed the constitutionality of 18 U.S.C. 922(g)(8), which prevents those under a domestic violence restraining order from possessing a firearm. The district court had ruled this provision to be unconstitutional on grounds that it allows the existence of a restraining order, even if issued "without particularized findings of the threat of future violence, to automatically deprive a citizen of his Second Amendment rights." The Fifth Circuit agreed with the district court's conclusion that the Second Amendment confers an individual right after it engaged in an extensive analysis of the text and history of the amendment. It further stated that "the history of the Amendment reinforces its plain text, namely that it protects individual Americans in their right to keep and bear arms whether or not they are a member of a select militia or performing active military service or training." In making this determination, the Fifth Circuit explicitly acknowledged that it was repudiating the position of every other circuit court that had previously addressed the meaning of the Second Amendment, stating: "[W]e are mindful that almost all of our sister circuits have rejected any individual rights view of the Second Amendment. However, it respectfully appears to us that all or almost all of these opinions seem to have done so either on the erroneous assumption that Miller resolved that issue or without sufficient articulated examination of the history and text of the Second Amendment." The court in Emerson stated: "We reject the collective rights and sophisticated collective rights models for interpreting the Second Amendment. We hold, consistent with Miller , that it protects the rights of individuals, including those not then actually a member of any militia or engaged in active military service or training, to privately possess and bear their own firearm ... that are suitable as personal, individual weapons and are not of the general kind or type excluded by Miller ." Although the Emerson court adopted the individual right model, it nonetheless reversed the district court decision, determining that rights protected by the Second Amendment are subject to reasonable restrictions: Although, as we have held, the Second Amendment does protect individual rights, that does not mean that those rights may never be made subject to any limited, narrowly tailored specific exceptions or restrictions for particular cases that are reasonable and not inconsistent with the right of Americans generally to individually keep and bear their private arms as historically understood in this country. Indeed, Emerson does not contend, and the district court did not hold, otherwise. As we have previously noted, it is clear that felons, infants and those of unsound mind may be prohibited from possessing firearms. Applying this standard to the challenged provision, the Emerson court noted that while the evidence before it did not establish that an express finding of a credible threat had been made by the local state court, the nexus between firearm possession by an enjoined party and the threat of violence was sufficient to establish the constitutionality of 18 U.S.C. 922(g)(8). The decision in Emerson was accompanied by a special concurrence arguing that "[t]he determination whether the rights bestowed by the Second Amendment are collective or individual [was] entirely unnecessary to resolve this case and has no bearing on the judgment we dictate by this opinion." Although the decision in Emerson did not result in the invalidation of any laws, the decision was quite significant as it marked the first time a circuit court adopted an individual rights interpretation of the Second Amendment, which in turn led to the most substantive exposition of the collective rights model by a sister circuit. <2.2.2. Silveira v. Lockyer> In Silveira v. Lockyer , the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit) rejected a Second Amendment challenge to California's Assault Weapons Ban, specifically repudiating the analysis in Emerson and adopting the collective right model interpretation of the Second Amendment. It stated, "Our court, like every other federal court of appeals to reach the issue except for the Fifth Circuit, has interpreted Miller as rejecting the traditional individual rights view." The Silveira decision was particularly significant because the Ninth Circuit essentially picked up the gauntlet thrown down in Emerson . The court engaged in its own substantive analysis of the text of the amendment, but reached the opposite conclusion than that of the Fifth Circuit, which is important because the opinion in Silveira acknowledged and purported to rectify the deficiencies in prior cases that have summarily interpreted Miller as precluding an individual rights interpretation. In particular, the Ninth Circuit began its analysis by expressly acknowledging that "the entire subject of the meaning of the Second Amendment deserves more consideration than we, or the Supreme Court, have thus far been able (or willing) to give it." After engaging in an extensive consideration of the same historical and textual arguments that were addressed in Emerson , the court in Silveira stated, "The amendment protects the people's right to maintain an effective state militia, and does not establish an individual right to own or possess firearms for personal or other use. This conclusion is reinforced in part by Miller 's implicit rejection of the traditional individual rights position." The court later reemphasized this position, declaring: In sum, our review of the historical record regarding the enactment of the Second Amendment reveals that the amendment was adopted to ensure that effective state militias would be maintained, thus preserving the people's right to bear arms. The militias, in turn, were viewed as critical to preserving the integrity of the states within the newly structured national government as well as to ensuring the freedom of the people from federal tyranny. Properly read, the historical record relating to the Second Amendment leaves little doubt as to its intended scope and effect. Upon determining that the collective right model controls Second Amendment analysis, the Ninth Circuit held that the amendment "poses no limitation on California's ability to enact legislation regulating or prohibiting the possession or use of firearms, including dangerous weapons such as assault weapons." Like the Emerson decision, the opinion in Silveira was accompanied by a special concurrence that argued that the court's "long analysis involving the merits of the Second Amendment claims," and its adoption of the "collective rights theory" was "unnecessary and improper" in light of existing precedent mandating the dismissal of such claims for a lack of standing. A request for rehearing en banc was denied by the full court, resulting in the dissent of six judges. The holdings in Emerson and Silveira , for the first time, presented the Supreme Court with two contemporaneous circuit court decisions that reached fundamentally different conclusions with regard to the protections afforded by the Second Amendment. While this dynamic led to a great deal of speculation as to whether the Court would grant a petition for certiorari in Silveira to resolve this split, the Court ultimately denied the application. This was presumably due to the fact that even though the decisions constituted a concrete split between the two circuit courts on this issue for the first time, no firearms laws were actually invalidated. <3. The District of Columbia v. Heller Decision> In light of the split interpretations of the meaning of the Second Amendment in the circuit court decisions Emerson and Silveira , both of which were denied certiorari by the Supreme Court, the stage for just such a conflict was set in 2007 in Parker v. District of Columbia . The decision in Parker , which eventually made its way to the Supreme Court, marked the first time that a federal appellate court struck down a law regulating firearms on the basis of the Second Amendment. <3.1. Parker v. District of Columbia> In Parker , six residents of the District of Columbia challenged three provisions of the District's 1975 Firearms Control Regulation Act: DC Code [phone number scrubbed].02(a)(4), which generally barred the registration of handguns, thus effectively prohibiting of possession of handguns in the District; 22-4504(a), which prohibited carrying a pistol without a license (to the extent the provision would prevent a registrant from moving a gun from one room to another within his or her home); and [phone number scrubbed].02, which required all lawfully owned firearms be kept unloaded and disassembled or bound by a trigger lock or similar device. The Parker court first dismissed the claims of five of the six plaintiffs upon determining that the District's general threat to prosecute violations of its gun control laws did not constitute an injury sufficient to confer standing on citizens who had only expressed an intention to violate the District's gun control laws but had not suffered any injury in fact. The remaining plaintiff, Dick Heller, was found to have standing due to the fact that he had applied for, and had been denied, a license to possess a handgun. Based on this, the court determined that the denial of a license "constitutes an injury independent of the District's prospective enforcement of its gun laws." The court also allowed Heller's claims challenging 22-4504(a) (prohibiting the carriage of a pistol without a license) and [phone number scrubbed].02 (requiring firearms be kept unloaded and disassembled or bound by a trigger lock) to stand, as they "would amount to further conditions on the [right] Heller desires." The court then turned to its substantive consideration of the Second Amendment, engaging in a textual and historical analysis that largely mirrored the approach of the Fifth Circuit in Emerson . The court placed particular importance on the "word[s] ... the drafters chose to describe the holders of the right 'the people.'" Stating that the phrase "the people" is "found in the First, Fourth, Ninth, and Tenth Amendments," and that "[i]t has never been doubted that these provisions were designed to protect the rights of individuals ," the court stated that it necessarily follows that the Second Amendment likewise confers an individual right. The court also rejected the contention that the prefatory clause of the amendment ("A well regulated Militia, being necessary to the security of a free State") qualified the effect of its operative clause ("the right of the people to keep and bear Arms, shall not be infringed"), based on its characterization of the historical factors at play. According to the court, early Congresses recognized that the militia existed as all "able-bodied men of a certain age," independent of any governmental creation, but also that a militia nevertheless required governmental organization to be effective. This interpretation enabled the court to dispose of the District's argument that "a militia did not exist unless it was subject to state discipline and leadership." By specifically rejecting the notion that there is a state organization requirement for the creation of a militia, the court was able to interpret the prefatory clause as encompassing a broad swath of the populace, irrespective of a state's right to raise a collective protective force. The court concluded its analysis by stating: "The important point, of course, is that the popular nature of the militia is consistent with an individual right to keep and bear arms: Preserving an individual right was the best way to ensure that the militia could serve when called." The Parker court also addressed the District's argument that it was not subject to the restraints of the Second Amendment because it is a purely federal entity. This argument was predicated on the supposition that since the District is not a state, no federalism concerns are posed within the context of the Second Amendment as there is no possibility that the exercise of legislative power would unconstitutionally encumber the organization of a state militia, that is, "interfere with the 'security of a free State.'" The court, in rejecting the District's argument, referred to it as an "appendage of the collective right position" and made note that "the Supreme Court has unambiguously held that the Constitution and Bill of Rights are in effect in the District." The final argument addressed by the court in Parker was the District's contention that "even if the Second Amendment protects an individual right and applies to the District, it does not bar the District's regulation, indeed, its virtual prohibition, of handgun ownership." Engaging in a historical analysis, the court determined that long guns (such as muskets and rifles) and pistols were in "common use" during the era when the Second Amendment was adopted. While noting that modern handguns, rifles, and shotguns are "undoubtedly quite improved over [their] colonial-era predecessors," the court held that the "modern handgun ... is, after all, a lineal descendant" of the pistols used in the Founding-era and that they "certainly bear 'some reasonable relationship to the preservation or efficiency of a well regulated militia,'" thereby meeting the standard delineated in Miller . The court further rejected the argument that the Second Amendment applies only to colonial era weapons, stating that "just as the First Amendment free speech clause covers modern communication devices unknown to the Founding generation, e.g., radio and television, and the Fourth Amendment protects telephonic conversation from a 'search,' the Second Amendment protects the possession of the modern-day equivalents of the colonial pistol." The court stressed that its conclusion should not be taken to suggest that "the government is absolutely barred from regulating the use and ownership of pistols," stating that "the protections of the Second Amendment are subject to the same sort of reasonable restrictions that have been recognized as limiting, for instance, the First Amendment." The court stated that its holding did not conflict with earlier Supreme Court determinations that existing laws prohibiting the concealed carriage of weapons or depriving convicted felons of the right to keep and bear arms "[do] not offend the Second Amendment." According to the court, regulations of this type "promote the government's interest in public safety consistent with our common law tradition. Just as importantly, however, they do not impair the core conduct upon which the right was premised." It went on to state other "[r]easonable regulations also might be thought consistent with a 'well regulated Militia,'" including but not necessarily limited to, the registration of firearms (on the basis that it would give the government an idea of how many would be armed for militia service if called upon), or reasonable firearm proficiency testing (as this would promote public safety and produce better candidates for service). Applying these standards to the provisions of the DC Code at issue, the court ruled that each challenged restriction violated the protections afforded by the Second Amendment. With regard to [phone number scrubbed].02(a)(4) (prohibiting the registration of a pistol), the court stated: "Once it is determined as we have done that handguns are 'Arms' referred to in the Second Amendment, it is not open to the District to ban them." Turning to 22-4504(a) (prohibiting the carriage of a pistol without a license, inside or outside the home), the court stated: "[J]ust as the District may not flatly ban the keeping of a handgun in the home, obviously it may not prevent it from being moved throughout one's house. Such a restriction would negate the lawful use upon which the right was premised i.e., self defense." Finally, with respect to [phone number scrubbed].02 (requiring that all lawfully owned firearms be kept unloaded and disassembled or bound by a trigger lock or similar device), the court stated: "[L]ike the bar on carrying a pistol within the home, [this provision] amounts to a complete prohibition on the lawful use of handguns for self-defense. As such, we hold it unconstitutional." <3.2. District of Columbia v. Heller> On November 20, 2007, the Supreme Court granted the District of Columbia's petition for certiorari , though limiting it to the question of "[w]hether the following provisions, DC Code [phone number scrubbed].02(a)(4), 22-4504(a), and [phone number scrubbed].02, violated the Second Amendment rights of individuals who are not affiliated with any state-regulated militia, but who wish to keep handguns and other firearms for private use in their homes?" <3.2.1. Oral Argument> On March 18, 2008, the Supreme Court heard oral argument for Heller , considering in detail many of the issues raised by the decision in Parker . Based on the questions and comments of the Justices, it was widely assumed that the Court would hold that the Second Amendment does in fact confer an individual right to keep and bear arms. In particular, Chief Justice Roberts and Justices Alito and Scalia all made statements indicating that they support an individual right interpretation. For instance, responding to the Petitioner's assertion that the prefatory clause of the amendment confirms that the right is militia related, Chief Justice Roberts stated: "[I]t's certainly an odd way in the Second Amendment to phrase the operative provision. If it is limited to State militias, why would they say 'the right of the people'? In other words, why wouldn't they say 'State militias have the right to keep arms'?" Likewise, Justice Scalia declared: I don't see how there's any, any, any contradiction between reading the second clause as a as a personal guarantee and reading the first one as assuring the existence of a militia, not necessarily a State-managed militia because the militia that resisted the British was not State-managed. But why isn't it perfectly plausible, indeed reasonable, to assume that since the framers knew that the way militias were destroyed by tyrants in the past was not by passing a law against militias, but by taking away the people's weapons that was the way militias were destroyed. The two clauses go together beautifully: Since we need a militia, the right of the people to keep and bear arms shall not be infringed. Additionally, Justice Kennedy indicated that he would support an individual right interpretation, suggesting that the purpose of the prefatory clause was to "reaffirm the right to have a militia," with the operative clause establishing that "there is a right to bear arms." Justice Kennedy's questioning further indicated that he might view a right to self-defense as being of a constitutional magnitude, suggesting that the Framers may have also been attempting to ensure the ability of "the remote settler to defend himself and his family against hostile Indian tribes and outlaws, wolves and bears and grizzlies." While Justice Thomas remained silent during the oral argument, he had made statements in the past indicating support for an individual right interpretation of the Second Amendment. <3.3. The Decision in Heller> On June 26, 2008, the Supreme Court issued its decision, holding by a vote of 5-4 that the Second Amendment protects an individual right to possess a firearm, unconnected to service in a militia, and protects the right to use that arm for traditionally lawful purposes such as self-defense within the home. The opinion engaged in an extensive analysis of the text of the amendment. It first focused on the operative clause of the amendment ("the right of the people to keep and bear Arms, shall not be infringed"), finding that the textual elements of this clause and the historical background of the amendment "guarantee the individual right to possess and carry weapons in case of confrontation." With regard to the prefatory clause ("A well regulated Militia, being necessary to the security of a free State,") the Court held that the term "militia" refers to all able-bodied men, as opposed to state and congressionally regulated military forces described in the Militia Clauses of the Constitution. The Court further held that "the adjective 'well-regulated' implied nothing more than imposition of proper discipline and training," and that the phrase "security of a free State" refers to the security of a free polity as opposed to the security of each of the several states. After analyzing the operative and prefatory clause, the Court then addressed the issue of whether the prefatory clause "fits" with the operative clause that "creates an individual right to keep and bear arms." The Court declared that the two clauses "fit[] perfectly" when viewed in light of the historical backdrop that motivated adoption of the Second Amendment. In particular, the Court pointed to the concern, raised by Justice Scalia in oral argument, of the Founding generation's knowledge that the federal government would disarm the people in order to disable the citizens' militia rather than banning the militia itself, which would then enable a politicized standing army or a select militia to rule. According to the Court, the amendment was thus designed to prevent Congress from abridging the "ancient right of individuals to keep and bear arms, so that the ideal of a citizens' militia would be preserved." After reaching this conclusion, the Court examined its prior decisions relating to the Second Amendment in order to ascertain "whether any of [its] prior precedents foreclose[] the conclusions [it] reached about the meaning of the Second Amendment." The Court first considered its ruling in United States v. Cruikshank , which held that the Second Amendment does not by its own force apply to anyone other than the federal government. There, the Cruikshank Court vacated the convictions of a white mob for depriving blacks of their right to keep and bear arms. Whereas past lower courts interpreted Cruikshank to support the proposition that the Second Amendment does not confer an individual right, the Heller Court stated that the decision in Cruikshank "supports, if anything, the individual-rights interpretation." The Court stressed that their decision in Cruikshank described the right protected by the Second Amendment as the "bearing [of] arms for a lawful purpose," and that "the people must look for their protection against any violation by their fellow-citizens of the rights it recognizes to the States' police power." This discussion in Cruikshank , according to the Court in Heller , "makes little sense if it is only a right to bear arms in a state militia." The Court then turned to its prior ruling in Presser v. Illinois , which held that the right to keep and bear arms was not violated by a law that prohibited groups of men "to associate together as military organizations, or to drill or parade with arms in cities and towns unless authorized by law." The Heller Court stated that this holding in Presser "[did] not refute the individual-rights interpretation of the Amendment," and has no bearing on the Second Amendment's "meaning or scope, beyond the fact that it does not prevent the prohibition of private paramilitary organizations." Regarding the holding in United States v. Miller , the Heller Court rejected the assertion that the decision in Miller established that the "Second Amendment 'protects the right to keep and bear arms for certain military purposes, but ... does not curtail the legislature's power to regulate the nonmilitary use and ownership of weapons.'" The Court declared that " Miller did not hold that and cannot be possibly read to have held that," given that the decision in Miller was predicated on the determination that the " type of weapon was not eligible for Second Amendment Protection." According to the Heller Court, the holding in Miller "is not only consistent with, but positively suggests, that the Second Amendment confers an individual right to keep and bear arms (though only arms that 'have some reasonable relationship to the preservation or efficiency of a well regulated militia')." The Court went on to note, "[h]ad the [ Miller ] Court believed that the Second Amendment protects only those serving in the militia, it would have been odd to examine the character of the weapon rather than simply note that the two crooks were not militiamen." The Court concluded its consideration of this issue by stating, " Miller stands only for the proposition that the Second Amendment right, whatever its nature, extends only to certain types of weapons." Having determined that the Second Amendment confers an individual right and that precedent supports such an interpretation, the Court stressed, "like most rights, the right secured by the Second Amendment is not unlimited." The Court noted that the right at issue had never been construed as allowing individuals "to keep and carry any weapons whatsoever in any manner whatsoever and for whatever purpose," and that "the majority of the 19 th century courts to consider the question held that prohibitions on carrying concealed weapons were lawful under the Second Amendment or state analogues." Moreover, the Court's opinion appears to indicate that current federal firearm laws are constitutionally tenable: [N]othing in our opinion should be taken to cast doubt on longstanding prohibitions on the possession of firearms by felons and the mentally ill, or laws forbidding the carrying of firearms in sensitive places such as schools and government buildings, or laws imposing conditions and qualifications on the commercial sale of arms. [fn 26: We identify these presumptively lawful regulatory measures only as examples; our list does not purport to be exhaustive.] The Court further stressed: We also recognize another important limitation on the right to keep and carry arms. Miller said, as we have explained, that the sorts of weapons protected were those "in common use at the time." [citation omitted] We think that limitation is fairly supported by the historical tradition of prohibiting the carrying "dangerous and unusual weapons." [citations omitted] The Court in Heller ultimately affirmed the holding in Parker v. District of Columbia , ruling unconstitutional the three relevant provisions of the DC Code. The Court then declared that the inherent right of self-defense is central to the Second Amendment right, and that the District's handgun ban amounted to a prohibition of an entire class of arms that has been overwhelmingly utilized by American society for that purpose. It did not specify a governing standard of review for Second Amendment issues, but stated that the District's handgun ban violates "any of the standards of scrutiny that we have applied to enumerated constitutional rights." The Court also struck down as unconstitutional the District's requirement that any lawful firearm in the home be disassembled or bound by a trigger lock, as such requirement "makes it impossible for citizens to use arms for the core lawful purpose of self-defense." However, the Court's opinion did not address the District's licensing requirement ( 22-4504), making note of Heller's concession that such a requirement would be permissible if enforced in a manner that is not arbitrary and capricious. Subsequent to the Supreme Court decision, the District of Columbia amended its firearms laws to be in compliance with the ruling. However, there has been much legislative movement with respect to the District's firearms laws. For more information on DC gun laws, see CRS Report R40474, DC Gun Laws and Proposed Amendments , by [author name scrubbed]. <3.4. The Second Amendment Post-Heller> Although the decision in Heller marked the first time in almost 70 years that the Supreme Court addressed the nature of the right conferred by the Second Amendment, the Court itself noted that its decision did not constitute "an exhaustive historical analysis ... of the full scope of the Second Amendment." Consequently, while the Court's opinion is extremely important simply by virtue of its determination that the Second Amendment protects an individual right to possess a firearm, it left unanswered many questions of significant constitutional magnitude. The Court acknowledged the criticism that its ruling leaves "so many applications of the right in doubt," and that "it does not provid[e] extensive historical justification for those regulations of the right," which the Court described as constitutionally permissible. In response to such criticism, the Court explained: [S]ince this case represents this Court's first in-depth examination of the Second Amendment, one should not expect it to clarify the entire field.... And there will be time enough to expound upon the historical justifications for the exceptions we have mentioned if and when those exceptions come before us. A significant question left open by the Court centers on the standard of scrutiny that should be applied to laws regulating the possession and use of firearms. In Heller , the Court refused to establish or identify any such standard, declaring instead that the challenged provisions were unconstitutional "[u]nder any of the standards of scrutiny that we have applied to enumerated constitutional rights." Yet, the Court did reject a test grounded in rational basis scrutiny, stating that "if all that was required to overcome the right to keep and bear arms was a rational basis, the Second Amendment would be redundant with the separate constitutional prohibitions on irrational laws, and would have no effect." And, the Court explicitly rejected Justice Breyer's argument, raised in his dissent, that an "interest-balancing inquiry" that "asks whether the statute burdens a protected interest in a way or to an extent that is out of proportion to the statute's salutary effects upon other important governmental interests" should be applied. Responding to Justice Breyer's suggesting, the Court stated: We know of no other enumerated constitutional right whose core protection has been subjected to a freestanding "interest-balancing" approach. The very enumeration of the right takes out of the hands of government even the Third Branch of Government the power to decide on a case-by-case basis whether the right is really worth insisting upon. A constitutional guarantee subject to future judges' assessments of its usefulness is no constitutional guarantee at all. Another issue that was unresolved by the Court is whether the Second Amendment applies to the states. However, this issue was soon settled in the 2009 term of the Supreme Court when it decided McDonald v. City of Chicago , subsequently discussed. <4. The Second Amendment Does It Apply to the States?> On June 28, 2010, the Supreme Court issued its decision in McDonald v. City of Chicago . The issue before the Court in McDonald was whether the Second Amendment applies to, or is incorporated against, the states. An incorporation analysis generally asks whether the protections provided for in the first eight amendments of the Bill of Rights apply to state governments in the same manner that they directly apply to the federal government. Judicial treatment of incorporation has evolved over time, with the Court inquiring: (1) if the first eight amendments apply directly to the states; (2) if the Privileges or Immunities Clause of the Fourteenth Amendment guarantees these rights; and (3) if the Due Process Clause of the Fourteenth Amendment incorporates the protections provided for in the first eight amendments. These three inquiries are explained below. <4.1. Direct Application> Initially, in the early 19 th century, the Supreme Court had ruled in Barron v. Mayor & City Council of Baltimore that the protection of individual liberties in the Bill of Rights applied only to the federal government, not to state or local governments. Chief Justice John Marshall, writing for the Court, stated: "The constitution was ordained and established by the people of the United States for themselves, for their own government, and not for the government of the individual states." He further stated that had the framers intended the Bill of Rights to apply to the states, "they would have declared this purpose in plain and intelligible language." Although application of the Bill of Rights solely to the federal government would mean that state and local governments could then be free to infringe upon these individual protections, Chief Justice Marshall observed that "[e]ach state established a constitution for itself, and in that constitution, provided such limitations and restrictions on the power of its particular government, as its judgment dictated." Although the argument continued to be made that the Bill of Rights applied directly to the states, the Court rejected this contention time and time again. <4.2. Privileges or Immunities Clause of the Fourteenth Amendment> It was not until after the Civil War when the Fourteenth Amendment was ratified that claimants resorted to the Privileges or Immunities Clause of Section 1 of the amendment for judicial protection. The Privileges or Immunities Clause provides: "No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States." Five years after the Fourteenth Amendment was ratified, the Supreme Court, in Slaughter-House Cases , rejected the plaintiffs' assertions that a state law, which granted a monopoly to the City of New Orleans, was in violation of the U.S. Constitution because it created involuntary servitude, denied them equal protection of the laws, and abridged their privileges or immunities as citizens under the Thirteenth and Fourteenth Amendments. In rejecting the plaintiffs' challenge, the Court narrowly construed all of these provisions. With respect to the Privileges or Immunities Clause, the Court held that this Clause was not meant to protect individuals from state government actions and was not meant to be a basis for federal courts to invalidate state laws. In doing so, the Court first acknowledged: "It is quite clear, then, that there is a citizenship of the United States, and a citizenship of a state, which are distinct from each other, and which depend upon different characteristics or circumstances in the individual." After making this distinction, the Court specifically stated that "it is only the [privileges and immunities of the citizens of the United States] which are placed by this clause under the protection of the Federal Constitution, and that the [privileges and immunities of the citizen of the State] whatever they may be, are not intended to have any additional protection by the paragraph of this amendment." Furthermore, the Court stated that "privileges and immunities relied on in the argument are those which belong to the citizens of the States as such, and that they are left to State governments for security and protection, and not by this article [the Fourteenth Amendment] placed under the special care of the Federal government." While this ruling has never been expressly overturned, and therefore generally continues to preclude use of the Privileges or Immunities Clause to apply the Bill of Rights, Justice Thomas addressed the Clause as it applies to the Second Amendment at length in his concurring opinion in McDonald (see infra ). <4.3. Due Process Clause of the Fourteenth Amendment> In the early 20 th century, the Supreme Court in Twining v. New Jersey recognized the possibility that the Due Process Clause of the Fourteenth Amendment incorporates provisions of the Bill of Rights, thereby making them applicable to state and local governments. The Due Process Clause of the Fourteenth Amendment provides: "[N]or shall any State deprive any person of life, liberty, or property, without due process of law." In Twining , the Court observed that [I]t is possible that some of the personal rights safeguarded by the first eight Amendments against National action may also be safeguarded against state action, because a denial of them would be a denial of due process of law ... not because those rights are enumerated in the first eight Amendments, but because they are of such nature that they are included in the conception of due process of law. Although the Court acknowledged that the Due Process Clause included "principles of justice so rooted in the tradition and conscience of our people as to be ranked fundamental," and therefore "implicit in the concept of ordered liberty," the Court, despite debate, has never endorsed total incorporation of all of the Bill of Rights. Rather, the Court embraced what has become known as the doctrine of "selective incorporation," which holds that the Due Process Clause incorporates the text of certain provisions of the Bill of Rights. It was in Gitlow v. New York that the Supreme Court for the first time said that the First Amendment's protection of freedom of speech applies to the states through its incorporation into the Due Process Clause of the Fourteenth Amendment. Although the Court held that New York's criminal anarchy statute did not violate the Fourteenth Amendment because the state was properly exercising its police power, the Court, in finding incorporation, stated, "[F]reedom of speech and of the press ... are among the fundamental personal rights and 'liberties' protected by the due process clause of the Fourteenth Amendment from impairment by the States." Prior to McDonald , the Supreme Court had found the following provisions of the Bill of Rights to be incorporated: The First Amendment's establishment clause, free exercise clause, and protection of speech, press, assembly, and petition. The Fourth Amendment's protection against unreasonable searches and seizures and the requirement for a warrant based on probable cause; also the exclusionary rule, which prevents the government from using evidence obtained in violation of the Fourth Amendment. The Fifth Amendment's prohibition of double jeopardy, protection against self-incrimination, and requirement that the government pay just compensation when it takes private property for public use. The Sixth Amendment's requirements for speedy and public trial, by an impartial jury, with notice of the charges, and for the chance to confront adverse witnesses, to have compulsory process to obtain favorable witnesses, and to have assistance of counsel if the sentence involves possible imprisonment. The Eight Amendment's prohibition against excessive bail and cruel and unusual punishment. Over time, the Court has articulated various tests for deciding whether a provision of the Bill of Rights is incorporated through the Due Process Clause of the Fourteenth Amendment. The Supreme Court in Duncan v. Louisiana summarized these formulations, stating, "the question has been asked whether a right is among those 'fundamental principles of liberty and justice which lie at the base of all our civil and political institutions ...' whether it is 'basic in our system of jurisprudence ...' and whether it 'is a fundamental right, essential to a fair trial.' " The Court also noted, in discussing state criminal processes, that "the question ... is ... whether given this kind of [common-law] system a particular procedure is fundamental whether, that is, a procedure is necessary to an Anglo-American regime of ordered liberty." <4.4. Has the Supreme Court Addressed Incorporation of the Second Amendment via the Due Process Clause?> Over 100 years ago, the Supreme Court held in United States v. Cruikshank that the Second Amendment does not act as a constraint upon state law. In its brief treatment of the Second Amendment, the Court in Cruikshank stated that "this is one of the amendments that has no other effect than to restrict the powers of the national government." This holding was reaffirmed in Presser v. Illinois , where the Court further commented that because "all citizens capable of bearing arms constitute the reserved military force or reserve militia of the United States as well as of the States," the "States cannot, even laying the constitutional provision [aside], prohibit the people from keeping and bearing arms, so as to deprive the United States of their rightful resource for maintaining the public security, and disable the people from performing their duty to the general government." In other words, the Court seemed to be of the opinion that there was no need to rely upon the Second Amendment to act as a constraint upon state law, because states could not go so far as to prohibit the people from owning firearms as doing so would interfere with the United States' ability to rely on its reserved military force defined as "citizens capable of bearing arms" to maintain the public security. Both of these decisions were decided shortly after the Slaughter-House Cases decision, and prior to the advent of modern incorporation principles (discussed above). In Heller , the Court commented upon the issue of incorporation, stating: With respect to Cruikshank 's continuing validity on incorporation, a question not presented by this case, we note that Cruikshank also said that the First Amendment did not apply against the States and did not engage in the sort of Fourteenth Amendment inquiry required by our later cases. Our decisions in Presser v. Illinois (citation omitted) and Miller v. Texas , 153 U.S. 535, 538, 14 S.Ct. 874, 38 L.Ed. 812 (1894), reaffirmed that the Second Amendment applies only to the Federal Government. At the time, this statement seemed to leave open the possibility that were the issue of incorporation to come before the Supreme Court, the Court would either support the application of modern incorporation doctrine principles to the Second Amendment or continue with the precedents found in Cruikshank and Presser that the Second Amendment does not apply to the states. <4.5. Post-Heller Appellate Decisions and Incorporation of the Second Amendment> After the Heller decision, three courts of appeals addressed whether the Second Amendment applies to the states, that is, via direct application or via incorporation through the Due Process Clause of the Fourteenth Amendment. The U.S. Courts of Appeals for the Second Circuit and Seventh Circuit both held that the Second Amendment does not apply to the states, whereas the Court of Appeals for the Ninth Circuit in Nordyke v. King held that the Second Amendment is applicable to the states, though it later vacated its decision in light of McDonald . <4.5.1. The Second and Seventh Circuit Decisions> The U.S. Court of Appeals for the Second Circuit (Second Circuit) was the first to address this issue in Maloney v. Rice. In Maloney , the plaintiff sought a declaration that a New York penal law that punishes the possession of nunchukas was unconstitutional. On appeal, the plaintiff argued that the state statutory ban violates the Second Amendment because it infringes on his right to keep and bear arms. The court, citing Presser , held that the state law did not violate the Second Amendment because "it is settled law ... that the Second Amendment applies only to limitations the federal government seeks to impose on this right." The court noted that, although Heller might have questioned the continuing validity of this principle, Supreme Court precedent directed them to follow Presser because "[w]here, as here, a Supreme Court precedent 'has direct application in a case, yet appears to rest on reasons rejected in some other line of decisions, the Court of Appeals should follow the case which directly controls, leaving to the Supreme Court the prerogative of overruling its own decisions.'" Similarly, in National Rifle Association v. City of Chicago , the U.S. Court of Appeals for the Seventh Circuit (Seventh Circuit) held that the Second Amendment does not apply to the states. Here, the National Rifle Association (NRA) appealed the decision of the lower court to dismiss its suits against two municipalities on the ground that Heller dealt with law enacted under the authority of the national government, while the City of Chicago and Village of Oak Park are subordinate bodies of a state. Although the NRA case was decided after the Ninth Circuit's decision in Nordyke v. King , which held the opposite, the Seventh Circuit stated that the Supreme Court's decisions in Cruikshank , Presser , and Miller still control, as they have direct application in the case. The court noted that, although Heller questioned Cruikshank , this "[did] not license inferior courts to go their own ways.... If a court of appeals may strike off on its own, this not only undermines the uniformity of national law but also may compel the Justices to grant certiorari before they think the question ripe for decision." <4.5.2. The Ninth Circuit Decision> On April 20, 2009, the U.S. Court of Appeals for the Ninth Circuit in Nordyke v. King held that the Due Process Clause of the Fourteenth Amendment incorporated the Second Amendment and applied it against the states and local governments. However, the Chief Judge issued an order on July 29, 2009, stating that the Ninth Circuit would rehear the case en banc and that the three-judge panel decision issued in April 2009 was not to be cited as precedent by or to any court of the Ninth Circuit. Following the McDonald decision, the Ninth Circuit vacated the panel decision and remanded the case for further consideration. Despite these developments, this report examines the April 2009 opinion, as the Court in McDonald followed a similar analysis when it examined the Second Amendment through the Due Process Clause of the Fourteenth Amendment. Nordyke stated that there are three doctrinal ways the Second Amendment could apply to the states: (1) direct application, (2) guaranteed as a right by the Privileges or Immunities Clause of the Fourteenth Amendment, or (3) incorporation by the Due Process Clause of the Fourteenth Amendment. Citing precedent, the court held that it was precluded from finding incorporation through the first two options. The court then embarked on an analysis under the Due Process Clause of the Fourteenth Amendment. It began by noting that "[s]elective incorporation is a species of substantive due process, in which the rights the Due Process Clause protects include some of the substantive rights enumerated in the first eight amendments of the Constitution." The court stated that addressing either selective incorporation, which addresses enumerated rights, or substantive due process, which addresses unenumerated rights, requires the court to answer if "a right is so fundamental that the Due Process Clause guarantees it." To answer this, the Ninth Circuit, although acknowledging other standards used in selective incorporation analyses, applied another standard the Supreme Court used "outside the context of incorporation" to determine whether an individual right unconnected to criminal or trial procedures is a fundamental right protected by substantive due process. Specifically, the Ninth Circuit inquired "whether the right to keep and bear arms ranks as fundamental, meaning 'necessary to an Anglo-American regime of ordered liberty' ... [which compelled them] to determine whether the right is 'deeply rooted in this Nation's history and tradition' (emphasis added)." The inquiry "deeply rooted in this Nation's history and tradition" stems from Moore v. City of East Cleveland , where the Supreme Court recognized a fundamental right to keep family together that includes an extended family. Noting that "incorporation is logically a part of substantive due process," the court in Nordyke applied the standard from Moore because that case noted "the similarity between ... general substantive due process and the incorporation inquiry stated in Duncan [ v. Louisiana ]." As will be seen infra , the Supreme Court in McDonald generally abstained from addressing that its past decisions had linked the Due Process Clause with a substantive due process analysis even though it also utilized the "deeply rooted in our Nation's history" standard. However, Justice Stevens, dissenting, conducted his own substantive due process analysis and concluded that the right is not incorporated. After engaging in a historical analysis of the right during the Founding era, the post-Revolutionary years, and the post-Civil War era, and drawing from some of the Supreme Court's findings in Heller , the Ninth Circuit concluded that the Second Amendment is incorporated and applies against state and local governments because "the crucial role [of this] deeply rooted right ... compels us to recognize that it is indeed fundamental [and] necessary to the Anglo-American conception of the ordered liberty that we have inherited." Typically, when a right is deemed fundamental, the court must use the strict scrutiny test as the standard of review, meaning that "a law will be upheld if it is necessary to achieve a compelling government purpose." Although the Ninth Circuit concluded that the Second Amendment was a fundamental right, it did not apply the strict scrutiny test to the challenged county ordinance. Rather, it noted that the Supreme Court in Heller did not announce a standard of review and held that the challenged ordinance, which prohibited the possession of firearms or ammunition on county property, "fits within the exception from the Second Amendment for 'sensitive places' that Heller recognized." <5. The McDonald v. City of Chicago Decision> On June 28, 2010, the Supreme Court issued its decision in McDonald v. City of Chicago . The petitioners, Otis McDonald and other residents of Chicago and the Village of Oak Park, Illinois, asserted that certain municipal ordinances prevented them from keeping handguns in their homes for self-defense. The Chicago ordinance provided: "No person ... shall ... possess ... any firearm unless such person is the holder of a valid registration certificate of such firearm." The Chicago Code, however, prohibited the registration of most handguns, which "effectively ban[s] handgun possession by almost all private citizens who reside in the City." Similarly, Oak Park made it "unlawful for any person to possess ... any firearm," a term that included "pistols, revolvers, guns and small arms ... commonly known as handguns." Petitioners advocated for incorporation of the Second Amendment against the states either under the Fourteenth Amendment's Privileges or Immunities Clause or under the Fourteenth Amendment's Due Process Clause. It is worth noting that the petitioners devoted much of their brief and oral argument for application of the Second Amendment via the Privileges or Immunities Clause of the Fourteenth Amendment. On the other hand, the NRA, who was recognized by the Court as a "respondent" in support of the petitioners' (McDonald) group, primarily argued for incorporation of the Second Amendment via the Due Process Clause of the Fourteenth Amendment. Although five Justices agreed that the Second Amendment applies to the states, these Justices came to different conclusions as to how the amendment is incorporated, resulting in a fractured opinion. Justice Alito delivered the opinion of the Court and concluded that the Due Process Clause of the Fourteenth Amendment incorporates the Second Amendment. This opinion was joined by Chief Justice Roberts, and Justices Scalia and Kennedy. Justice Thomas, however, filed a concurring opinion in which he concluded that the Privileges or Immunities Clause of the Fourteenth Amendment guarantees the right to keep and bear arms. Two dissenting opinions were filed. Justice Stevens opined that whether the Second Amendment applies should be analyzed under a substantive due process analysis, and that "the analysis should depend on whether there is a constitutionally protected liberty to keep handguns in the home ... which he [consequently] did not believe existed due to the 'fundamentally ambivalent relationship' of firearms to liberty." The second dissenting opinion was authored by Justice Breyer, joined by Justices Ginsburg and Sotomayor, who opined that the history of the right is so uncertain that it does not support incorporation; that determining the constitutionality of a particular state gun law is outside the Court's scope and expertise; and that incorporation would intrude significantly upon state police power. <5.1. Justice Alito's Majority and Plurality Opinion: Incorporation of the Second Amendment via the Due Process Clause of the Fourteenth Amendment> Justice Alito, writing for the Court, revisited the precedents in Barron and Slaughter-House Cases , which precluded application of the Bill of Rights either by direct application or the Privileges or Immunities Clause of the Fourteenth Amendment, respectively. Although Justice Alito, writing for the plurality, declined to disturb these holdings, and further acknowledged that the Court's decisions in Cruikshank , Presser , and Miller held that the Second Amendment applies only to the federal government, he stated that those decisions "do not preclude us from considering whether the Due Process Clause of the Fourteenth Amendment makes the Second Amendment right binding on the States." Before analyzing how the Fourteenth Amendment incorporates the Second Amendment, the Court first examined the evolution of its Due Process Clause analysis. It noted five features of its earlier approach to a Due Process Clause analysis, which included viewing "the due process question as entirely separate from the question whether a right was a privilege or immunity of national citizenship"; the use of "different formulations in describing the boundaries of due process," which included looking to "immutable principles of justice which no member of the Union may disregard," or protecting rights that are "so rooted in the traditions and conscience of our people as to be ranked fundamental," and that are "the very essence of a scheme of ordered liberty ... and essential to 'a fair and enlightened system of justice'"; asking whether any other "civilized system could be imagined" as not affording a particular procedural safeguard before compelling a state to recognize a particular right; recognizing that some rights set out in the Bill of Rights failed to meet the test for inclusion within the protection of the Due Process Clause; and holding that even if a right was protected against state infringement that "the protection or remedies afforded against [the state] sometimes differed from the protection or remedies provided against abridgment by the Federal Government." Out of these five features, the Court pointed out that later cases, which selectively incorporated certain rights, abandoned three of the previously noted characteristics. The Court, instead of examining " any civilized system," now asks "whether a particular guarantee is fundamental to our scheme of ordered liberty and system of justice." The second feature the Court has shed was any prior "reluctance to hold that rights guaranteed by the Bill of Rights met the requirements for protection under the Due Process Clause," stating that the Court has incorporated almost all of its provisions, as discussed above. Lastly, the Court has "abandoned 'the notion that the Fourteenth Amendment applies to the States only a watered-down, subjective version of the individual guarantees of the Bill of Rights,' stating that it would be 'incongruous' to apply different standards 'depending on whether the claim was asserted in a state or federal court.'" With some exceptions, the Court has held that incorporated Bill of Rights protections "'are all to be enforced against the States under the Fourteenth Amendment according to the same standards that protect those personal rights against federal encroachment.'" With this modern framework for analyzing if a right comes under the protection of the Due Process Clause, the Court turned to the issue of whether the Second Amendment was just such a right that was incorporated in the concept of due process. The Court, similar to the Ninth Circuit, analyzed whether "the right to keep and bear arms is fundamental to our scheme of ordered liberty, (citation omitted) or as [it has] said in a related context, whether this right is 'deeply rooted in this Nation's history and tradition' Washington v. Glucksberg , 521 U.S. 702, 721 (1997) (internal quotation marks omitted)." Turning back to its decision in Heller , the Court emphasized self-defense as a basic right that is the "central component" of the Second Amendment right. It reiterated that it had found "the need for defense of self, family, and property [as] most acute" in the home and that the right applies to handguns because they are "the most preferred firearm in the nation to 'keep' and use for protection of one's home and family." Thus, the Court's decision appeared to concentrate on whether the Fourteenth Amendment's Due Process Clause incorporated the Second Amendment as it was defined in Heller , that is, the right to keep and bear arms for a lawful purpose such as self-defense and that it protects those weapons typically possessed by law-abiding citizens for lawful purposes. In the Court's review of historical evidence from both the Framing-era of the Bill of Rights and the ratifying era of the Fourteenth Amendment, it believed it to be "clear that the Framers and ratifiers ... counted the right to keep and bear arms among those fundamental rights necessary to our system of ordered liberty." According to the Court, both Federalists and Antifederalists of the Framing-era considered the right to keep and bear arms as fundamental to the newly formed system of government, but differed as to whether the right was sufficiently protected. Federalists believed that the right was adequately protected due to the limited powers assigned to the federal government, while Antifederalists, who feared that the new federal government would infringe on traditional rights, insisted on the adoption of the Bill of Rights as a condition of ratification. By the mid-19 th century, the Court found that the Second Amendment "was still highly valued for the purposes of self-defense" even though the perceived threat of the federal government's intrusion had faded. According to the Court, in the aftermath of the Civil War, southern states and militia members made "systematic efforts" to disarm African Americans, to which the 39 th Congress decided that legislative action was necessary. The legislative actions included the Freedmen's Bureau Act and the Civil Rights Act of 1866, both of which the Court found demonstrated that the right to keep and bear arms was still recognized as fundamental. Specifically, Section 14 of the Freedmen's Bureau Act provided that "the right ... to have full and equal benefit of all laws and proceedings concerning personal liberty, personal security, and the acquisition, enjoyment, and disposition of estate, real and personal, including the constitutional right to bear arms , shall be secured to and enjoyed by all citizens ... without respect to race or color, or previous condition of slavery (emphasis added)." Section 1 of the Civil Rights Act, similarly, guaranteed the "full and equal benefit of all laws and proceedings for the security of person and property, as is enjoyed by white citizens." Although the Civil Rights Act does not explicitly define the meaning of "all laws and proceedings," the Court stated that Representative Bingham, one of the drafters of the Fourteenth Amendment, believed the act "protected the same rights as enumerated in the Freedmen's Bureau bill." Based on this evidence, the Court concluded that "the Civil Rights Act, like the Freedmen's Bureau Act, aimed to protect 'the constitutional right to bear arms' and not simply to prohibit discrimination" and that "[t]oday, it is generally accepted that the Fourteenth Amendment was understood to provide a constitutional basis for protecting the rights set out in the Civil Rights Act." In addition, the Court presented excerpts of the congressional debates on the Fourteenth Amendment, and from the period immediately following ratification of the amendment, as well as emphasized the number of state constitutions that recognized the right, as evidence that the right to keep and bear arms was considered fundamental. Although the Court found incorporation under the Due Process Clause, the plurality chose to address an argument made by respondents concerning the Privileges or Immunities Clause, specifically that the historical record provides no basis for imposing the Second Amendment on the states, and that Section 1, presumably in its entirety, was "overwhelmingly" viewed by Members of the U.S. House of Representatives as an antidiscrimination rule. The respondents' end point seemed to be that mixed understanding and divided views among 19 th century legislators and legal scholars alike demonstrate that the public could not have understood the reach of the Privileges or Immunities Clause or understood that the Clause incorporated the Bill of Rights. The Court, however, focused on the assertion that Section 1 would only outlaw discriminatory measures and stated five reasons as to why such a construction would be "implausible." These reasons included (1) that if Section 1 did no more than prohibit discrimination, it would be plausible that "the Fourth Amendment, as applied to the states, would not prohibit all unreasonable searches and seizures, but only discriminatory searches and seizure"; (2) that the Freedmen's Bureau Act must be read as more than a simple prohibition of racial discrimination because it would have been nonsensical for Congress to guarantee "the full and equal benefit" of "the constitutional right to bear arms," if it did not exist; and (3) that if the 39 th Congress and the ratifying public had simply prohibited racial discrimination with respect to the bearing of arms, opponents of the Black Codes, laws that deprived blacks of their rights, would have been left without the means of self-defense. <5.2. Justice Thomas's Concurring Opinion: Application of the Second Amendment via the Privileges or Immunities Clause> Although the plurality declined to find incorporation under the Privileges or Immunities Clause, Justice Thomas in his concurring opinion proceeded with his own analysis of the Second Amendment's application through the Clause, because he could "not agree that it is enforceable against the States through a clause that speaks only to 'process.'" Justice Thomas took to task the Court's precedent where it has determined that the Due Process Clause applies to unenumerated rights against the states, believing that "neither its text nor its history suggests that it protects the many substantive rights this Court's cases now claim it does." In acknowledging the numerous cases founded upon the substantive due process framework and the importance of stare decisis , Justice Thomas stated that his only task at hand is to decide "to what extent, [a] particular clause in the Constitution protects the particular right at issue" and that the objective of his inquiry is to "discern what 'ordinary citizens' at the time of ratification would have understood the Privileges or Immunities Clause to mean." First, Justice Thomas found that "the terms 'privileges' and 'immunities' had an established meaning as synonyms for 'rights.'" Second, in tracing the English roots, he concluded that the "[F]ounding generation generally did not consider many of the rights identified in [the] amendments as new entitlements, but as inalienable rights of all men," and that "both the States and Federal Government had long recognized the inalienable rights of state citizenship." Third, he concluded that Article IV, 2, which provides that "[t]he Citizens of each State shall be entitled to all Privileges and Immunities of Citizens in the several States," protected traveling citizens against state discrimination with respect to the fundamental rights of state citizenship. Noting textual similarity between Article IV, 2 and that of the Privileges or Immunities Clause ( 1) of the Fourteenth Amendment, Justice Thomas stated that "it can be assumed that the public's understanding of the latter was informed by its understanding of the former." Therefore, to determine whether the Second Amendment was one of the rights guaranteed in the Fourteenth Amendment's Privileges or Immunities Clause, he explored two remaining questions. First, he asked if "the privileges or immunities of 'citizens of the United States' recognized by 1 [are] the same as the privileges and immunities of 'citizens in the several States' to which Article IV, 2 refers?" To a certain extent, Justice Thomas implicitly answered this question by referring to some instances where politicians debating the Fourteenth Amendment and legal commentators equated the privileges and immunities of 1 to those referred to in Article IV, 2. However, much of Justice Thomas's analysis focused on presenting evidence, such as treaties, congressional speeches, and legislation of the era. From these various sources, Justice Thomas concluded that the "evidence overwhelmingly demonstrates" that "the ratifying public understood the Privileges or Immunities Clause to protect constitutionally enumerated rights, including the right to keep and bear arms." The second question asked is if " 1 [of the Fourteenth Amendment], like Article IV, 2 prohibits only discrimination with respect to certain rights if the State chooses to recognize them, or does it require States to recognize those rights?" Or, more specifically applied to the right at issue, "whether the Privileges or Immunities Clause merely prohibits States from discriminating among citizens if they recognize the Second Amendment's right to keep and bear arms, or whether the Clause requires States to recognize the right." In his analysis, Justice Thomas seemed to answer this question by stating "it was understood that liberty would be assured little protection if 1 left each State to decide which privileges or immunities of United States citizenship it would protect." However, a greater part of his discussion to this second question was devoted to why the Privileges or Immunities Clause protects against more than just state discrimination and establishes a "minimum baseline of rights for all American citizens." First, Justice Thomas pointed out that the Privileges or Immunities Clause uses the verb "abridge" rather than "discriminate," to describe the limit it imposes on state authority ("[n]o State shall"). He referred to the dictionary which defines the word "abridge" to mean "[t]o deprive; to cut off ... as, to abridge one of his rights." Thus, a plain reading of the Clause indicates that it is meant to impose a limitation on state power to infringe upon pre-existing substantive rights and does not indicate that the Framers of the Clause used "abridge" to prohibit only discrimination. Second, Justice Thomas presented several reasons as to the lack of discussion on this Clause and Section 1 to rebut the "typical" argument that because there was no extensive public discussion on the Clause, that it must "not have been understood to accomplish such a significant task of subjecting States to federal enforcement of minimum baseline of rights." He, instead, looked to historical events that "underscored the need for, and wide agreement upon, federal enforcement of constitutionally enumerated rights against the States, including the right to keep and bear arms." Chronicling the many instances prior to, and after, the Civil War where pro-slavery forces and southern legislatures enacted laws that "repressed virtually every right recognized in the Constitution" including prohibiting blacks from carrying or possessing firearms, Justice Thomas, reiterating the Court, stated that "if the Fourteenth Amendment 'had outlawed only those laws that discriminate on the basis of race or previous condition of servitude, African-Americans in the South would likely have remained vulnerable to attack by many of their worst abusers: the state militia and state peace officers.'" In other words, because evidence demonstrates that the intent was to protect blacks from such abuses, the Clause, contrary to respondents' claim, cannot simply be about protection from discriminatory state laws, as a nondiscriminatory law banning firearm possession outright would have still "left firearms in the hands of militia and local peace officers." Building upon his Privileges or Immunities Clause analysis, Justice Thomas concluded that "history confirms what the text of the ... Clause most naturally suggests: ... that '[n]o State shall ... abridge' the rights of United States citizens, the Clause establishes a minimum baseline of federal rights, and the constitutional right to keep and bear arms plainly was among them." <5.3. Justice Stevens's Dissenting Opinion: No Incorporation Under a Substantive Due Process Analysis> Justice Stevens began his dissent by rephrasing the question presented. Rather than asking if the Fourteenth Amendment incorporates the Second Amendment, a question he believed to be settled by the Cruickshank , Presser , and Miller decisions, the question he posed was "whether the Constitution 'guarantees individuals to a fundamental right,' enforceable against the States, 'to possess a functional, personal firearm, including a handgun, within the home.'" He stated that the Court's decisions that render procedural guarantees in the Bill of Rights enforceable against the states have little impact on the meaning of the word "liberty" in the Clause or about the scope of its protection of nonprocedural rights, such as the Second Amendment. Asserting that a substantive due process analysis must be used to determine if the Second Amendment should be applied to the states, his dissent provided a "fresh survey of this old terrain." Justice Stevens presented three general principles elicited from the Court's substantive due process case law. First, he stated "that the rights protected by the Due Process Clause are not merely procedural in nature." A second principle made clear by case law is that substantive due process is fundamentally a matter of personal liberty, in which it must be asked if the interest asserted is "compromised within the term liberty." The third principle derived from case law is that "the rights protected against state infringement by the Fourteenth Amendment's Due Process Clause need not be identical in shape or scope to the rights protected against Federal Government infringement by the various provisions of the Bill of Rights." He also forewarned that "the costs of federal courts' imposing a uniform national standard may be especially high when the relevant regulatory interests vary significantly across localities, and when the ruling implicates the States' core police powers." Justice Stevens disagreed with the plurality that the historical pedigree of a right is dispositive of its status under the Due Process Clause, and its suggestion "that only interests that have proved 'fundamental from an American perspective,' ... or 'deeply rooted in this Nation's history and tradition,' to the Court's satisfaction, may qualify for incorporation into the Fourteenth Amendment." He stated that although the tests have varied, the Court "has been largely consistent in its liberty-based approach to substantive interests outside of the adjudicatory system," and that the focus has been "not so much on the historical conceptions of the guarantee as on its functional significance within the States' regimes." With this framework, Justice Stevens believed it necessary to examine the "nature of the right that petitioners have asserted," and "whether [the right asserted] is an aspect of Fourteenth Amendment 'liberty.'" Finding the gravamen behind petitioners' complaint plainly to be "an appeal to keep a handgun or other firearm of one's choosing in the home," Justice Stevens stated that the petitioners' argument "has real force" but felt that a number of factors supported the respondents. First, Justice Stevens stated that "firearms have a fundamentally ambivalent relationship to liberty." On the one hand, "[g]uns may be useful for self-defense, as well as hunting and sport, but they also have a unique potential to facilitate death and destruction and thereby to destabilize ordered liberty." Second, "the right to possess a firearm of one's choosing is different in kind from the liberty interests [the Court] has recognized under the Due Process Clause" and that is "not the kind of substantive interest ... on which a uniform, judicially enforced national standard is presumptively appropriate." Third, the experience of other advanced democracies undermines "the notion that an expansive right to keep and bear arms is intrinsic to ordered liberty." Fourth, Justice Stevens reasoned that the Second Amendment differs from the other Amendments in that it is a federalism provision and that "it is directed at preserving the autonomy of the sovereign States, and its logic therefore 'resists' incorporation by a federal court against the States." In other words, because the Second Amendment, like the Tenth Amendment, exists for the vitality of the states, one cannot argue that it applies to the states. Furthermore, Justice Stevens stated the reasons that motivated the Framers or Reconstruction Congress to act "have only a limited bearing on the question that confronts the homeowner in a crime-infested metropolis today." Fifth, he emphasized that the "idea that States may place substantial restrictions on the right to keep and bear arms short of complete disarmament, is in fact, far more entrenched than the notion that the Federal Constitution protects any such right." Agreeing with the Seventh Circuit that "[f]ederalism is a far 'older and more deeply rooted tradition than is a right to carry,' or to own, 'any particular kind of weapon,'" Justice Stevens noted that the Court's ruling in particular will take a "heavy toll in terms of state sovereignty." Lastly, due to the varying patterns of gun violence and traditions and cultures of lawful gun use across the states and localities, among other things, Justice Stevens asserted that even if the Court could assert a plausible constitutional basis for intervening, that it should not necessarily do so. Justice Scalia also wrote a concurring opinion, which takes issue with the substantive due process, or "liberty clause" analysis espoused by Justice Stevens. Justice Scalia primarily critiqued the subjective nature of the standard proposed by the dissent, stating that any of the guideposts or constraints listed by Justice Stevens still leaves too much power in the hands of judges, ultimately depriving people of power. <5.4. Justice Breyer's Dissenting Opinion: No Incorporation Under Due Process Clause> Justice Breyer issued a separate dissenting opinion, in which Justices Ginsburg and Sotomayor joined. Noting Justice Stevens's conclusion that the Fourteenth Amendment's guarantee of substantive due process does not include a general right to keep and bear firearms for purposes of self-defense, Justice Breyer chose to consider separately the question of "incorporation" as the Court had done so when it asked "if the Second Amendment right to private self-defense is 'fundamental' so that it applies to the States through the Fourteenth Amendment." In short, Justice Breyer concluded that he could "find nothing in the Second Amendment's text, history, or underlying rationale that could warrant characterizing it as 'fundamental' insofar as it seeks to protect the keeping and bearing of arms for private-self-defense purposes." First, Justice Breyer revisited the Heller decision by stating that the Court had based its conclusion "almost exclusively upon its reading of history." Yet, he cited numerous articles by historians, scholars, and judges that the history underlying the Heller decision is far from clear. Given the Court's emphasis on the historical pedigree of the right, he thus posited "where Heller 's historical foundations are so uncertain, why extend its applicability?" However, Justice Breyer expressed that the Court "has never stated that the historical status of a right is the only relevant consideration," but rather it has asked if the "right in question has remained fundamental over time." Furthermore, he opined that the Court should look to other factors where history does not provide a clear answer. These factors include "the nature of the right; any contemporary disagreement about whether the right is fundamental; the extent to which incorporation will further other ... constitutional aims; and the extent to which incorporation will advance or hinder the Constitution's structural aims, including its division of powers among different governmental institutions." Justice Breyer applied these factors to the "private right of self-defense" as it is considered "the central component" of the Second Amendment by the Court in Heller . With respect to these factors, he found (1) that there is disagreement, or no consensus, that the private right of self-defense is fundamental; (2) that there is no reason to believe that incorporation will further any broader constitutional objectives; and (3) that incorporation of the right will disrupt the constitutional allocation of decision-making authority. Justice Breyer gave several reasons in support of this last factor, including that incorporation of the right recognized in Heller "would amount to an incursion on a traditional and important area of state concern, altering the constitutional relationship between the States and the Federal Government." Additionally, because "determining the constitutionality of a particular state gun law requires finding answers to complex empirically based questions," he made the case that the courts are not suited with either the expertise or the tools to weigh the constitutional right to bear arms "against the 'primary concern of every government a concern for the safety and indeed the lives of its citizens'" (citation omitted). In light of these factors, he suggested that the Court could proceed in examining state gun regulation by "adopting a jurisprudential approach similar to the many state courts that administer a state constitutional right to bear arms." However, he noted that the Court has not only not done so, but also rejected an "interest-balancing approach" similar to that utilized by the states. Second, Justice Breyer returned to examine history after determining that none of the factors supported incorporation. Because the Court examined whether the interests the Second Amendment protects are "deeply rooted in this Nation's history and tradition," Justice Breyer declared that the question, thus, is not whether there are references to the right to bear arms for self-defense throughout the Nation's history as there naturally would be, but rather "whether there is a consensus that so substantial a private self-defense right as the one described in Heller applies to the States." Although the Court in Heller collected much evidence, Justice Breyer stated that he found "no more than ambiguity and uncertainty" when he supplemented the findings in Heller with additional historical facts from the 18 th , 19 th , 20 th , and 21 st centuries. He declared that "a historical record that is so ambiguous cannot itself provide an adequate basis for incorporating a private right of self-defense and applying it against the States." The plurality opinion criticized Justice Breyer's dissent on four grounds. First, it did not approve of his assertion that "there is no popular consensus" that the right is fundamental, stating that the Court has never used "popular consensus" as a rule for finding incorporation. Second, the plurality did not agree with his argument that "the right does not protect minorities or persons holding political power" when he argued that incorporation should not be found because the right at issue does not further any broader constitutional objective. The plurality countered by citing petitioners' and other supporting briefs' claims that the right is especially important for women and members of groups vulnerable to crime as evidence that the Second Amendment right protects "the rights of minorities and other residents of high-crime areas whose needs are not being met by elected public officials." Third, the plurality agreed with Justice Breyer that incorporation will limit the legislative freedom of the states, but it was not convinced that this argument was persuasive in finding a lack of incorporation, given that a limitation on the states always exists when a provision is incorporated. Last, the plurality disagreed with Justice Breyer's argument that "incorporation will require judges to assess the costs and benefits of firearms restrictions," because "[t]he very enumeration of the right takes out of the hands of government ... the power to decide on a case-by-case basis whether the right is really worth insisting upon"(emphasis in the original). <5.5. The Second Amendment Post-McDonald> Although holding that the Second Amendment as recognized in Heller applies to the states, the Court did not decide whether the challenged municipal ordinances were in violation of the amendment, leaving the question for the lower court to examine. Because the McDonald decision was thus limited, a number of questions unanswered by the Court in Heller still remain, most of which are concerned with the scope of the Second Amendment. First, what standard of judicial scrutiny will be used to decide if a firearms law is in violation of the Second Amendment? As discussed above, the Court in Heller did not specify a particular level of scrutiny, instead stating that the three challenged District of Columbia firearms provisions were unconstitutional "[u]nder any of the standards of scrutiny that we have applied to enumerated constitutional rights." The Court in Heller rejected a rational basis standard as well as Justice Breyer's proposed "interest-balancing" inquiry, which would have examined "whether the statute burdens a protected interest in a way that is out of proportion to the statute's salutary effects upon other important governmental interests." (For more of the Court's discussion of the standard of scrutiny in Heller , see " The Second Amendment Post- Heller "). Since McDonald , the U.S. Court of Appeals for the Third Circuit (Third Circuit), in United States v. Marzzarella , attempted to draw a framework for how to approach such cases when it held that a federal ban on possession of unmarked firearms was constitutional. The Third Circuit noted that Heller suggested a two-pronged approach: First, we ask whether the challenged law imposes a burden on conduct falling within the scope of the Second Amendment's guarantee (citations omitted). If it does not, our inquiry is complete. If it does, we evaluate the law under some form of means-end scrutiny. If the law passes muster under the standard, it is constitutional. If it fails, it is invalid. With respect to the challenged federal statute, the defendant argued that because firearms in common use in 1791 did not have serial numbers, the Second Amendment must protect firearms without serial numbers. The court was not convinced by this argument because it found that "it would make little sense to categorically protect a class of weapons bearing a certain characteristic wholly unrelated to their utility. ... The mere fact that some firearms possess a nonfunctional characteristic should not create a categorically protected class of firearms on the basis of that characteristic." The court was further skeptical of the defendant's argument that "possession in the home is conclusive proof that 922(k) regulates protected conduct." Nonetheless, the court assumed that 18 U.S.C. 922(k) burdened the defendant's Second Amendment right. Looking to First Amendment jurisprudence for guidance, the court noted that even an enumerated, fundamental right may be subjected to varying levels of scrutiny depending on the circumstances. The court noted that 922(k) "does not severely limit the possession of firearms," and still pass muster because the statute is narrowly tailored to achieve the government's compelling interest in preserving serial numbers for tracing purposes. Second, does the Second Amendment right for purposes of lawful self-defense extend only to the home? In both Heller and McDonald , the provisions challenged were those that prevented handgun possession in the home, and in each case the Supreme Court stressed the right of self-defense within the home as being central component of the right to keep and bear arms. However, the Court did not make clear if this similar protective right extend to a vehicle, a temporary living space, a place of business, or in public places? Heller mentioned the possibility that the self-defense right has the potential to extend further upon "future evaluation." Third, what types of regulations would be burdensome enough to infringe on the Second Amendment right? Both Heller and McDonald emphasized that the right to keep and bear arms is not "a right to keep and carry any weapon whatsoever in any manner whatsoever and for whatever purpose." The Court further repeated assurances that its holding "does not imperil every law regulating firearms," and "[does] not cast doubt on [] longstanding regulatory measures [such] as 'prohibitions on the possession of firearms by felons and the mentally ill,' 'laws forbidding the carrying of firearms in sensitive places such as schools and government buildings, or laws imposing conditions and qualifications on the commercial sale of arm.'" Heller indicated that mere regulation of a right would not sufficiently infringe upon, or burden, the Second Amendment right, when it pointed out that certain colonial-era ordinances did not "remotely burden the right of self-defense as much as an absolute ban on handguns." In other words, it appears that to be burdensome, a regulation must also substantially burden the self-defensive right. Fourth, what types of weapons will fall within the protection of the Second Amendment? Heller determined that the Second Amendment protection extends to weapons that are "in common use at the time," and not those that are "dangerous and unusual." The Court in Heller made clear that the Second Amendment protects handguns, as it found them to be a common weapon "overwhelmingly chosen by American society" for purposes of self-defense, but not other weapons such as machine guns, short-barreled rifles and shotguns, or grenade launchers. However, it is unclear if other types of so-called "assault" weapons, martial arts weapons, and clubs will be protected under the Second Amendment. There have been recent challenges to state and local "assault weapons" bans, which have been upheld. In 2009, the California Court of Appeals in People v. James considered Heller 's impact on California's Roberti-Roos Assault Weapons Control Act of 1989, which several localities like the District of Columbia and Cook County, Illinois have mirrored. In James , the court declared that the prohibited weapons on the state's list "are not the types of weapons that are typically possessed by law-abiding citizens for lawful purposes such as sport hunting or self-defense; rather these are weapons of war." It concluded that the relevant portion of the act did not prohibit conduct protected by the Second Amendment as defined in Heller and therefore the state was within its ability to prohibit the types of dangerous and unusual weapons an individual can use. It is highly likely that these last three questions, which center on the scope of the Second Amendment, will result in future litigation. As courts begin to tackle these questions, they may draw from the Third Circuit's framework or develop their own standards. For example, since the Marzzarella decision, the U.S. Court of Appeals for the Seventh Circuit in United States v. Skoien rejected a Second Amendment challenge to 18 U.S.C. 922(g)(9) prohibiting persons convicted of misdemeanor crimes of domestic violence from possessing firearms on the basis that "logic and data" demonstrate "a substantial relation between 922(g)(9) and [an important governmental] objective." Faced with evaluating the same federal provision as in Skoien , the U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) in United States v. Chester issued a decision to provide district courts in its circuit guidance on the framework for deciding Second Amendment challenges. The Fourth Circuit followed the two-pronged approach delineated in Marzzarella , that is, the first, a historical inquiry "seeks to determine whether the conduct at issue was understood to be within the scope of the right at the time of ratification," and second, if the regulation burdens the conduct that was within the scope of the Second Amendment as historically understood, "then we move up to the second step of applying the appropriate form of means-end scrutiny." Although the Fourth Circuit remanded the case to the district court, it noted that 922(g)(9), like 922(g)(1) prohibiting convicted felons from possession requires the court to evaluate whether a person, rather than a person's conduct, is unprotected by the Second Amendment, and that "the historical data is not conclusive on the question of whether the Founding era understanding was that the Second Amendment did not apply to felons." Thus, as in Mar zza rella , the Fourth Circuit assumed, due to lack of historical evidence, that the defendant was entitled to some Second Amendment protection to keep and possess firearms in his home for self-defense. For this defendant and other similarly situated persons, the court declared that the government, upon remand, must meet the intermediate scrutiny standard and not strict scrutiny, because the defendant's claim "was not within the 'core right' identified in Heller the right of a law-abiding , responsible citizen to possess and carry a weapon for self-defense by virtue of [the defendant's] criminal history as a domestic violence misdemeanant." (emphasis in the original).

In District of Columbia v. Heller, the Supreme Court of the United States ruled in a 5-4 decision that the Second Amendment to the Constitution of the United States protects an individual right to possess a firearm, unconnected with service in a militia, and the use of that firearm for traditionally lawful purposes, such as self-defense within the home. The decision in Heller affirmed the decision of the Court of Appeals for the District of Columbia, which declared three provisions of the District of Columbia's Firearms Control Regulation Act unconstitutional. The provisions specifically ruled on were: DC Code § [phone number scrubbed].02, which generally barred the registration of handguns; DC Code § 22-4504, which prohibited carrying a pistol without a license, insofar as the provision would prevent a registrant from moving a gun from one room to another within his or her home; and 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. In noting that the District's approach "totally bans handgun possession in the home," the Supreme Court declared that the inherent right of self-defense is central to the Second Amendment right, and that the District's handgun ban amounted to a prohibition of an entire class of arms that has been overwhelmingly utilized by American society for that purpose. The Court in Heller conducted an extensive analysis of the Second Amendment to interpret its meaning, but the decision left unanswered other significant constitutional questions, including the standard of scrutiny that should be applied to laws regulating the possession and use of firearms, and whether the Second Amendment is incorporated, or applies to, the states. After Heller, three federal Courts of Appeals addressed the question of incorporation. Two of these decisions, from the U.S. Courts of Appeals for the Second Circuit and the Seventh Circuit, held that the Second Amendment did not apply to the states, whereas the Court of Appeals for the Ninth Circuit held that the Second Amendment is incorporated under the Due Process Clause of the Fourteenth Amendment, although this decision has since been vacated. In McDonald v. City of Chicago, the Court reversed the decision of the Court of Appeals for the Seventh Circuit, and held that the Second Amendment applies to the states. With respect to the Heller decision, this report provides an overview of judicial treatment of the Second Amendment over the past 70 years in both the Supreme Court and federal appellate courts. With respect to the McDonald decision, this report presents an overview of the principles of incorporation, early cases that addressed the application of the Second Amendment to state governments, and the federal appellate cases that addressed incorporation of the Second Amendment since the Heller decision. Lastly, this report provides an analysis of the Court's opinions in Heller and McDonald and the potential implications of these decisions for firearms legislation at the federal, state, and local levels.

<1. Introduction> Introduced in various incarnations in every congressional session since the 103 rd Congress, the proposed Employment Non-Discrimination Act (ENDA; H.R. 1755 / S. 815 in the 113 th Congress) would prohibit discrimination based on an individual's actual or perceived sexual orientation or gender identity by public and private employers in hiring, discharge, compensation, and other terms and conditions of employment. The stated purpose of the legislation is "to address the history and persistent, widespread pattern of discrimination, including unconstitutional discrimination, on the basis of sexual orientation and gender identity by private sector employers and local, State, and Federal Government employers," as well as to provide effective remedies for such discrimination. Specific exemptions from coverage are included for religious organizations and educational institutions, the armed services, and employers with fewer than 15 employees. Preferential treatment or quotas on the basis of sexual orientation or gender identity and "disparate impact" claims of discrimination would be specifically precluded. Patterned on Title VII of the Civil Rights Act of 1964, the act would be enforced by the Equal Employment Opportunity Commission (EEOC). Although earlier versions of the legislation, dating back to 1975, proposed simply amending the provisions of Title VII to add "sexual orientation" to categories of discrimination already prohibited, more recent versions of ENDA have proposed a stand-alone legislative safeguard against sexual orientation and gender identity discrimination in employment. Because the proposed legislation incorporates by reference many of Title VII's provisions, it is similar in scope to the earlier law. However, because discrimination on the basis of sexual orientation and gender identity was not before Congress when it enacted Title VII, the measures also differ in several significant respects. On November 7, 2013, the Senate passed ENDA. Because several amendments were adopted during the markup process and floor vote, the final version differs in several respects from the House version of the bill. Where relevant, these differences are identified in this report. <2. Coverage> Like Title VII, ENDA would prohibit employers, employment agencies, and labor organizations from discriminating on the basis of sexual orientation or gender identity. Both public and private employers would be covered, although private employers who have fewer than 15 employees would be exempt. Like Title VII, ENDA would define "employer" to exclude "bona fide private membership" clubs that qualify for federal tax exemptions. As described in greater detail below, religious organizations and the Armed Forces would also be specifically excluded from coverage under the legislation. Likewise, most public and private employees would be protected by ENDA, including employees covered by the Government Employee Rights Act of 1991 and the Congressional Accountability Act of 1995. Volunteers who receive no compensation, however, would not be covered under the legislation. <3. Prohibited Acts> If enacted, ENDA would make it an unlawful employment practice for an employer to discriminate against an individual "because of such individual's actual or perceived sexual orientation or gender identity." The legislation's delineation of prohibited employment practices substantially tracks the catalogue of employer malfeasance condemned by Title VII, which generally makes it unlawful for employers with 15 or more employees, employment agencies, and labor organizations to discriminate against employees or applicants for employment because of race, color, religion, sex, or national origin. Thus, all forms of employment and pre-employment bias would be forbidden, including discrimination in hiring, discharge, promotion, layoff and recall, compensation and fringe benefits, classification, training, apprenticeship, referral, union membership, and other "terms, conditions, or privileges of employment." Likewise, employers would not be allowed to "limit, segregate, or classify" employees in ways that "deprive or tend to deprive" them of job opportunities or "adversely affect" their employment status. A comparable range of employment agency and labor organization practices, again largely borrowed from Title VII, would be prohibited by ENDA, which also would prohibit discrimination in apprenticeship or training programs. In addition, the legislation incorporates Title VII language that would specifically prohibit retaliation against employees who complain of discriminatory conduct. Despite these similarities with respect to prohibited acts, ENDA would differ from Title VII in several significant ways. For example, one provision without direct parallel in Title VII's statutory text would make an employer liable for employment actions that are "based on the sexual orientation or gender identity of a person with whom the individual associates or has associated." Another provision would narrow the evidentiary options available in sexual orientation and gender identity cases by stipulating that employees may bring only disparate treatment claims, meaning that disparate impact claims would be prohibited. Disparate treatment generally occurs when an employer intentionally discriminates against an employee by treating a similarly situated employee differently, while disparate impact occurs when an employer's acts or policies are facially neutral but have an adverse effect on a class of employees and are not otherwise reasonable. Proof of intent to discriminate is required to prove a disparate treatment claim, but is not required to establish a disparate impact claim, which can often be proved through the use of statistics. Because disparate impact claims would not be allowed under ENDA, a plaintiff would have to prove that an employer intended to discriminate, a higher evidentiary threshold. Reinforcing this limitation is another provision that would bar the EEOC from requiring employers to collect or provide statistics on sexual orientation and gender identity. However, nothing in ENDA would prohibit employers from voluntarily submitting such statistics to the EEOC. In addition to these provisions, the ENDA legislation would clarify that preferential treatment or quotas on the basis of sexual orientation or gender identity would not be required. Likewise, employers would not be prohibited from requiring employees to adhere to reasonable dress or grooming standards, as long as the employer permits employees who have undergone gender transition to comply with the same dress or grooming standards for the gender to which the employee has transitioned or is transitioning. Finally, ENDA states that nothing in the act should be construed to require construction of new or additional facilities. In addition, the Senate version of ENDA was amended during markup in the Committee on Health, Education, Labor, and Pensions. The amended bill contains several additional requirements, including a provision that would bar individuals who sue under both ENDA and Title VII from being awarded remedies under both statutes, as well as a section that would authorize mixed-motive claims, which generally involve employment actions that are based on both permissible and impermissible reasons. In addition, the committee-approved version of ENDA would revise the bill's attorney's fees provisions (discussed below) by clarifying that authority to award such fees would be limited "to the same extent as is permitted under Title VII.... " <3.1. Sexual Orientation> As noted above, ENDA would prohibit employment discrimination on the basis of actual or perceived sexual orientation. "Sexual orientation" would be defined to mean "homosexuality, heterosexuality, or bisexuality." In contrast, Title VII's prohibition against discrimination on the basis of sex has consistently been interpreted to exclude discrimination on the basis of sexual orientation. Although some have argued that sex discrimination encompasses sexual orientation discrimination, the courts have generally rejected that theory, reasoning that the prohibition against sex discrimination refers only to the traditional definition of biological sex. Because Title VII does not protect against employment discrimination on the basis of sexual orientation, ENDA would significantly expand the scope of protection under current employment discrimination law. It is important to note, however, that courts have held that the fact that a victim of discrimination is gay or bisexual does not preclude a claim under Title VII. For example, in some cases, courts have allowed Title VII claims to proceed when an individual who is gay can demonstrate that he or she was the victim of unlawful sex discrimination in the form of sexual harassment or gender stereotyping. In the context of sexual harassment, recent court decisions have been guided by the Supreme Court's decision in Oncale v. Sundowner Offshore Services . In that case, a male employee suffered physical abuse of a sexual nature, but his claims of sexual harassment were initially denied because the lower court held that same-sex sexual harassment is not actionable under Title VII. The Supreme Court reversed, holding that, in cases of alleged sexual harassment, the gender of the victim and harasser are not dispositive, but rather the critical question is whether the harassment occurred "because of sex." The Court also recognized that an inference that harassment is "because of sex" is not obvious where the harasser and the victim are of the same sex, but provided three examples of how such an inference could be established: (1) if the harasser sexually desired the victim; (2) if the harasser was hostile to the presence of one sex in the workplace; or (3) if comparative data showed that the harasser targeted only members of one sex. Based upon the Supreme Court's opinion in Price Waterhouse v. Hopkins , individuals who are gay may also prevail under Title VII when an employer discriminates based on the employee's failure to conform to sex stereotypes. In Price Waterhouse , a female employee was denied partnership in an accounting firm, despite the fact that she was regarded as a high performer. Furthermore, partners in the firm had instructed her to act more femininely in order to be considered for a partnership in the future. The Court held that Price Waterhouse was applying standards for partnership in a prohibited sexually disparate manner, in that Title VII did not permit an employer to evaluate female employees based upon their conformity with the employer's stereotypical view of femininity. As a result, harassment of an individual for failure to conform to sex stereotypes could constitute harassment "because of sex," even if the animosity towards nonconformance is caused by a belief that such behavior indicates homosexuality. Based on these decisions, it appears that individuals who are gay may currently be protected under Title VII if they are discriminated against because of sex. However, such individuals would not be protected by current law if they were the victim of discrimination on the basis of sexual orientation, a situation that ENDA appears designed to remedy. It is important to note that ENDA states that the act should not be construed to invalidate or limit rights under any other federal or state law. Therefore, ENDA would not appear to alter the current protections that may be available to individuals who are gay under Title VII or state law. <3.2. Gender Identity> ENDA would also prohibit employment discrimination on the basis of actual or perceived gender identity. "Gender identity" would be defined to mean "the gender-related identity, appearance, or mannerisms or other gender-related characteristics of an individual, with or without regard to the individual's designated sex at birth." Under current law, Title VII does not expressly prohibit gender identity discrimination. Nonetheless, there have been cases interpreting Title VII's prohibition against sex discrimination to cover gender and/or gender identity. Although the majority of federal courts to consider the issue have concluded that discrimination on the basis of gender identity is not sex discrimination, there have been several courts that have reached the opposite conclusion in the years since the Supreme Court's decision in Price Waterhous e . As noted above, the Price Waterhouse decision, in which the Court repeatedly declared that Title VII bars discrimination on the basis of "gender," held that discrimination against a female employee who did not conform to socially constructed gender expectations constituted unlawful gender discrimination in violation of Title VII. Since Price Waterhouse , several courts have openly speculated that the Price Waterhouse decision "seem[s] to indicate that the word 'sex' in Title VII encompasses both gender and sex, and forbids discrimination because of one's failure to act in a way expected of a man or a woman." For example, in Smith v. Salem , a male firefighter who was undergoing gender transition to female argued that he had been suspended because of his feminine appearance. The U.S. Court of Appeals for the Sixth Circuit held that, to the extent that the firefighter asserted that she experienced discriminatory treatment due to the fact that she did not conform to what her employer believed males should look and act like, she had sufficiently plead a prima facie case of sex discrimination. Similarly, in Barnes v. Cincinnati , a male police officer undergoing gender transition to female was denied a promotion because she acted too femininely in her supervisors' opinions. More recently, the EEOC adopted a similar interpretation of Title VII. In Macy v. Holder , a job applicant alleged that she had been hired for a position in the Bureau of Alcohol, Tobacco, Firearms and Explosives but was subsequently denied the job when she informed the agency that she was undergoing a gender transition. The EEOC ruled that intentional discrimination based on gender identity is sex discrimination and therefore permitted the complainant's Title VII claim to proceed. Although this administrative decision is not binding on the federal courts, it could have a significant enforcement effect, given that the EEOC is responsible for handling initial claims processing for employment discrimination complaints. Meanwhile, the U.S. Court of Appeals for the Eleventh Circuit reached a similar conclusion on constitutional grounds in a case involving a Georgia state employee who was fired from her job for being transgender. According to the court, "[w]e conclude that a government agent violates the Equal Protection Clause's prohibition of sex-based discrimination when he or she fires a transgender or transsexual employee because of his or her gender non-conformity." Although some courts have held that Title VII's prohibition against sex discrimination may encompass claims based on gender identity when unlawful gender stereotyping is involved, the courts have not recognized gender identity discrimination on its own to be an unlawful employment practice under Title VII. As a result, ENDA would expand the scope of protection under current employment law by explicitly prohibiting gender identity discrimination. As noted above, ENDA states that the act should not be construed to invalidate or limit rights under any other federal or state law. Therefore, ENDA would not appear to alter the current protections based on gender identity that may be available under Title VII or state law. <4. Exceptions for the Armed Forces and Religious Organizations> ENDA contains several exceptions. First, the Armed Forces, which include the Army, Navy, Air Force, Marines, and Coast Guard, would be exempt, and the legislation specifies that current laws regarding veterans' preferences in employment would not be affected. The courts have similarly held that uniformed military personnel are not covered by Title VII, although civilian military employees are protected by Title VII. Notably, certain religious organizations would also be exempt from coverage under ENDA. This exemption is consistent with previous congressional efforts to avoid infringing on a religious organization's exercise of religion with respect to its employment practices, such as the Title VII provision that exempts certain religious organizations from compliance with that statute. In that sense, ENDA would expand the current protection offered to religious organizations relating to discrimination in employment practices. Title VII includes two exceptions that allow certain employers to consider religion in employment decisions. Specifically, the prohibition against religious discrimination does not apply to "a religious corporation, association, educational institution, or society with respect to the employment of individuals of a particular religion to perform work connected with the carrying on by such corporation, association, educational institution, or society of its activities." The prohibition also does not apply to religious educational institutions if the institution "is, in whole or in substantial part, owned, supported, controlled, or managed by a particular religion or by a particular [organization], or if the curriculum of the [institution] is directed toward the propagation of a particular religion." These exemptions are sometimes referred to as sections 702(a) and 703(e)(2), respectively. The Title VII exemptions apply with respect to discrimination based on religion only and do not allow qualifying organizations to discriminate on any other basis forbidden by Title VII, such as race, color, national origin, or sex. Like Title VII, ENDA "shall not apply to a corporation, association, educational institution or institution of learning, or society that is exempt from the religious discrimination provisions of title VII of the Civil Rights Act of 1964 pursuant to section 702(a) or 703(e)(2) of such Act." By exempting the organizations covered by the 702(a) and 703(e)(2) exemptions of Title VII, ENDA ensures that such organizations would not be required to hire or retain an individual if the organization had objections to the individual's sexual orientation or gender identity. Notably, the language of Title VII does not appear to require that the organization's religious beliefs oppose certain sexual orientations or gender identifications. In other words, the ENDA exemption does not appear to limit the permissibility of religious organizations' discrimination based on sexual orientation or gender identity to instances in which those factors may conflict with religious beliefs. For example, under the legislation, even religious organizations whose religious teachings do not oppose homosexuality could be permitted to refuse to hire a gay applicant. Thus, the proposed legislation likely would not interfere with religious organizations' employment practices involving considerations of sexual orientation or gender identity of employees and applicants. To the contrary, it may actually broaden these organizations' ability to discriminate in hiring. In this sense, the ENDA exception goes farther than the Title VII exception, which allows religious employers to discriminate on the basis of religion but not on the basis of race, color, national origin, or sex. The question of what organizations would be covered by the ENDA exemption may be resolved by looking at organizations that have sought protection under the relevant Title VII exemptions. Title VII did not define what organizations would qualify for an exemption under the statute, and court decisions have indicated several factors relevant to deciding whether an organization qualifies, including (1) the purpose or mission of the organization; (2) the ownership, affiliation, or source of financial support of the organization; (3) requirements placed upon staff and members of the organization (faculty and students if the organization is a school); and (4) the extent of religious practices in or the religious nature of products and services offered by the organization. No single factor appears to be dispositive and as one federal court has noted, "the decision whether an organization is 'religious' for purposes of the exemption cannot be based on its conformity to some preconceived notion of what a religious organization should do, but must be measured with reference to the particular religion identified by the organization." Organizations may qualify for an exemption if their purpose, character, and operations incorporate elements of their religion. For example, in LeBoon v. Lancaster Jewish Community Center Association , a Jewish community center qualified for an exemption under Title VII when it terminated the employment of a Christian employee. The center's stated mission was to promote Jewish life and values, and three local rabbis were significantly involved in its management. Furthermore, the center conducted a variety of programs observing Jewish religious holidays and traditions. The U.S. Court of Appeals for the Third Circuit noted the organization's primarily religious character, indicated by factors such as the composition of its administrative body and the programs that it offered to the community. Ultimately, the court held that religious organizations may qualify for an exemption despite engaging in secular activities, not adhering to the strictest tenets of the religion, or not hiring only co-religionists. On the other hand, courts have declined to apply the exemption to organizations that cannot demonstrate a connection between religious beliefs and the organization itself. In Equal Employment Opportunity Commission (EEOC) v. Townley Engineering and Manufacturing Company , the owners of a mining equipment manufacturing company claimed an exemption under Title VII after an employee initiated legal proceedings objecting to attending mandatory religious services. The owners claimed that they founded their company under "a covenant with God that their business would be a Christian, faith-operated business" and that they were "unable to separate God from any portion of their daily lives, including their activities at the Townley company." The court reviewed legal precedent and the legislative history of Title VII and held that the central function of the exemption "has been to exempt churches, synagogues, and the like, and organizations closely affiliated with those entities." It noted that Townley was a for-profit company, producing a secular product, with no affiliation with or support from a church. Further, it had no religious purpose. Although the court recognized that the owners did include religious characteristics in their operation of their company, the court held that "the beliefs of the owners and operators of a corporation are not simply enough in themselves to make the corporation 'religious'" under the Title VII exemption. In Pime v. Loyola University of Chicago , a former Jesuit university sought to retain its religious identity even after it had evolved into a secular institution. It claimed an exemption under Title VII as a university supported, controlled, or managed in whole or in part by a religious society because it reserved three tenured positions for Jesuits and several university administrators (including the president, one-third of the trustees, and other officers) were also Jesuits. However, the Society of Jesus did not instruct the president or trustees with regard to university matters and did not control the decisions of other Jesuits who served in official positions at the university. As a result, the U.S. Court of Appeals for the Seventh Circuit held that, despite a "Jesuit presence" on campus, the university did not qualify for an exemption from Title VII. In a similar case, EEOC v. Kamehameha Schools /Bishop Estate , the U.S. Court of Appeals for the Ninth Circuit likewise held that a school that hired Protestant teachers to provide a secular education to students did not qualify for an exemption under Title VII. The Kamehameha Schools were created by the will of a member of the Hawaiian royal family, which provided that teachers be members of the Protestant faith and claimed an exemption as a religious educational institution based on this provision. However, the court held that the schools' purpose and character were primarily secular and not religious, noting that the religious characteristics the schools had (i.e., comparative religious studies, scheduled prayers and services, Bible quotations in a school publication, and employment of nominally Protestant teachers) were common to private schools. The court also noted that the schools had embraced a broad mandate to help native Hawaiians "participate in contemporary society for a rewarding and productive life" through a solid secular education. As a result, the court held that the teachers' religious affiliation was an insufficient basis to qualify for an exemption as a religious institution. The result in Kamehameha Schools was influenced to some degree by the absence of church ownership or control. Indeed, the court of appeals observed that it had found "no case holding the Title VII exemption to be applicable where the institution was not wholly or partially owned by a church." Subsequently, in Killinger v. Samford University , the U.S. Court of Appeals for the Eleventh Circuit held that a Baptist college was an exempt religious institution which could require professors to subscribe to the school's religious doctrine. The court noted that a Baptist convention comprised the largest single source of revenue for the college and that the school's charter listed as its chief purpose the "promotion of Christian Religion." Thus, under Title VII precedent, independent Christian and other religious schools not owned, financed, or controlled by church bodies may find it difficult to qualify for the "religious organization" exemption in ENDA. Of course, as stand-alone legislation, it is possible that courts would find that the policy concerns underlying ENDA are sufficiently different from Title VII to warrant a less restrictive reading of the former. Absent clarification in ENDA itself, or its legislative history, any resolution of the issue would have to await further judicial elaboration. Meanwhile, during the recent floor vote on ENDA, the Senate adopted an amendment that would clarify the exemption for religious organizations. Under the amendment, federal agencies or state or local agencies that receive federal funding would be prohibited from withholding benefits or barring program participation for religious employers who are exempt from ENDA. <5. Enforcement and Remedies> Enforcement procedures under ENDA would parallel the enforcement provisions of Title VII. Thus, the Department of Justice (DOJ) would enforce ENDA against state and local governments, and administrative enforcement with respect to private employment would be delegated to the EEOC, which would have the same authority to receive and investigate complaints, to negotiate voluntary settlements, and to seek judicial remedies as it currently exercises under Title VII. Similarly, in devising remedies for sexual orientation or gender identity discrimination under the legislation, a federal court would have the same jurisdiction and powers as the court has to enforce Title VII. In general, federal courts possess broad remedial discretion under Title VII, including the ability to enjoin the unlawful employment practice and to "order such affirmative action as may be appropriate, which may include, but is not limited to, reinstatement or hiring of employees, with or without back pay ... or any other relief as the court deems appropriate." Although the Supreme Court early on adopted a "make-whole" theory of Title VII relief, including use of affirmative action remedies, minority preferences and the like, where necessary to redress discrimination of a particularly "egregious" or "longstanding" nature, ENDA would specifically forbid employers from using quotas or preferential treatment. Likewise, the remedies under ENDA would be patterned on Title VII's remedial provisions. Under Title VII, victims of discrimination may seek equitable relief, including limited back pay awards for wage, salary, and fringe benefits lost as the result of discrimination. Private employers who intentionally discriminate in violation of the statute may be liable for compensatory and punitive damages, while plaintiffs may seek awards of compensatory, but not punitive, damages against federal, state, and local governmental agencies. The following ceilings or "caps" are established by law for compensatory and punitive damages combined: (1) $50,000 for defendants who have 15 to 100 employees; (2) $100,000 for employers with 101 to 200 employees; (3) $200,000 for employers with 201 to 500 employees; and (4) $300,000 for employers with more than 500 employees. The Supreme Court has also excluded from the statutory limits on damages so-called "front pay," awarded to redress discrimination victims for continuing injury in promotion or discharge cases where reinstatement is not a feasible remedy. These Title VII remedies appear to be applicable to claims that would be filed under ENDA. Meanwhile, ENDA would waive the states' Eleventh Amendment immunity from suit for sexual orientation discrimination or gender identity against employees or applicants within any state "program or activity" that receives federal financial assistance. The Eleventh Amendment provides states with immunity from claims brought under federal law in both federal and state courts. Although Congress may waive the states' sovereign immunity by "appropriate" legislation enacted pursuant to Section 5 of the Fourteenth Amendment, the scope of congressional power to create a private right of action against the states for monetary damages has been substantially narrowed by a series of Supreme Court decisions. The era of a reinvigorated Eleventh Amendment immunity can be traced to Seminole Tribe v. Florida , which invalidated a portion of the Indian Gaming Regulatory Act authorizing tribal suits against the states. Neither the Commerce Clause nor Section 5 proved to be an effective vehicle to override state sovereign immunity. Three years later, in Alden v. Maine the Supreme Court ruled that the states could not be sued, even in their own courts, for violation of the Fair Labor Standards Act. City of Boerne v. Flores announced the Court's new framework for determining the validity of congressional action under Section 5. In holding unconstitutional the Religious Freedom Restoration Act, Justice Kennedy wrote that Congress's Section 5 power was remedial only; it was not a basis for legislation defining the substantive content of the equal protection guarantee. Moreover, the remedy had to be "congruent and proportional" to the scope and frequency of any violations identified by Congress. These constitutional limitations were subsequently applied by the Court to hold the states immune from private lawsuits under the Age Discrimination in Employment Act, the Violence Against Women Act, and the Americans with Disabilities Act. Taken together, these decisions restrict the ability of private individuals to take the states to court for federal civil rights violations. They may not, however, apply to states' voluntary acceptance of federal benefits that are expressly conditioned on waiver of Eleventh Amendment immunity. "Congress may, in the exercise of its spending power, condition its grant of funds to the States upon their taking certain actions that Congress could not require them to take, and that acceptance of the funds entails an agreement to the actions." Thus, when a statute enacted under the Spending Clause conditions grants to the states upon an unambiguous waiver of Eleventh Amendment immunity, as ENDA proposes, "the condition is constitutionally permissible as long as it rests on the state's voluntary and knowing acceptance of it." Finally, the attorney's fees provision in ENDA differs somewhat from the attorney's fees provision in Title VII. Under Title VII, a court is generally authorized to award "reasonable" attorney's fees (including expert fees) to a "prevailing" plaintiff, unless special circumstances make such an award unjust. Complainants may be considered "prevailing parties" if "they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing the suit." Although either a plaintiff or a defendant may be the prevailing party, fee awards to defendant employers are not the general rule, given the public interest in having Title VII plaintiffs act as "private attorneys general" and the likelihood that defendant employers would have less need of financial assistance. In addition, in cases involving federal employment, both the EEOC and federal agencies are authorized to award reasonable attorney's fees or costs. The EEOC, however, does not appear to have such authority with respect to private sector employment discrimination claims. Under ENDA, courts would have the same authority to award attorney's fees to prevailing parties as they do under Title VII. ENDA would similarly authorize the EEOC to award such fees, but, unlike Title VII, ENDA would appear to allow the EEOC to make such awards in cases involving both federal and private employment discrimination claims.

Introduced in various incarnations in every congressional session since the 103rd Congress, the proposed Employment Non-Discrimination Act (ENDA; H.R. 1755/S. 815 in the 113th Congress) would prohibit discrimination based on an individual's actual or perceived sexual orientation or gender identity by public and private employers in hiring, discharge, compensation, and other terms and conditions of employment. The stated purpose of the legislation is "to address the history and persistent, widespread pattern of discrimination, including unconstitutional discrimination, on the basis of sexual orientation and gender identity by private sector employers and local, State, and Federal Government employers," as well as to provide effective remedies for such discrimination. Patterned on Title VII of the Civil Rights Act of 1964, the act would be enforced by the Equal Employment Opportunity Commission (EEOC).

<1. Main Points> Russia will host the Asia-Pacific Economic Cooperation's (APEC) week-long series of senior-level meetings in Vladivostok on September 2-9, 2012. The main event for the week will be the 20 th APEC Economic Leaders' Meeting to be held September 8-9, 2012. For the United States, the main points for these APEC meetings are the following. President Obama does not plan to attend the 2012 APEC Economic Leaders' Meeting. Secretary of State Hillary Clinton will represent the United States. As host, Russia has identified food security, supply chain reliability, and fostering innovative growth through cooperation as priorities for the meetings, in addition to APEC's general goals of trade and investment liberalization and regional economic integration. A major backdrop for the meeting will be the status of the ongoing Trans-Pacific Partnership (TPP) negotiations and the potential implications for APEC's future; all of the TPP-negotiating nations are APEC members. The U.S. priorities in Vladivostok are to build on the accomplishments made during the 19 th APEC Economic Leaders' Meeting held in Honolulu on November 12-13, 2011; and to cooperate with Russia on the elements of the 2012 agenda for which the two nations share a common perspective. <2. Overview of APEC> The Asia-Pacific Economic Cooperation (APEC) was founded in 1989 for the purpose of promoting trade and investment liberalization in the Asia-Pacific as a means of fostering sustainable economic growth and prosperity in the region. APEC currently has 21 members: Australia, Brunei, Canada, Chile, China, Hong Kong (officially Hong Kong, China), Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, South Korea, Taiwan (officially Chinese Taipei), Thailand, the United States, and Vietnam. APEC is one of a few international organizations in which both China and Taiwan are members. During the 1994 Economic Leaders' Meeting in Bogor, Indonesia, APEC members agreed to the Bogor Goals of "free and open trade and investment in the Asia-Pacific by 2010 for developed economies and 2020 for developing economies." APEC has also made trade facilitation changes in governmental procedures to increase the ease and efficiency of trade a major priority. APEC has three distinct features among multilateral trade organizations. First, all the liberalization measures taken by its members are voluntary. Members announce their liberalization measures via "Individual Action Plans" (IAPs). Second, these liberalization measures are generally extended to all economies not just APEC members under the concept of "open regionalism." Third, decisions are made by consensus rather than through a process of formal negotiations. Over the years, APEC has been subject to some criticism, in part because of its lack of formal, binding agreements. However, APEC's proponents point to its accomplishments in lowering trade barriers and facilitating trade. Since APEC's inception, the average tariff rate among its members has declined from 16% to 5%, in part due the commitments made in the IAPs. An APEC trade facilitation initiative from 2002 to 2006 lowered the cost of business transactions for APEC members by an average of 5%. According to some business leaders, APEC's trade facilitation efforts have had a greater effect on international trade in the region than formal trade agreements that selectively lower tariff rates. According to APEC supporters, these APEC accomplishments have directly contributed to the growth in intra-APEC trade and the region's economic growth. Since 1989, intra-APEC trade has increased four-fold, significantly outpacing the growth in world trade. In 2011, APEC members had grown to account for 44% of global exports and 46% of global imports (see shaded box). Every year, a different APEC member organizes and hosts a series of meetings held throughout the year, including the annual Economic Leaders' Meeting, which is traditionally held in October or November. The United States was the host in 2011, Russia is this year's host, and Indonesia will be the host in 2013. This year's Economic Leaders' Meeting is being held in September in part due to anticipated weather conditions in Vladivostok, Russia's economic hub on its Pacific coast. The host member usually picks a theme for the year. Russia chose as the theme for 2012, "Integrate to Grow, Innovate to Prosper." <3. U.S. Trade Relations with APEC> The other 20 APEC members are important trading partners for the United States. Between 2001 and 2011, U.S. total trade with APEC increased from $1.2 trillion to $2.3 trillion. U.S. exports to APEC members over the same period rose from $461 billion to $894 billion; U.S. imports from APEC members jumped from $751 billion to $1.389 trillion. The U.S. trade deficit with other APEC members increased from $290 billion in 2001 to $495 billion in 2011. In 2011, 60% of U.S. exports went to APEC members and 63% of U.S. imports came from APEC members. Six of the top 10 U.S. bilateral trading partners in 2011 were APEC members (see Appendix B ). As a group, these six APEC members Canada, China, Mexico, Japan, South Korea, and Taiwan received 48.5% of U.S. exports and provided 54.6% of U.S. imports in 2011. Other significant U.S. trading partners in APEC include (by rank in terms of total trade with the United States): Singapore (15 th ; $50.3 billion); Russia (20 th ; $42.9 billion); Hong Kong (21 st ; $40.9 billion); Malaysia (22 nd ; $40.0 billion); and Australia (24 th ; $37.8 billion). <4. The November 2011 APEC Meetings in Honolulu> On November 12-13, 2011, the United States hosted the 19 th APEC Economic Leaders' Meeting in Honolulu. President Obama was joined by the leaders of the other 20 APEC members, or their chosen representatives. The U.S. President held separate bilateral meetings (in chronological order) with Japan's Prime Minister Yoshihiko Noda, Russia's President Dmitry Medvedev, and China's President Hu Jintao. In addition, the nine leaders of the nations that were then negotiating the TPP agreement Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States, and Vietnam met and announced what the Office of the U.S. Trade Representative (USTR) described as "the broad outlines of an ambitious, 21 st century Trans-Pacific Partnership (TPP) agreement." According to USTR, the outline calls for a full regional agreement that provides for comprehensive market access for goods and services, addresses emerging trade issues, and provides for the accession of new members. Since the Honolulu meeting, Canada and Mexico have been accepted into the TPP negotiations, and Japan is considering joining the talks. In a speech given during the Honolulu meetings, President Obama stated, "Along with our trade agreements with South Korea, Panama, and Colombia, the TPP will also help achieve my goal of doubling U.S. exports, which support millions of American jobs." As is the tradition, a Leaders' Declaration was released following the two-day event. Entitled "The Honolulu Declaration Toward a Seamless Regional Economy," the 2011 declaration: reaffirmed the members' pledge against protectionism; affirmed that APEC's core mission "continues to be further integration of our economies and expansion of trade among us"; indicated that APEC pursues its core mission "by addressing next-generation trade and investment issues, including through our trade agreements and a Free Trade Area of the Asia-Pacific [FTAAP]"; stated a shared commitment to "green growth" by "speeding the transition toward a global low-carbon economy," including the phasing out of "inefficient fossil-fuel subsidies" and measures to prohibit trade in illegally harvested forest products; pledged APEC members to pursue regulatory reform and convergence to eliminate "unjustifiably burdensome and outdated regulation"; and committed APEC members to "take concrete actions to expand economic opportunities for women." For the United States, another important outcome of the 2011 APEC Economic Leaders' Meeting was the agreement to set a cap tariff rate on "environmental goods" of 5%, and to phase out tariffs on environmental goods by 2015. However, the 21 APEC members could not reach a final agreement on which goods would be considered "environmental goods." <5. The Agenda for the 2012 Economic Leaders' Meeting> As host for the 20 th APEC Economic Leaders' Meeting, Russia has the lead in setting the agenda for the two-day event. According to the APEC 2012 webpage, the main priorities are: trade and investment liberalization and regional economic integration; strengthening food security; establishing reliable supply chains; and intensive cooperation to foster innovative growth. In order to address those priorities, Russia has promoted discussions about improving transportation infrastructure in the region, enhancing information and communications technology, and advancing regulatory reform and facilitation. This will be the first APEC meeting at which Russia is a member of the World Trade Organization. The United States has several objectives for this year's meeting in Vladivostok, either to complete priorities established in Honolulu or in cooperation with Russia's agenda. The United States hopes to conclude the discussion of which goods will qualify as "environmental goods," and thereby fall under the tariff phase-out agreed to last year in Honolulu. Similarly, the United States would like APEC to continue its efforts begun in 2011 to improve supply chain efficiency by identifying and eliminating technical choke points in the operation and regulation of international trade. In May 2012, APEC held a meeting on food security in Kazan, Russia, at which its members made a commitment to support sustainable agriculture and facilitate trade in agricultural goods. The United States would like to continue this discussion of food security, and adopt a more explicit statement regarding restrictions on the export of agricultural goods. One area where Russia and the United States differ concerns education. Russia and some other APEC members would like to explore the mutual accreditation of tertiary education degrees, but the United States and another group of APEC members have serious concerns about this initiative. <6. APEC and Other Regional Fora> Since its beginning, the Obama Administration has signaled that the Asia-Pacific region is a foreign policy priority, and that APEC has an important role in U.S. relations in the region. Besides several high-level trips to Asia, the Obama Administration has sought to strengthen U.S. ties to the region. In 2011, the United States officially joined the East Asia Summit (EAS), "a forum for dialogue on broad strategic, political and economic issues [emphasis added] of common interest and concern with the aim of promoting peace, stability and economic prosperity in East Asia." The United States has also enhanced relations with the Association of Southeast Asian Nations (ASEAN), by appointing the first resident U.S. Ambassador to ASEAN (David L. Carden, confirmed by the Senate on May 4, 2011) and initiating an annual U.S.-ASEAN Summit. The heightened U.S. engagement in the Asia-Pacific region has raised questions about APEC's continued role and relevance in U.S. foreign policy, particularly given the growing number of alternative regional events or organizations at which the United States can present its views. The Obama Administration has stated that the "rebalancing" of U.S. foreign policy towards Asia has a significant economic component, but there are a plethora of economic and trade groupings in the region. The Obama Administration frequently has portrayed APEC as the premier economic and trade organization in the Asia-Pacific region, and views the EAS as the main geopolitical association in the region. This view is not shared by all of the other members of these two associations. The Obama Administration has also actively pursued progress in the ongoing TPP negotiations, promoting the potential trade agreement as a stepping stone for creating the FTAAP envisioned by APEC. Not all of APEC's members agree with this representation of the TPP and some do not share the U.S. conceptualization of a future FTAAP. Some Chinese scholars and officials have expressed considerable concern about U.S motivations behind fostering a comprehensive free trade agreement in the Asia-Pacific region, perceiving TPP as part of a U.S. containment policy aimed at China. Some observers challenge the consistency of a negotiated, binding, and discriminatory TPP with APEC's Bogor Goals and its consensus-based, voluntary, "open regionalism" approach to trade and investment liberalization. In addition, along with reemphasizing the importance of APEC to the region, the Obama Administration has spoken extensively about the "central role" of ASEAN in Asia-Pacific relations. While 7 of the 10 ASEAN members are also APEC members, there remains some tension between the supposed importance of APEC as the primary path for regional economic integration and the U.S. view of ASEAN as the pivotal player in regional relations. The 10 ASEAN members have already concluded a free trade agreement amongst themselves, as well as with China, India, Japan, and South Korea, and are negotiating a free trade agreement with the European Union. ASEAN also is central to the ongoing ASEAN+3 (China, Japan, and South Korea) and ASEAN+6 (Australia, China, India, Japan, New Zealand, and South Korea) free trade agreement negotiations. It is unclear if the United States would welcome the conclusion of a free trade agreement between ASEAN and other nations that did not include the United States. <7. Implications for Congress> Congressional interest in APEC has generally focused on three issues implications for U.S. trade policy in general, potential effects on relations with China, and budgetary matters. APEC's original vision of a voluntary "open regionalism" approach to trade and investment liberalization has proven difficult to implement in the traditional U.S. structure of binding trade agreements. On occasion, the trade liberalization measures proposed to APEC by the United States in its Individual Action Plan (IAP) have required changes in U.S. trade laws (such as the lowering of tariff rates) or trade policy. On November 12, 2011, the 112 th Congress passed the Asia-Pacific Economic Cooperation Business Travel Card Act of 2011 ( P.L. 112-54 ), authorizing the Secretary of Homeland Security to issue APEC Business Travel Cards, which allow expedited immigration processing through airline crew lanes upon arrival at any U.S. international airport port of entry, but are not a substitute for an entry visa (if required). Over the last few years, APEC has emerged as an issue in U.S. relations with China. While some U.S. observers are apprehensive about China's growing assertiveness in Asia and its active program to negotiate free trade agreements in the region, some Chinese officials and scholars view the U.S. effort to use APEC to promote an FTAAP and negotiate a TPP without China's participation as part of a greater U.S. strategy of containment of China. Finally, as an APEC member, the United States must contribute to the annual budget of APEC to maintain the APEC Secretariat in Singapore and finance various APEC activities and programs. In previous fiscal years, the level of direct U.S. financial support for APEC was $901,000 per year. Congress appropriated additional funds in fiscal years 2009, 2010, and 2011 to finance preparations and programs related to hosting APEC in 2011. The Congressional Budget Justification for FY2013 includes a request for $1.028 million for APEC support. Appendix A. Agenda for APEC Meetings in Vladivostok, Russia Appendix B. U.S. Trade with APEC Trade with the 20 other APEC members constitutes a major component of U.S. merchandise trade. The top 3 U.S. trading partners in 2011 are APEC members, as are 6 in the top 10. The following table lists the U.S. exports, imports, total trade and balance of trade with each of the 20 other APEC members.

Russia will host the Asia-Pacific Economic Cooperation's (APEC) week-long series of senior-level meetings in Vladivostok on September 2-9, 2012. The main event for the week will be the 20th APEC Economic Leaders' Meeting to be held September 8-9, 2012. President Barack Obama will not attend the event; Secretary of State Hillary Clinton will lead the U.S. delegation. As host for the 20th APEC Economic Leaders' Meeting, Russia has set the main agenda items as: advancing trade and investment liberalization and regional economic integration; strengthening food security; establishing reliable supply chains; and promoting cooperation to foster innovative growth. The United States hopes to complete priorities established at last year's Economic Leaders' Meeting in Honolulu and support Russia's agenda in cases where the two nations share a common objective. On November 12-13, 2011, the United States hosted the 19th APEC Economic Leaders' Meeting in Honolulu. While in Honolulu, the nine leaders of negotiating nations—Australia, Brunei, Chile, Malaysia, New Zealand, Peru, Singapore, the United States, and Vietnam—met and announced the broad outline for the Trans-Pacific Partnership (TPP) trade agreement, which to the United States and some other APEC members may serve as a stepping stone for a broader Free Trade Area of the Asia-Pacific open to all APEC members. However, not all APEC members support such a vision for the TPP. Following the 19th APEC Economic Leaders' Meeting, the APEC leaders issued a declaration, reaffirming their opposition to protectionism and pledging to advance regional integration and the expansion of trade among APEC members. The leaders also agreed to set a cap tariff rate on "environmental goods" of 5%, and to phase out tariffs on environmental goods by 2015. However, they could not reach a final agreement on which goods would be considered "environmental goods." Given the growing number of alternative regional events or organizations at which the United States can present its views, the heightened U.S. engagement in the Asia-Pacific region has raised questions about APEC's continued role and relevance in U.S. foreign policy. Since taking office, President Obama has strengthened ties with the Association of Southeast Asian Nations (ASEAN) and the East Asian Summit (EAS), raising questions about the roles of each of these groups in U.S. relations in the region. In addition, China has grown concerned about greater U.S. interest in the region, with some Chinese officials viewing it as part of a U.S. containment policy aimed at China. Congressional interest in APEC has generally focused on three issues—implications for U.S. trade policy in general, potential effects on relations with China, and budgetary matters. On occasion, the trade liberalization measures proposed to APEC by the United States have required changes in U.S. trade laws. As an APEC member, the United States must contribute to the annual budget of APEC. The Congressional Budget Justification for FY2013 includes a request for $1.028 million for APEC support.

<1. Introduction> Although much progress has been made in achieving the ambitious goals that Congress established more than 35 years ago to restore and maintain the chemical, physical, and biological integrity of the nation's waters, long-standing problems persist, and new problems have emerged. Water quality problems are diverse, ranging from pollution runoff from farms and ranches, city streets, and other diffuse or "nonpoint" sources, to "point" source discharges of metals and organic and inorganic toxic substances from factories and sewage treatment plants. The principal law that deals with polluting activity in the nation's streams, lakes, estuaries, and coastal waters is the Federal Water Pollution Control Act (P.L. 92-500, enacted in 1972), commonly known as the Clean Water Act, or CWA. It consists of two major parts: regulatory provisions that impose progressively more stringent requirements on industries and cities to abate pollution and meet the statutory goal of zero discharge of pollutants; and provisions that authorize federal financial assistance for municipal wastewater treatment plant construction. Both parts are supported by research activities, plus permit and enforcement provisions. Programs at the federal level are administered by the Environmental Protection Agency (EPA); state and local governments have major day-to-day responsibilities to implement CWA programs through standard-setting, permitting, enforcement, and administering financial assistance programs. The water quality restoration objective declared in the 1972 act was accompanied by statutory goals to eliminate the discharge of pollutants into navigable waters by 1985 and to attain, wherever possible, waters deemed "fishable and swimmable" by 1983. Although those goals have not been fully achieved, considerable progress has been made, especially in controlling conventional pollutants (suspended solids, bacteria, and oxygen-consuming materials) discharged by industries and sewage treatment plants. Progress has been mixed in controlling discharges of toxic pollutants (heavy metals, inorganic and organic chemicals), which are more numerous and can harm human health and the environment even when present in very small amounts at the parts-per-billion level. Moreover, efforts to control pollution from diffuse sources, termed nonpoint source pollution (rainfall runoff from urban, suburban, and agricultural areas, for example), are more recent, given the earlier emphasis on "point source" pollution (discharges from industrial and municipal wastewater treatment plants). Overall, data reported by EPA and states indicate that 45% of river and stream miles assessed by states and 47% of assessed lake acres do not meet applicable water quality standards and are impaired for one or more desired uses. In 2006 EPA issued an assessment of streams and small rivers and reported that 67% of U.S. stream miles are in poor or fair condition and that nutrients and streambed sediments have the largest adverse impact on the biological condition of these waters. Approximately 95,000 lakes and 544,000 river miles in the United States are under fish-consumption advisories (including 100% of the Great Lakes and their connecting waters), due to chemical contaminants in lakes, rivers, and coastal waters, and one-third of shellfishing beds are closed or restricted, due to toxic pollutant contamination. Mercury is a contaminant of growing concern as of 2003, 45 states had issued partial or statewide fish or shellfish consumption advisories because of elevated mercury levels. The last major amendments to the law were the Water Quality Act of 1987 ( P.L. 100-4 ). These amendments culminated six years of congressional efforts to extend and revise the act and were the most comprehensive amendments since 1972. Authorizations of appropriations for some programs provided in P.L. 100-4 , such as general grant assistance to states, research, and general EPA support authorized in that law, expired in FY1990 and FY1991. Authorizations for wastewater treatment funding expired in FY1994. None of these programs has lapsed, however, as Congress has continued to appropriate funds to implement them. EPA, states, industry, and other citizens continue to implement the 1987 legislation, including meeting the numerous requirements and deadlines in it. The Clean Water Act has been viewed as one of the most successful environmental laws in terms of achieving its statutory goals, which have been widely supported by the public, but lately some have questioned whether additional actions to achieve further benefits are worth the costs. Criticism has come from industry, which has been the long-standing focus of the act's regulatory programs and often opposes imposition of new stringent and costly requirements. Criticism also has come from developers and property rights groups who contend that federal regulations (particularly the act's wetlands permit program) are a costly intrusion on private land-use decisions. States and cities have traditionally supported water quality programs and federal funding to assist them in carrying out the law, but many have opposed CWA measures that they fear might impose new unfunded mandates. Many environmental groups believe that further fine-tuning is needed to maintain progress achieved to date and to address remaining water quality problems. Initially following enactment of amendments in 1987, no major CWA legislative activity occurred. In the 104 th Congress (1995), the House passed a comprehensive reauthorization bill that was opposed by the Clinton Administration and environmental groups; it was not enacted. Since then, no comprehensive reauthorization legislation has been introduced, but beginning in the 106 th Congress, a number of bills dealing with specific water quality issues in the law have been enacted especially, legislation to reauthorize several existing CWA programs. Since the 107 th Congress, one of the dominant CWA issues has been water infrastructure financing that is, extension and modification of provisions of the act authorizing financial assistance for municipal wastewater treatment projects. House and Senate committees have approved bills and the House passed bills in the 110 th and 111 th Congresses, but none has been enacted. The remainder of this report discusses CWA issues of particular interest in the 111 th Congress, beginning with discussion of two issues that were prominent water infrastructure funding, and regulatory protection of wetlands. It then describes several other issues that also received attention. It concludes with a discussion of water quality appropriations and water infrastructure as part of economic stimulus legislation in 2009. <2. Legislative Issues in the 111th Congress> The year 2007 marked the 35 th anniversary of passage of the Clean Water Act and 20 years since the last major amendments to the law. While, as noted, there has been measurable clean water progress as a result of the act, observers and analysts agree that significant water pollution problems remain. However, there is less agreement about what solutions are needed and whether new legislation is required. Several key water quality issues exist: evaluating actions to implement existing provisions of the law, assessing whether additional steps are necessary to achieve overall goals of the act that have not yet been attained, ensuring that progress made to date is not lost through diminished attention to water quality needs, and defining the appropriate federal role in guiding and paying for clean water infrastructure and other activities. For some time, efforts to comprehensively amend the act have stalled as interests have debated whether and exactly how to change the law. Many issues that might be addressed involve making difficult tradeoffs between impacts on different sectors of the economy, taking action when there is technical or scientific uncertainty, and allocating governmental responsibilities among federal, state, local, and tribal entities for implementing the law. These factors partly explain why Congress has recently favored focusing legislative attention on narrow bills to extend or modify selected CWA programs, rather than taking up comprehensive proposals. Other factors also have been at work. These include a general reluctance by most members of Congress to address controversial environmental issues in view of the slim majorities held by political parties in the House and the Senate; and a lack of presidential initiatives on clean water issues (neither the Clinton nor the Bush Administration proposed CWA legislation). In addition, for some time after the terrorist attacks of September 11, 2001, Congress was more focused on security, terrorism, and Iraq war issues than on many other topics, including environmental protection. As a result of the 2006 mid-term elections and changed congressional leadership beginning in 2007, many observers expected that the 110 th Congress would pursue oversight of clean water and other environmental programs. Greater interest in environmental issues was apparent, but no comprehensive legislation was enacted. A particular legislative focus was water infrastructure financing legislation, specifically reauthorization of the act's financial aid program (discussed next in this report). Also on the congressional agenda was consideration of the geographic reach of the Clean Water Act over the nation's waters and wetlands, in light of court rulings including two Supreme Court decisions that have narrowed the law's regulatory jurisdiction, but in ways that are somewhat unclear. The 2008 election encouraged many policymakers and stakeholders to anticipate much greater attention to environmental issues, including clean water, by the 111 th Congress and the Obama Administration. During the 2008 presidential campaign, candidate Obama supported several issues, including preservation of wetlands, Great Lakes restoration legislation, water conservation, regulation of large animal feeding operations, and full funding of clean water infrastructure assistance programs. Funding for water infrastructure projects, discussed next in this report, received early attention in the 111 th Congress in light of interest in utilizing increased investment in public works projects including wastewater in order to stimulate the faltering U.S. economy, but the Obama Administration did not present specific legislative proposals concerning water quality. As discussed below, the 111 th Congress considered a number of water quality issues through oversight and legislation. Two bills amending the CWA were enacted and are discussed. One dealt with extending a moratorium for CWA permitting of certain vessels ( P.L. 111-215 ), and the other dealt with ensuring that federal agencies and departments pay localities for reasonable costs associated with managing stormwater pollution from federal properties ( P.L. 111-378 ). <2.1. Authorization of Water Infrastructure Funding> Meeting the nation's needs to build, upgrade, rebuild, and repair wastewater infrastructure is a significant element in achieving the Clean Water Act's water quality objectives. The act's program of financial aid for municipal wastewater treatment plant construction is a key contributor to that effort. Since 1972 Congress has provided more than $85 billion to assist cities in constructing projects to achieve the act's requirements for secondary treatment of municipal sewage (equivalent to 85% reduction of wastes), or more stringent treatment where required by local water quality conditions. State and local governments have spent more than $25 billion of their own funds for construction, as well. Federal funds can be used only for construction purposes (e.g., new plants or upgrades), but not for operation and maintenance of facilities. Still, funding needs remain very high: an additional $298 billion, according to the most recent Needs Survey estimate by EPA and the states, released in June 2010, a 17% increase above the estimate reported four years earlier. This current estimate includes $187.9 billion for wastewater treatment and collection systems ($26.7 billion more than the previous report), which represent more than 60% of all needs; $63.6 billion for combined sewer overflow corrections ($1.4 billion less than the previous estimate); $42.3 billion for stormwater management ($17 billion more than the previous estimate); and $4.4 billion to build systems to distribute recycled water ($700 million less than the previous estimate). EPA reported several reasons for increased total needs for wastewater treatment, which were $23 billion higher than in the previous report: improvements needed to meet more protective water quality standards, rehabilitation of aging infrastructure, and expanding capacity to meet population growth. Needs for stormwater management increased by $17 billion and were mostly due to emerging needs to provide "green" infrastructure, according to EPA. The estimates do not explicitly include funding needed to address security issues, or funding possibly needed for treatment works to adapt to climate change impacts. In September 2002, EPA released a study called the Gap Analysis that assessed the difference between current spending for wastewater infrastructure and total funding needs (both capital and operation and maintenance). In that report, EPA estimated that, over the next two decades, the United States needs to spend nearly $390 billion to replace existing wastewater infrastructure systems and to build new ones. Funding needs for operation and maintenance (not eligible for Clean Water Act funding) are an additional $148 billion over the next two decades, the agency estimated. According to the Gap Analysis, if there is no increase in investment, there will be about a $6 billion gap between current annual capital expenditures for wastewater treatment ($13 billion annually) and projected spending needs of approximately $19 billion. The study also estimated that, if wastewater spending were to increase by 3% annually (essentially meaning a doubling of rates paid by ratepayers), the gap would shrink by nearly 90% (to about $1 billion annually). At issue has been what the federal role should be in assisting states and cities, especially in view of such high projected funding needs. In the 111 th Congress, recognition of significant remaining funding needs for water infrastructure merged with consideration of legislation that would use federal government spending to stimulate recovery of the U.S. economy (see discussion of "Economic Stimulus" below, page 25 ). Debate over the nature of the nation's efforts regarding wastewater infrastructure was a central and controversial part of the 1987 amendments to the act. The amendments extended through FY1990 the traditional Title II program of grants for sewage treatment project construction, under which the federal share was 55% of project costs. The 1987 law initiated a program of grants to capitalize State Water Pollution Control Revolving Funds (SRFs), which are loan programs, in a new Title VI. States are required to deposit an amount equal to at least 20% of the federal capitalization grant in the Fund established under Title VI. Under the revolving fund concept, monies used for wastewater treatment construction are repaid by loan recipients to the states (repayment was not required for grants under the Title II program), to be recycled for future construction in other communities, thus providing an ongoing source of financing. The expectation in 1987 was that the federal contributions to SRFs would assist in making a transition to full state and local financing by FY1995. Although most states believe that the SRF is working well, early funding and administrative problems and continuing large funding needs have delayed the anticipated shift to full state responsibility, even as loans are being repaid to states. Thus, SRF issues have been prominent on the Clean Water Act reauthorization agenda in recent Congresses. SRF monies may be used for specified activities, including making loans for as much as 100% of project costs (at or below market interest rates, including interest-free loans), to buy or refinance cities' debt obligation, or as a source of revenue or security for payment of principal and interest on a state-issued bond. SRF monies also may be used to provide loan guarantees or credit enhancement for localities. Loans made by a state from its SRF are to be used first to assure progress towards the goals of the act and, in particular, on projects to meet the standards and enforceable requirements of the act. After states achieve those requirements of the act, SRF monies also may be used to implement nonpoint pollution management and national estuary programs. Since the SRF program began, states have used $2.6 billion to assist more than 8,650 nonpoint management projects; none has gone to estuary management activities. All states have established the mechanisms to administer the new loan programs and have been receiving SRF capitalization funds under Title VI. Many have complained that the SRF program is unduly complicated by federal rules that are intended in part to provide accountability for federal dollars, even though Congress had intended that states were to have greater flexibility. Congressional oversight has examined the progress toward reducing the backlog of wastewater treatment facilities needed to achieve the act's water quality objectives, while newer estimates of future funding needs have drawn increased attention to the role of the SRF program in meeting such needs. Although there has been some criticism of the SRF program, and debate continues over specific concerns, the basic approach is well supported. Congress used the clean water SRF as the model when it established a drinking water SRF in 1996 ( P.L. 104-182 ). Although the initial intent was to phase out federal support for this program, Congress has continued to appropriate SRF capitalization grants to the states, providing an average of $1.35 billion annually in recent years. Table 1 summarizes wastewater treatment funding under Title II (traditional grants program) and Title VI (capitalization grants for revolving loan programs) since the 1987 amendments. This table does not include appropriations for congressionally earmarked special project grants in individual cities, which in recent years have represented about 15% of appropriated water infrastructure funds. One issue of continuing interest is impacts on small communities. These entities in particular have found it difficult to participate in the SRF loan program, since many are characterized by narrow or weak tax bases, limited or no access to capital markets, lower relative household incomes, and higher per capita needs. They often find it harder to borrow to meet their capital needs and pay relatively high premiums to do so. Meeting the special needs of small towns, through a reestablished grant program, other funding source, or loan program with special rules, has been an issue of interest to Congress. Because remaining clean water funding needs are still so large nationally, at issue is whether and how to extend SRF assistance to address those needs, how to allocate SRF funds among the states, and how to prioritize projects and funding. Additionally, there is concern about the adequacy of SRF or other funding specifically for high-cost projects dealing with problems of overflows from municipal combined and separate sewers which can release partially treated or untreated wastewaters that harm public health and the environment. EPA estimates that the cost of projects to control sewer overflows, from combined and separate sanitary sewer systems, and manage stormwater runoff, is nearly $64 billion nationwide nearly twice the total of SRF capitalization grants appropriated since 1987. And more recently, wastewater utilities have sought assistance to assess operational vulnerabilities and upgrade physical protection of their facilities against possible terrorist attacks that could threaten the water infrastructure system. During the Bush Administration, EPA officials took the position that infrastructure funding needs go beyond what the federal government can do on its own, and the President's budget for several years advanced the concept that federal funding would cease after 2011 and that state and local self-financing would occur thereafter. Although saying that federal and state funding can help water utilities meet future needs, EPA's principal water infrastructure initiative during that time was to support other types of responses to help ensure that investment needs are met in an efficient, timely, and equitable manner. In particular, EPA worked with water utilities to promote strategies based on concepts of better management, full-cost pricing, efficient water use, and watershed approaches to protection. EPA also has encouraged consumers to use water-efficient products (e.g., residential bathroom products), with the intent of reducing national water and wastewater infrastructure needs through conservation measures by reducing projected water demand and wastewater flow, thus allowing deferral or downsizing of capital projects. The Obama Administration's EPA likewise supports sustainable practices to reduce the potential gap between funding needs and spending. Building on concepts similar to those supported by the Bush Administration and on a request in the President's FY2010 budget, in October 2010 EPA issued a "Clean Water and Drinking Water Infrastructure Sustainability Policy" addressing management and pricing of infrastructure funded through SRFs to encourage conservation and provide adequate long-term funding for future capital needs. EPA will work with water utilities to promote planning processes that reflect not only public health and water quality, but also conservation of natural resources and innovative treatment. Further, EPA will work with states to target SRF assistance to projects that focus on system upgrade and replacement in existing communities, reflect full life cycle costs of infrastructure assets, and conserve natural resources or use alternative approaches. <2.1.1. Legislative Responses> Congress has considered water infrastructure funding issues several times since the 107 th Congress. In that Congress, House and Senate committees approved bills to extend the act's SRF program and increase federal assistance ( H.R. 3930 ; S. 1961 ). The Senate bill was reported, but a report on H.R. 3930 was not filed; neither bill received further action. In the 108 th Congress, bills to reauthorize the Clean Water Act SRF program were introduced, as were separate bills to reauthorize funding for sewer overflow grants (CWA Section 221). The Senate Environment and Public Works Committee reported legislation authorizing $41.25 billion over five years for wastewater and drinking water infrastructure programs, including $20 billion for the clean water SRF program ( S. 2550 ). In addition, the House Transportation and Infrastructure Subcommittee on Water Resources and Environment approved H.R. 1560 (legislation similar to H.R. 3930 , the bill approved by that committee in the 107 th Congress), but no further action occurred. In the 109 th Congress, the Senate Environment and Public Works Committee approved S. 1400 , the Water Infrastructure Financing Act, in July 2005. The bill was similar to S. 2550 in the 108 th Congress. No further action occurred on this bill, and there was no legislative activity in the House on similar legislation during the 109 th Congress. Throughout this period, several factors contributed to problems in moving any of these bills further in the legislative process, including Administration opposition to higher authorization levels, disputes over the formula for allocating clean water SRF grants among the states, and controversies over application of prevailing wage requirements of the Davis-Bacon Act. The issue of the applicability of the Davis-Bacon Act to SRF-funded projects has been especially controversial, because that act has both strong supporters and critics in Congress and elsewhere. Davis-Bacon requires, among other things, that not less than the locally prevailing wage be paid to workers employed, under contract, on federal construction work "to which the United States or the District of Columbia is a party." Critics of Davis-Bacon say that it unnecessarily increases public construction costs and hampers competition, while supporters say that it helps stabilize the local construction industry by preventing competition that would undercut local wages and working conditions. Under the original SRF program authorization enacted in 1987, the Davis-Bacon Act applied to so-called "first use" monies provided by a state from its SRF (that is, loans made from initial federal capitalization grants, but not to subsequent monies provided from repayments to the SRF). When that authorization expired at the end of FY1994, Davis-Bacon requirements also expired. Thus, the recent issue has been whether to restore the applicability of those requirements. <2.1.2. 110th Congress> In March 2007 the House approved three wastewater infrastructure financing bills; however, the Senate did not act on any of them during the remainder of the 110 th Congress. H.R. 720 , the Water Quality Financing Act of 2007, was substantially similar to legislation that the House Transportation and Infrastructure Committee's Water Resources and Environment Subcommittee approved in the 108 th Congress ( H.R. 1560 ). It would have authorized $14 billion for the clean water SRF program for FY2008-FY2011. It included several provisions intended to benefit economically disadvantaged and small communities, such as allowing extended loan repayments (30 years, rather than 20) and additional subsidies (e.g., principal forgiveness and negative interest loans) for communities that meet a state's affordability criteria. One key difference between this bill and the earlier legislation was the specification in H.R. 720 that the Davis-Bacon Act prevailing wage requirement shall apply to all projects financed in whole or in part through an SRF. The House also passed H.R. 569 , a bill to reauthorize CWA Section 221 and to provide funding for projects to correct municipal sewer overflows (see discussion of this issue on page 18 ); and H.R. 700 , a bill to reauthorize CWA Section 220 and to extend a pilot program to develop alternative water source projects (i.e., projects to meet critical water supply needs). The Senate Environment and Public Works Committee held an oversight hearing on wastewater infrastructure needs in September 2007 and later took up a specific legislative proposal dealing with financing issues. In September 2008, the committee approved the Water Infrastructure Financing Act ( S. 3617 ), a bill that was similar to a measure that the committee approved in the 109 th Congress ( S. 1400 ). S. 3617 would have authorized $19.6 billion for grants to capitalize the Clean Water Act SRF program and $14.7 billion for Safe Drinking Water Act SRF capitalization grants through FY2012. The bill would have expanded eligibility for clean water SRF assistance including, for example, projects that implement stormwater management, water conservation or efficiency projects, and water and wastewater reuse and recycling projects; and it included a number of provisions to make the clean water and drinking water SRF programs more parallel, such as allowing SRF assistance to be used by private as well as public wastewater treatment systems. The committee approved an amendment adding Davis-Bacon Act language similar to that in House-passed H.R. 720 , specifying that prevailing wage requirements shall apply to all projects financed in whole or in part through an SRF. <2.1.3. 111th Congress> Water infrastructure legislation again received attention in the 111 th Congress. The House passed a bill, and legislation was reported by a Senate committee. Several issues contributed to the fact that, once again, no legislation was enacted. In particular, there was continuing criticism about the applicability of Davis-Bacon prevailing wage requirements, and criticism also of a new formula for state-by-state allocation of SRF capitalization grants. <2.1.3.1. H.R. 1262> On March 12, 2009, the House approved legislation to reauthorize the SRF program and several related programs in the CWA ( H.R. 1262 ). The bill included provisions of five bills that the House passed during the 110 th Congress, but none were enacted. Title I of H.R. 1262 would have authorized $13.8 billion in SRF capitalization grants over five years, FY2010-2014, and was essentially the same text as H.R. 720 as passed by the House in March 2007. It included several provisions intended to benefit economically disadvantaged and small communities, such as allowing extended loan repayments (30 years, rather than 20) and additional subsidies (e.g., principal forgiveness and negative interest loans) for communities that meet a state's affordability criteria. The bill included several provisions intended to encourage and make SRF-eligible projects involving green infrastructure, water reuse and conservation, and energy-efficient technologies. It included provisions to require communities to plan for capital replacement needs and to develop and implement an asset management plan for the repair and maintenance of infrastructure that is being financed. It also included specification that the Davis-Bacon Act prevailing wage requirement shall apply to all projects financed in whole or in part through an SRF. During debate on the bill, the House defeated an amendment that would have deleted the prevailing wage provision from the bill. Title II incorporated the text of H.R. 700 . It would have reauthorized CWA Section 220 to extend a pilot program to develop alternative water source projects at $50 million per year through FY2014. The House passed a similar bill (also H.R. 700 ) in March 2007. Title III incorporated the text of H.R. 895 . It would have reauthorized CWA Section 221 to authorize a total of $2.5 billion through FY2014 for projects to correct municipal sewer overflows. Twenty percent of these monies were to be used for green infrastructure projects. The House passed a similar bill ( H.R. 569 ) in March 2007. Title IV incorporated the text of H.R. 753 . It was intended to ensure that sewage treatment plants monitor for and report discharges of raw sewage due to overflows from sanitary sewers. The bill would have required EPA to issue criteria to guide plant operators in assessing whether a sewer overflow has the potential to affect human health or imminently and substantially endanger human health. The Senate Environment and Public Works Committee approved a bill similar to this title of H.R. 1262 on June 18 ( S. 937 ). The House also passed a similar bill in June 2008 ( H.R. 2452 ). Title V would have reauthorized the CWA's program for cleanup of contaminated sediments in the Great Lakes with $150 million per year in funding through FY2014. In the 110 th Congress, the House had passed H.R. 6460 , providing this level of funding and making certain programmatic changes, but as enacted ( P.L. 110-365 ), the bill retained the existing funding level of $50 million per year. Title V would have increased authorized funding to the level supported by the House in the 110 th Congress. The Senate Environment and Public Works Committee approved a bill similar to this title of H.R. 1262 on June 18 ( S. 933 ). During consideration of H.R. 1262 , the House adopted several amendments, including (1) a requirement that states use at least 15% of SRF capitalization grants to assist small communities; (2) establishment of a federal task force on proper disposal of unused pharmaceuticals (based on H.R. 276 ); (3) a requirement that the Office of Management and Budget establish a crosscut budget for Chesapeake Bay (based on H.R. 1053 ); and (4) requirements for studies of infrastructure along the Rio Grande River and along the U.S.-Mexico border, wastewater infrastructure in the United States and Canada that discharge into the Great Lakes, and the presence of pharmaceuticals and personal care product chemicals in U.S. waters. <2.1.3.2. S. 1005> Companion legislation was approved by the Senate Environment and Public Works Committee in May 2009 ( S. 1005 , the Water Infrastructure Financing Act), but the Senate did not consider the bill. The legislation was modeled after a bill approved by the same committee in the 110 th Congress ( S. 3617 ). The 111 th Congress bill would have authorized $20 billion over five years for clean water SRF grants and $14.7 billion over five years for drinking water SRF grants. It also would have added a $1.85 billion nationwide grant program for addressing combined sewer overflows (reauthorizing existing CWA Section 221) and a $50 million grant program for agriculture-related water quality issues. Like the 110 th Congress bill, S. 1005 would have expanded eligibility for clean water SRF assistance including, for example, to projects that implement stormwater management, water conservation or efficiency projects, and water and wastewater reuse and recycling projects; and it included a number of provisions to make the clean water and drinking water SRF programs more parallel. Unlike House-passed H.R. 1262 , the Senate bill did not include a requirement for states to set aside or reserve a portion of their SRF capitalization grants for "green" infrastructure projects, such as projects that include water or energy efficiency measures. However, it included incentives for "green" infrastructure, such as allowing states to forgive a portion of an SRF loan used for "green" projects. During markup, the Committee adopted several amendments, including one to specify that the Davis-Bacon Act prevailing wage requirement shall apply to all projects financed in whole or in part through a clean water or drinking water SRF (Davis-Bacon language was not included in the bill as introduced), one to require a study by the National Academy of Sciences on the presence of pharmaceuticals and personal care products in U.S. waters, and another to direct EPA to gather information necessary to update an existing guidance document that addresses affordability of CSO remediation projects. <2.1.4. SRF Allocation Formula> An important issue to many stakeholders is the formula that determines how clean water SRF capitalization grants are distributed among the states. CWA Section 205(c)(3) contains a table that identifies each state's percentage share of appropriated funds. That statutory allotment has not been revised since 1987. Both H.R. 1262 and S. 1005 would have revised the current allotment, but in different ways. The House bill would have extended the current formula in full for two years. Beginning in the third year (FY2012 and thereafter), distribution would be determined under a hybrid approach: for appropriated funds up to $1.35 billion, the current formula would apply, and for appropriated funds in excess of that amount, allotment would be done in accordance with funding needs as reported in the most recent clean water needs survey conducted by EPA and states. The Senate bill included a table with a new state-by-state allotment for clean water SRF capitalization grants. The revised formula, which was to take effect in FY2010 and apply through FY2014, included certain adjustments for example, guaranteeing small states a minimum 0.75% share (rather than 0.5% as under current law), and generally insuring that no state would "gain" more than 50% compared with its current percentage share or "lose" more than 25% compared with its current allotment. For details of the S. 1005 formula and comparison with the current statutory allocation, see Table A-1 in this report. The allocation formula was one of the factors that contributed to the fact that the Senate did not consider S. 1005 . The formula proposed in the legislation was based on needs identified in the 2004 clean water needs survey. However, after the Senate committee reported the bill, EPA released the 2008 needs survey, leading some members to favor developing a different formula based on the newer needs estimates. Ultimately, bill sponsors were unable to revise the allocation formula in the legislation to meet these concerns. <2.1.5. Water Infrastructure Trust Fund> For some time, interest has been growing in identifying and developing new mechanisms to help localities pay for water infrastructure projects, beyond direct federal grants or SRFs, which appear insufficient to fully meet funding needs. In June 2005, the House Transportation and Infrastructure Subcommittee on Water Resources and Environment held hearings on alternative means to fund water infrastructure projects in the future. At the first hearing, witnesses focused on one way to increase funding for water infrastructure that has been advocated by some groups, creating a national clean water trust fund that would conceptually be similar to trust funds that exist for highway and aviation projects. Witnesses and subcommittee members discussed difficulties in identifying potential revenue sources that would be deemed fair and equitable. The second hearing addressed other financing options, such as expanded use of tax-exempt private activity bonds, and more efficient management techniques, such as asset management programs and sustainable infrastructure initiatives. In the 109 th Congress, legislation was introduced to establish a $7.5 billion federal trust fund for wastewater infrastructure improvements. That bill, H.R. 4560 , proposed to use a concept for funding such projects that has been promoted by wastewater treatment industry officials, other stakeholders, and some environmentalists, who argue it could provide a new source of money for necessary system upgrades amid dwindling federal funds. The bill contemplated a system of user fees to create the fund, but the source of revenue was not specified in the bill. Although the 109 th Congress did not act on H.R. 4560 , the issue of a water infrastructure trust fund received some attention in the 111 th Congress. Legislation to create a Water Protection and Reinvestment Trust Fund was introduced ( H.R. 3202 ). Proponents estimated that at least $10 billion per year could be raised through a combination of excise taxes on water-based beverages, pharmaceutical products, and items disposed on in wastewater (such as cosmetics and toilet paper), plus a corporate profits tax. These revenues would be available to fund clean water and drinking water SRF programs, as well as security upgrades, wastewater and drinking water technology research, grants to water utilities for climate change adaptation, and other programs. The House Transportation and Infrastructure Subcommittee on Water Resources held a hearing on July 15, 2009, receiving testimony from a number of witnesses on the legislation and related issues. A GAO witness discussed findings in a GAO report which concluded that a combination of taxes on industry, corporation and water could provide a dedicated source of revenue, but that finding consensus on the issue could be challenging. No further legislative action occurred. <2.2. Regulatory Protection of Wetlands> How best to protect the nation's remaining wetlands and regulate activities taking place in wetlands has become one of the most contentious environmental policy issues, especially in the context of the CWA, which contains a key wetlands regulatory tool, the permit program in Section 404. It requires landowners or developers to obtain permits for disposal of dredged or fill material that is generated by construction or similar activity into navigable waters of the United States, including wetlands. Section 404 has evolved through judicial interpretation and regulatory change to become one of the principal federal tools used to protect wetlands, although that term appears only once in Section 404 itself and is not defined there. At the same time, its implementation has come to be seen as intrusive and burdensome to those whose activities it regulates. At issue today is how to address criticism of the Section 404 regulatory program while achieving desired goals of wetlands protection. Unlike the rest of the act, the permit aspects of Section 404 are administered by the U.S. Army Corps of Engineers, rather than EPA, although the Corps uses EPA environmental guidance. Other federal agencies including the U.S. Fish and Wildlife Service (FWS) and Natural Resource Conservation Service (NRCS) have more limited roles in the Corps' permitting decisions. Tension has existed for many years between the regulation of activities in wetlands under Section 404 and related laws, on the one hand, and the desire of landowners to develop property that may include wetlands, on the other hand. The conflicts over wetlands regulation have for the most part occurred in judicial and administrative proceedings, as Congress has not amended Section 404 since 1977, when it provided exemptions for categories of routine activities, such as normal farming and forestry. Controversy has grown over the extent of federal jurisdiction and impacts on private property, burdens and delay of permit procedures, and roles of federal agencies and states in issuing permits. <2.2.1. Judicial Proceedings Involving Section 404> One issue involving long-standing controversy and litigation is whether isolated waters are properly within the jurisdiction of Section 404. Isolated waters wetlands which are not physically adjacent to navigable surface waters often appear to provide only some of the values for which wetlands are protected, such as flood control or water purification, even if they meet the technical definition of a wetland. <2.2.1.1. SWANCC> On January 9, 2001, the Supreme Court ruled on the question of whether the CWA provides the Corps and EPA with authority over isolated waters. The Court's 5-4 ruling in Solid Waste Agency of Northern Cook County (SWANCC) v. U.S. Army Corps of Engineers (531 U.S. 159 (2001)) held that the Corps' denial of a 404 permit for a disposal site on isolated wetlands solely on the basis that migratory birds use the site exceeds the authority provided in the act. The full extent of impacts on the regulatory program resulting from this decision remains unclear, even 10 years after the ruling, in part because of different interpretations of SWANCC reflected in subsequent federal court cases. While it continues to be difficult to fully assess how regulatory protection of wetlands will be affected as a result of the SWANCC decision and other possible changes, the remaining responsibility to protect affected wetlands falls on states and localities. Environmentalists believe that the Court misinterpreted congressional intent on the matter, while industry and landowner groups welcomed the ruling. Policy implications of how much the decision restricts federal regulation depend on how broadly or narrowly the opinion is applied. Some federal courts have interpreted SWANCC narrowly, thus limiting its effect on current permit rules, while a few read the decision more broadly. The government's view on this key question came in EPA-Corps guidance issued in January 2003. It provides a legal interpretation essentially based on a narrow reading of the Court's decision, thus allowing federal regulation of some isolated waters to continue, but it calls for more headquarters review in disputed cases. Interest groups on all sides have been critical of confusion in implementing the 2003 guidance, which constitutes the main tool for interpreting the reach of the SWANCC decision. Environmentalists remain concerned about diminished protection resulting from the guidance, while developers said that without new regulations, confusing and contradictory interpretations of wetland rules will continue. <2.2.1.2. Rapanos v. United States> Federal courts continue to have a key role in interpreting and clarifying the SWANCC decision. On February 21, 2006, the Supreme Court heard arguments in two cases brought by landowners ( Rapanos v. United States ; Carabell v. U.S. Army Corps of Engineers ) seeking to narrow the scope of the CWA permit program as it applies to development involving wetlands. The issue in both cases had to do with the reach of the CWA to cover "waters" that were not navigable waters, in the traditional sense, but were connected somehow to navigable waters or "adjacent" to those waters. (The act requires a federal permit to discharge dredged or fill materials into "navigable waters.") Many legal and other observers hoped that the Court's ruling in these cases would bring greater clarity about the scope of federal jurisdiction. The Court's ruling was issued on June 19, 2006 ( Rapanos, v. United States , 547 U.S. 715 (2006)). In a 5-4 decision, a plurality of the Court, led by Justice Scalia, held that the lower court had applied an incorrect standard to determine whether the wetlands at issue are covered by the CWA. Justice Kennedy joined this plurality to vacate the lower court decisions and remand the cases for further consideration, but he took different positions on most of the substantive issues raised by the cases, as did four other dissenting justices. Because the several opinions written by the justices did not draw a clear line regarding which wetlands and other waters are subject to federal jurisdiction, one result has been more case-by-case determinations and continuing litigation. There also has been pressure on the Corps and EPA to clarify the issues through an administrative rulemaking. On June 5, 2007 nearly one year after the Rapanos ruling EPA and the Corps issued guidance to enable their field staffs to make CWA jurisdictional determinations in light of the decision. According to the guidance, the agencies will assert regulatory jurisdiction over certain waters, such as traditional navigable waters and adjacent wetlands. Jurisdiction over others, such as non-navigable tributaries that do not typically flow year-round and wetlands adjacent to such tributaries, will be determined on a case-by-case basis, to determine if the waters in question have a significant nexus with a traditional navigable water. The guidance took effect immediately, but the agencies also solicited public comments, and left open the possibility of further changes in the future. Based on more than 66,000 public comments received and 18 months of implementation of the 2007 guidance, EPA and the Corps issued revised guidance December 2, 2008. The revisions made few changes to the earlier document, but did add clarification of some key terms that are important to determining CWA jurisdiction, such as the meaning of the regulatory term "adjacent wetlands." The agencies continue to take the position that, based on additional experience, they could provide supplementary guidance or initiate rulemaking. Some environmental groups criticized the revised guidance, saying that it continues to substantially limit the scope of waters that are protected by the CWA. Industry analysts said that the few changes in the guidance could make it simpler for regulators to make jurisdictional determinations , but overall, industry groups such as developers are frustrated by what they see as inconsistencies and delays in obtaining needed permits . <2.2.2. Congressional Responses> Congressional committees have held a number of oversight hearings on both the SWANCC and Rapanos decisions, seeking clarification of interpretations and impacts of the rulings. But the uncertainties about federal jurisdiction over wetlands and other waters raised by the rulings remain highly controversial. In response, legislation to overturn the decisions by providing a broad definition of "waters of the United States" has been introduced regularly since the 107 th Congress. Other legislation to narrow the definition of "waters of the United States" also was introduced on one occasion, in the 109 th Congress. Environmental advocates and others contend that Congress must clarify the important issues left unsettled by the Supreme Court's 2001 and 2006 rulings and by the Corps/EPA guidance. They also argue that legislation is needed to "reaffirm" what Congress intended when the CWA was enacted in 1972 and what EPA and the Corps have subsequently been practicing until the two Supreme Court rulings, in terms of broad CWA jurisdiction. In the 110 th Congress, two such bills were H.R. 2421 and S. 1870 . The House Transportation and Infrastructure Committee held hearings on H.R. 2421 and related jurisdictional issues in July 2007 and April 2008. The Senate Environment and Public Works Committee held a hearing on issues related to the Rapanos ruling in December 2007 and held a legislative hearing on S. 1870 the following April. But critics continue to question the constitutionality of the legislation and assert that it would expand federal authority, thus likely increasing confusion, rather than settling it. Obama Administration officials have addressed concerns about the continuing uncertainties regarding the proper scope of CWA regulatory jurisdiction. In May 2009, the heads of EPA, the Corps, the Department of Agriculture, the Department of the Interior, and the Council on Environmental Quality jointly wrote to congressional leaders to support the need for legislative clarification of the issues marking the first time that the Administration has done so and to identify certain principles that might help guide legislative and other actions: Broadly protect the nation's waters; make the definition of covered waters predictable and manageable; promote consistency between CWA and agricultural wetlands programs; and recognize long-standing practices, such as exemptions now in effect only through regulations or guidance. In the 111 th Congress, legislation similar to bills introduced previously was advanced by a Senate committee, but the bill was not considered by the full Senate. On June 18, 2009, the Environment and Public Works Committee approved, 12-7, an amended version of S. 787 , the Clean Water Restoration Act. A written report on S. 787 ( S.Rept. 111-361 ) was filed more than 18 months later, days before the 111 th Congress adjourned sine die . The bill would have amended the CWA to define "waters of the United States" to mean: all waters subject to the ebb and flow of the tide, the territorial seas, and all interstate and intrastate waters, including lakes, rivers, streams (including intermittent streams), mudflats, sandflats, wetlands, sloughs, prairie potholes, wet meadows, playa lakes, and natural ponds, all tributaries of any of the above waters, and all impoundments of the foregoing. The bill would have excluded prior converted cropland and certain waste treatment systems from the term "waters of the United States," and it would have protected, or saved, existing regulatory exclusions such as for dredge or fill discharges from normal farming activities. The bill also would have instructed that "waters of the United States" be construed consistently with (1) how EPA and the Corps interpreted and applied "waters of the United States prior to January 9, 2001, the day before SWANCC was decided, and (2) Congress's constitutional authority. During markup, the committee rejected several amendments that would have struck some of the terms in the new definition (such as mudflats and prairie potholes), but it approved language stating that the CWA's jurisdiction shall be construed consistent with EPA and Corps interpretation prior to Jan. 9, 2001. However, critics asserted that that intent was what the Court found invalid in its rulings in the SWANCC and Rapanos cases. Companion legislation was introduced in the House on April 23, 2010 ( H.R. 5088 , America's Commitment to Clean Water Act). Like S. 787 , the House bill was intended to clarify regulatory scope of the CWA and restore jurisdiction as it had been interpreted prior to the SWANCC and Rapanos rulings. Like the Senate committee bill, H.R. 5088 would have deleted the word "navigable" from the law, which has become a source of interpretive controversy, and would have amended the CWA to define "waters of the United States," which would become the operational term for jurisdiction. Unlike the Senate committee bill described above, the new definition of that term was to be drawn from existing EPA-Corps regulatory definitions, with some modifications. The principal House sponsor, Representative Oberstar, stated that the bill differed from prior proposals (such as H.R. 2421 in the 110 th Congress), based on extensive public comments and suggestions. Despite changes from earlier versions, the bill was criticized based on concern that it would increase the scope of federal jurisdiction, not merely re-state what Congress enacted in 1972. <3. Other Clean Water Act Issues> Several other issues affecting efforts to achieve the goals and objectives of the Clean Water Act drew interest during the 111 th Congress through oversight and legislation. Two bills were enacted a bill concerning pollutant discharges from vessels, and another dealing with federal agencies' responsibility to pay for stormwater charges. <3.1. Implementation of the BEACH Act> In 2000 Congress enacted the Beaches Environmental Assessment and Coastal Health Act (the BEACH Act) in order to augment federal and state efforts to prevent human exposure to polluted coastal recreation waters, including the Great Lakes. This act directed coastal states to adopt updated water quality standards and EPA to develop new protective criteria and standards. It also authorized grants to coastal states to support monitoring and notification programs. In May 2007 the GAO issued a report on federal and state implementation, finding that EPA has implemented most provisions of the act, but has not yet published new or revised water quality criteria, which the law required by 2005. In the 110 th Congress, Senate and House committees held hearings on the status of implementation of the BEACH Act, and bills to extend authorization for appropriations for the act's grants were introduced. The House approved one such bill ( H.R. 2537 ). It would have would allowed states to use BEACH Act funds to track sources of pollution and would require states to use rapid testing methods of beach water, in order to improve public notification. It proposed to increase grant funds to the states from $30 million annually to $40 million. It also would have directed EPA to publish revised water quality criteria for pathogens, a key pollutant of concern at beaches, as well as a list of all pathogens and pathogen indicators it has studied and observed in the course of developing those criteria. The Senate Environment and Public Works Committee approved companion legislation ( S. 2844 ), but no further action occurred. The 111 th Congress considered similar bills. House and Senate committees approved legislation ( H.R. 2093 and a similar bill, S. 878 ) that would have required more rapid testing of beach waters for contamination and faster notification to the public to warn of contamination. Both bills also would have increased grants funds to the states for beach monitoring and testing. The House passed H.R. 2093 on July 29, 2010. <3.2. Combined and Separate Sewer Overflows> About 750 U.S. communities have combined sewers where domestic sanitary sewage, industrial wastes, infiltration from groundwater, and stormwater runoff are collected. These systems serve approximately 40 million persons, mainly in older urban and coastal cities. Normally (under dry-weather conditions), the combined wastes are conveyed to a municipal sewage treatment plant. Properly designed, sized, and maintained combined sewers can be an acceptable part of a city's water pollution control infrastructure. However, combined sewer overflow (CSO) occurs when the capacity of the collection and treatment system is exceeded due to high volumes of rainwater or snowmelt, and the excess volume is diverted and discharged directly into receiving waters, bypassing the sewage treatment plants. Often the excess flow that contains raw sewage, industrial wastes, and stormwater is discharged untreated. Many combined sewer systems are found in coastal areas where recreational areas, fish habitat and shellfish beds may be contaminated by the discharges. To manage CSOs, cities are subject to a policy issued by EPA in 1994 that requires implementation of nine minimum controls that generally are based on combinations of management techniques (such as temporary retention of excess flow during storm events) and structural measures (such as construction of separate storm sewer systems). One issue that concerns some cities is the problem of overflows from municipal separate sanitary sewers (SSOs) that are not CSOs because they transport only sanitary wastes. Discharges of untreated sewage from these sewers can occur from manholes, broken pipes and deteriorated infrastructure, and undersized pipes, and can occur in wet or dry weather. EPA estimates that there are about 18,000 municipalities with separate sanitary sewers, all of which can, under certain circumstances, experience overflows. No explicit EPA or statutory control policy for addressing SSOs currently exists. Funding for CSO and SSO projects is a major concern of states and cities. The most recent clean water needs survey found that the largest needs category, totaling $55 billion and representing 27% of total water infrastructure needs, is to address CSOs. In 2000, Congress passed legislation, the Wet Weather Water Quality Act, authorizing a two-year $1.5 billion grants program to reduce wet weather flows from municipal sewer systems, both CSOs and SSOs (Section 112 of Division B, P.L. 106-154 ). However, Congress provided no appropriations for these wet weather grants during the two years of authorization (FY2002-FY2003). As described above, in March 2007, the House passed legislation to reauthorize this grant program ( H.R. 569 ), and in the 111 th Congress, similar language was included in Title III of H.R. 1262 , as passed by the House in March 2009, and also in S. 1005 , as reported to the Senate in June 2009. On a related issue, Title IV of H.R. 1262 also included the text of H.R. 753 in the 111 th Congress (and was identical to House-passed H.R. 2452 from the 110 th Congress), which would have required EPA to issue criteria to guide wastewater treatment plant operators in assessing whether a sewer overflow has the potential to affect human health or imminently and substantially endanger human health. Similar legislation was approved by the Senate Environment and Public Works Committee ( S. 937 ). <3.3. Chesapeake Bay Restoration> Despite several decades' of activity by government, the private sector, and the general public, efforts to restore and protect the Chesapeake Bay watershed have been insufficient to meet restoration goals. The Bay and its tributaries remain in poor health, with polluted water, reduced populations of fish and shellfish, and degraded habitat and resources. The primary pollutants causing impairments are nutrients (nitrogen and phosphorus) and sediment, which are discharged from multiple urban, suburban, and rural sources around the Bay. In May 2009, President Obama issued an executive order that declared the Bay a "national treasure" and charged the federal government with assuming a strong leadership role in restoring the Bay. The executive order established a Federal Leadership Committee for the Chesapeake Bay to develop and implement a new strategy for protecting and restoring the Chesapeake region. The resulting strategy, which was released on May 12, 2010, launches major specific environmental initiatives to establish new clean water regulations on stormwater discharges and pollution discharges from animal feedlots in the Bay watershed, put new agricultural conservation practices on farms in the region, and restore land and water habitat. A central feature of the overall strategy is EPA's pledge to establish a Total Maximum Daily Load (TMDL) for Chesapeake Bay. Section 303 of the CWA requires states to identify waters that are impaired by pollution, even after application of pollution controls. For those waters, states must establish a TMDL to ensure that water quality standards can be attained. A TMDL is essentially a pollution budget, a quantitative estimate of what it takes to achieve standards, setting the maximum amount of pollution that a waterbody can receive without violating standards. If a state fails to do this, EPA is required to make its own TMDL determination for the state. Throughout the United States including the Chesapeake Bay watershed more than 20,000 waterways are known to be violating applicable water quality standards and to require a TMDL. Lawsuits have been brought with the intention of pressuring EPA and states to develop TMDLs; under a consent decree in one such lawsuit, EPA must establish a Chesapeake Bay TMDL no later than May 1, 2011. The Chesapeake Bay TMDL will be the largest single TMDL developed to date. It will address all segments of the Bay and its tidal tributaries that are impaired from discharges of nitrogen, phosphorus, and sediment, and the TMDL will allocate needed reductions of these pollutants to all jurisdictions in the 64,000 square mile watershed. Detailed plans identifying specific reductions will be developed by the Bay states in Watershed Implementation Plans. EPA's TMDL plans and the overall federal Bay restoration strategy under the executive order are controversial with a number of groups that are concerned about the likely mandatory nature of many of EPA's and states' upcoming actions. On the other hand, environmental activists are pleased that the federal government is now asserting a leadership role to restore the Bay and are supporting legislation that would codify requirements for the Bay TMDL in the Clean Water Act, while authorizing grants and other assistance for implementing required measures. Bills to do so were introduced in the 111 th Congress ( S. 1816 and H.R. 3852 ), and House and Senate committee hearings were held. In June 2010, the Senate Environment and Public Works Committee approved an amended version of S. 1816 . As reported, the bill generally sought to codify 2025 as a date-certain for implementing restoration actions throughout the Chesapeake Basin and would have made explicit backup authority for EPA to develop measures to restore the watershed, if states fail to do so. The legislation would have authorized significant financial resources, totaling $2.26 billion over five years, to assist in implementing programs, projects, and measures for restoration of the Chesapeake Basin watershed. <3.4. National Estuary Program Reauthorization> The 1987 CWA amendments established the National Estuary Program (NEP), a program to promote comprehensive planning efforts to protect nationally significant estuaries that are threatened by pollution, development, and overuse. Governors may nominate an estuary for inclusion in the program. Once approved by EPA, the estuary can receive financial and technical assistance from EPA to develop and implement a comprehensive management plan that addresses factors that contribute to the estuary's degradation. The planning process is intended to be stakeholder-driven and collaborative, and non-federal matching funds are required. To date, EPA has approved 28 estuaries as part of the program. Since 1987, Congress has amended the NEP provision to reauthorize funding and in several cases to identify estuaries to be given priority consideration under the program. Current authorization of appropriations expired in FY2010. In April 2010, the House passed legislation ( H.R. 4715 , the Clean Estuaries Act) to reauthorize assistance through FY2016 and to increase the authorization in order to encourage EPA to expand the number of estuaries included in the program. Further, H.R. 4715 would have added several requirements in the development of a comprehensive management plan, such as addressing the impacts of climate change, and would have required periodic update of the plan and evaluation and approval by EPA. Under the bill, if the EPA review were to find the plan deficient, EPA could reduce grant funding until the plan was revised. On June 30, 2010, the Senate Environment and Public Works Committee approved an amended version of H.R. 4715 . <3.5. Mountaintop Mining> Mountaintop removal coal mining involves removing the top of a mountain in order to recover the coal seams contained there. This practice occurs in six Appalachian states (Kentucky, West Virginia, Virginia, Tennessee, Pennsylvania, and Ohio). It creates an immense quantity of excess spoil, which is typically placed in valley fills on the sides of the former mountains, burying streams that flow through the valleys. Critics say that, as a result of valley fills, stream water quality and the aquatic and wildlife habitat that streams support are destroyed. The mining industry argues that mountaintop mining is essential to conducting surface coal mining in the Appalachian region and that surface coal mining would not be economically feasible there if producers were restricted from using valleys for the disposal of mining overburden. Mountaintop mining is regulated under several laws, including the CWA Section 404 permit program (discussed above) and the Surface Mining Control and Reclamation Act. In June 2009, officials of EPA, the Corps of Engineers, and the Department of the Interior signed a Memorandum of Understanding outlining a series of administrative actions under these laws to reduce the harmful environmental impacts of mountaintop mining and surface coal mining in Appalachia. The plan includes a series of near-term and longer-term actions that emphasize specific steps, improved coordination, and greater transparency of decisions. The actions are being implemented through regulatory proposals, guidance documents, and review of pending applications for permits to authorize mountaintop mining-valley fill operations. In the 111 th Congress (as in several prior Congresses), legislation intended to sharply restrict the practice of mountaintop mining was introduced ( H.R. 1310 , the Clean Water Protection Act, and a different measure, S. 696 , the Appalachia Restoration Act). Both bills would have narrowed the CWA definition of "fill material," and thus narrowed the types of materials that can be discharged into U.S. waters under a Section 404 permit. The significance of both bills is that discharges of materials that are not eligible for a Section 404 permit are regulated under CWA Section 402. Because Section 402 discharge requirements are more restrictive than those for Section 404, some discharges that could be permitted under Section 404 cannot be authorized under Section 402. Supporters of the bills favored making it more difficult to use Section 404 to authorize activities that they consider to be environmentally harmful. On the other hand, critics said that, as a practical matter, economically important activities such as coal mining could not meet the more stringent limitations of a Section 402 permit and, thus, would be infeasible. Additionally, legislation intended as criticism of the Administration's recent regulatory actions also was introduced in the 111 th Congress ( H.R. 6113 and S. 3993 , the Electricity Reliability Protection Act of 2010). This bill would have prohibited EPA, the Army Corps, and OSM from administering or enforcing any policy or procedure that was announced in the June 2009 MOU or the April 2010 EPA permitting guidance unless they are contained in promulgated regulations. Critics of the Administration's actions have argued that the policies constitute rules, and thus should be subject to complete administrative requirements of rulemaking, including public notice and comment and subsequent judicial review. <3.6. Pollutant Discharges from Vessels> The impacts of court rulings in several cases concerning implementation of existing provisions of the law and involving questions of whether certain activities require a Clean Water Act discharge permit have been of interest for some time. A fundamental element of the act is the requirement that the "discharge of a pollutant" from a point source shall be carried out pursuant to a permit authorized by the National Pollutant Discharge Elimination System (NPDES) program under Section 402 of the law. Discharges incidental to the normal operation of vessels were not subject to regulation under the Clean Water Act until a 2006 federal court decision reversed EPA policy on the issue. In response, EPA began the process of developing general permits for vessel discharges. However, legislation enacted in July 2008, the Clean Boating Act ( P.L. 110-299 ), provided a two-year moratorium on imposing permit requirements on commercial fishing boats of all size and other commercial vessels less than 79 feet long. The legislation did not relieve larger vessels from permitting requirements, and in December 2008 EPA issued a general permit that applies to approximately 69,000 vessels. Obama Administration officials said that they are considering changes to the vessel general permit, which environmental groups and some states criticized as being weak. During the moratorium provided by P.L. 110-299 , EPA and the Coast Guard were directed to evaluate the impacts of discharges from the vessels that were exempted by the legislation. A draft report was released in March 2010, but because the report would not be final by the time that the moratorium expires, in July Congress approved legislation to extend the current moratorium until December 18, 2013. President Obama signed the extension on July 30, 2010 ( P.L. 111-215 ). <3.7. Federal Responsibility to Pay for Stormwater Charges> CWA Section 313 provides that federal agencies and departments shall comply with all federal, state, local requirements to control water pollution from their facilities or property, in the same manner as nongovernmental entities. In December, Congress passed a bill to clarify that Section 313's requirements specifically include federal responsibility to pay reasonable service charges or fees associated with managing stormwater pollution that comes from federal properties ( P.L. 111-378 ). Supporters of the legislation, which included several state, county, and local government organizations, said that the bill addressed an issue of equity, that is, that the federal government bears a proportional responsibility for addressing pollution originating from its facilities and should participate actively in improving the nation's water quality. <3.8. The Relationship Between CWA and FIFRA> In recent years, federal courts have held that aerial application of a pesticide over and into U.S. waters requires a CWA permit, even when the pesticide use meets other requirements of federal law, including the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA). These decisions drew the attention of many pesticide applicators, including public health entities such as mosquito control districts, concerned with how the rulings might affect their need to control pests associated with diseases such as the West Nile virus. In November 2006, EPA finalized a rule seeking to resolve the conflict over the regulatory scope of the CWA and FIFRA related to pesticide use, in light of the recent litigation, by promulgating clarifying circumstances under which a CWA permit is or is not required for activities carried out pursuant to FIFRA. But in January 2009, a federal court rejected EPA's argument that residual and excess pesticides from aerial applications that impact U.S. waters do not require an NPDES permit because they are adequately regulated by FIFRA, and the court vacated the rule. In the 109 th Congress, prior to issuance of the now-vacated rule, legislation intended to affirm that a CWA permit is not required for use of FIFRA-approved pesticides was introduced, but it was not enacted. In June 2009, the federal court granted an EPA request for a two-year delay in the effective date of the court's ruling. During this time, EPA plans to work with states and other affected parties to develop general CWA permits for pesticide applications covered by the ruling. EPA proposed the general permit in June and still expects to finalize the permit by April 9, 2011, as required by the court. Industry groups requested a Supreme Court review of the case, but in February 2010, the Court declined the request. Legislation intended to nullify the 2009 federal court ruling was introduced in the 111 th Congress ( H.R. 6087 / S. 3735 and S. 6273 ), but there was no further action on any of the bills. <3.9. EPA's Water Transfer Rule> Clean Water Act permitting issues also were raised in other litigation. In 2004, the Supreme Court held that the transfer of polluted water from one waterbody to another may require a permit, notwithstanding that no new pollutant is added in the process of transfer. The decision raised concerns in agricultural areas where such transfers often occur in supplying irrigation water, presently without a permit. Congress has not held oversight hearings on impacts of the Court's decision, and legislation that might address the ruling has not been introduced. In response to the Court's ruling, in June 2008, EPA promulgated a rule defining categories or types of water transfers that the agency believes do not require NPDES permits. The rule, which supports EPA's long-standing legal interpretation of the CWA, was quickly challenged in federal courts by the Miccosukee Indian Tribe of Florida and environmental advocates. A ruling in that litigation has not been issued. However, in a related case, a federal appeals court ruled that pumping polluted water from canals in the Everglades into Lake Okeechobee without a permit does not violate the CWA. In its ruling, the U.S. Court of Appeals for the 11 th Circuit (the same court that is hearing the direct challenge to EPA's water transfer rule) cited the rule and said that EPA's regulation is a reasonable, and thus permissible, construction of the language of the statute. Environmental group plaintiffs in the case who oppose the EPA rule petitioned the 11 th Circuit court for an en banc rehearing, and in October 2009 EPA officials told the court that the agency plans to reconsider the water transfer rule because of concerns about the water quality impacts of some water transfers. <3.10. Responding to the Deepwater Horizon Oil Spill> On April 20, 2010, an explosion and fire occurred on the Deepwater Horizon drilling rig in the Gulf of Mexico. This resulted in 11 worker fatalities, a massive oil release, and a national response effort in the Gulf region by the federal and state governments as well as the oil company BP. Since the explosion of the rig, public and private efforts have focused on multiple response efforts to cap the undersea well and capture and contain the oil in order to prevent as much as possible of it from reaching shorelines. Congress has examined the response activities, events that preceded the explosion and spill, and policies that comprise the federal framework for responding to oil spills generally. The federal government's oil spill response framework is found in the National Contingency Plan, which contains the government's procedures for responding to oil spills and hazardous substance releases. The National Oil and Hazardous Substances Pollution Contingency Plan (NCP) was established administratively in 1968, after U.S. policymakers observed the response to a 37-million-gallon oil tanker spill (Torrey Canyon) off the coast of England and saw the need for a coordinated approach to cope with potential spills in U.S. waters. Subsequent laws have broadened the NCP, including the Clean Water Act in 1972; the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA or Superfund, 42 U.S.C. 9601 et seq.) in 1980; and the Oil Pollution Act (OPA, 33 U.S.C. 2701 note) in 1990. Thus, the statutory framework for responding to an oil spill derives principally from two laws: section 311 of the CWA established requirements for oil spill reporting, response, and liability, and established the NCP to coordinate the national response strategy; and OPA establishes liability limits (or caps) for oil spill removal costs and a range of other costs, such as injuries to natural resources. OPA consolidated the existing federal oil spill laws under one program, expanded the existing liability provisions within the CWA, and created new free-standing requirements regarding oil spill prevention and response. A number of other federal laws also are relevant, such as the Outer Continental Shelf Lands Act (OCSLA), which provides a system for regulating offshore oil and gas exploration, leasing, and ultimate development (43 U.S.C. 1331 et seq.). Multiple committees in Congress considered a large number of bills that were introduced after the Deepwater Horizon oil spill. A wide range of issues were addressed, such as increasing existing liability limits for an oil spill (e.g., H.R. 5355 and S. 3305 ), streamlining claims assistance authority (e.g., S. 3375 ), expanding oil spill research programs to help develop cleanup technologies or prevent spills (e.g., H.R. 2693 ). The only bill enacted during the 111 th Congress was a measure to advance monies from the existing Oil Spill Liability Trust Fund to pay costs related to oil spill removal ( P.L. 111-191 ). Many of the bills would have amended OPA, which is the primary domestic authority in this area, but several addressed CWA provisions, as well. For example, H.R. 5629 , which was approved by the House Transportation and Infrastructure Committee on July 1, 2010, was a comprehensive bill that would among other provisions have raised OPA's liability limits, revised NCP procedures under the CWA to regulate chemical dispersants that may be used to mitigate a spill, and clarified federal agency responsibility under the CWA for oil spill response. (Provisions of H.R. 5629 were included in a broader measure, the Consolidated Land, Energy, and Aquatic Resources Act ( H.R. 3454 ) that the House passed on July 30.) Another bill, H.R. 5608 , would have required the President to revise the NCP to ensure that it incorporates consideration of worst case discharges; Area Contingency Plans, which are specific response plans for individual geographic areas, would similarly have been required to plan for worse case discharges. A third proposal, H.R. 5677 , would have, among its provisions, required EPA to begin water quality monitoring within 48 hours of a spill in order to provide information about impacts on aquatic and other resources. It also would have required the President to update the NCP at least every five years. Another bill, S. 3466 , dealt with penalties and enforcement, but it would not have modified the CWA. It would have amended the Mandatory Victims Restitution Act of 1996 to add criminal offenses under the CWA to the statutory list of violations for which mandatory restitution of victims is required. It also would have directed the U.S. Sentencing Commission, which develops sentencing guidelines for federal prosecutors, to provide for compensation of victims for criminal violations of the CWA. <4. Continuing Issue: Appropriations> Clean water issues also were addressed by Congress in the context of appropriations. <4.1. FY2009 Appropriations> President Bush's FY2009 budget was presented on February 5, 2008. Overall, the budget sought $7.1 billion for EPA programs and activities, 5% less than Congress appropriated for FY2008. The request included a number of reductions for water quality programs. It sought $555 million for the clean water SRF program (20% below the FY2008 level) and, as in previous budgets, requested no funding for congressionally earmarked water infrastructure grants. In addition, the budget asked for 8% less for nonpoint pollution management grants ($184.5 million, compared with $200.8 million in FY2008) and sought no funding for the targeted watershed grants program, a competitive grant program that provides funding for community-driven watershed restoration projects; it received $10 million in FY2008 appropriations. In June 2008, a House Appropriations subcommittee approved a bill with FY2009 funds for EPA. The bill included $850 million for clean water SRF capitalization grants ($295 million above the Administration's request and $161 million above the FY2008 level) and $180 million for congressionally earmarked water infrastructure grants. No further action occurred before the start of the new fiscal year, on October 1, 2008. However, at the end of September, Congress and the President agreed to legislation providing partial-year funding for EPA and most other agencies and departments. This bill, the Consolidated Security, Disaster Assistance, and Continuing Resolution Act, 2009 ( P.L. 110-329 ), provided funding through March 6, 2009, at FY2008-enacted levels (i.e., $689 million for clean water SRF grants). A second short-term CR was enacted on March 6 ( P.L. 111-6 ), while Congress was finishing consideration of a full-year omnibus FY2009 appropriations bill that President Obama signed on March 11, 2009 ( P.L. 111-8 ). It provided $689 million in regular appropriations for the full year, but Congress also provided $4.0 billion more in economic stimulus funds, which are discussed next. The 2009 omnibus appropriations act also included $183.5 million for earmarked water infrastructure grants. <4.2. Economic Stimulus> As the economy slid into recession in 2008, and fiscal problems began to affect all levels of government, states and cities have increasingly looked to the federal government for assistance in addressing the nation's faltering economic conditions. As a result, interest in using federal government spending to stimulate U.S. economic recovery intensified, and soon after taking office in January 2009, President Obama urged Congress to enact a multi-billion dollar fiscal stimulus bill. Among the options that were under discussion, many favored making accelerated investments in the nation's public infrastructure in order to create jobs while also meeting infrastructure needs. Legislative focus centered on providing supplemental appropriations for a wide range of government programs, including the clean water SRF program. Because of the urgency of responding to the economic downturn, emphasis was on providing funds for projects that could move to construction quickly, which are often referred to as "shovel ready" or "ready to go" projects. To support arguments for generous spending levels in a stimulus bill, interest groups came forward with lists and estimates of "ready to go" projects. For example, state and local water agencies reportedly identified from $9 to $20 billion in wastewater treatment projects that are "ready to go." Legislators moved quickly on these issues, because President Obama urged passage of economic stimulus legislation by mid-February 2009. On January 28, 2009, the House passed H.R. 1 , the American Recovery and Reinvestment Act, providing supplemental appropriations for a number of existing federal infrastructure and other programs, including $6 billion for clean water SRF capitalization grants. On February 10, the Senate passed an amended version of the legislation, providing $4 billion for clean water SRF grants, and on February 13, the House and Senate agreed to a reconciled version of the legislation providing $4 billion for clean water SRF grants that will be available through September 30, 2010. President Obama signed the bill into law on February 17 ( P.L. 111-5 ). Clean Water SRF funds provided in the bill were distributed to states according to the existing CWA state-by-state formulation that applies to regular SRF appropriations, but the bill waived the CWA requirement that states provide a 20% match to the federal capitalization grant. Also, the legislation allowed states to provide assistance to communities in the form of negative interest loans, principal forgiveness, grants, or a combination. States were to give preference to activities that can start and finish quickly, with a goal that at least 50% of the funds go to activities that could be initiated within 120 days of enactment. Further, states were to give priority to wastewater projects that could proceed to construction within 12 months of enactment, and EPA was directed to redistribute any SRF capitalization grant funds that were not under contract or construction within that time. The legislation also directed states to use at least 20% of their capitalization grants to fund projects that address green infrastructure, water or energy efficiency improvements, or other environmentally innovative activities. The supplemental clean water SRF funds provided by P.L. 111-5 were nearly six times larger than funds appropriated to states in the regular FY2009 appropriations act. Most state and local government officials welcomed the help provided by the stimulus funds in addressing long-standing infrastructure needs, but they noted that significant funding needs will remain even after the stimulus money has been spent. Despite the tight deadlines specified in the law, all states were able to meet the requirement that funds be under contract or construction by the one-year anniversary in February 2010; thus, EPA did not re-distribute any funds to other states. <4.3. FY2010 Appropriations> President Obama delivered details of the Administration's FY2010 budget request on May 7, 2009. He requested $10.5 billion in total funding for EPA. The most significant investments in the FY2010 budget included funds for water infrastructure. Specifically, the budget sought $2.4 billion for clean water SRF capitalization grants, nearly 2.5 times more than FY2009 appropriations. EPA estimated this funding level would finance 1,000 clean water projects. The budget also sought new funding for Great Lakes restoration efforts requesting $475 million for multiple programs and projects, including remediation of contaminated sediments (the Great Lakes Legacy Act would not be separately funded). About one-half of the total would be provided by EPA to other agencies for their Great Lakes programs and projects, such as the Department of Agriculture and Department of the Interior. Congress reached final agreement on legislation providing EPA's FY2010 appropriation at the end of October 2009, several weeks after the start of the new fiscal year. Congress agreed to provide $2.1 billion for clean water SRF capitalization grants and $187 million for congressionally directed water infrastructure special project grants. While providing substantial funding for wastewater projects, the bill also imposed conditions on how the money could be used. Building on requirements in the 2009 economic stimulus legislation, the bill directed that not less than 30% of the clean water SRF capitalization grants in excess of $1 billion be used to provide additional subsidization in the form of negative interest loans, forgiveness of principal, or grants. Also, to the extent there were sufficient applications, not less than 20% of funds provided under a state's SRF program were to be used for green infrastructure, water efficiency, or energy efficiency improvements. As passed, the bill included language requiring application of the Davis-Bacon Act's prevailing wage provisions for clean water projects. In November 2009, EPA issued policy guidance stating the agency's interpretation that, under the language as passed, prevailing wage rules would apply not only to assistance agreements funded with FY2010 appropriations, but also to all assistance agreements executed on or after October 30, 2009, and prior to October 1, 2010. Industry groups and some states responded that, by applying the Davis-Bacon requirements retroactively, as well as forward, the policy memo was unnecessarily broad and would needlessly delay some projects. Criticism of EPA's guidance on Davis-Bacon applicability contributed to the Senate's failure to take action on CWA water infrastructure reauthorization legislation, S. 1005 , discussed above. The bill supported the President's $475 million request for Great Lakes restoration. In connection with these funds, the House and Senate Appropriations Committees directed EPA to develop plans for spending the money and also directed EPA to report annually to Congress on program accomplishments and specific funding levels for participating federal agencies. President Obama signed the bill on October 30, 2009 ( P.L. 111-88 ). <4.4. FY2011 Appropriations> President Obama presented his FY2011 budget request to Congress on February 1, 2010. Overall, the President's budget called for a freeze on non-security discretionary expenditures at EPA and other federal agencies. Consequently, the total request for EPA was $10.02 billion, compared with $10.3 billion enacted for FY2010. The FY2011 request sought $2.0 billion for clean water SRF capitalization grants, which was $100 million less than FY2010, but still an increase above recent years' funding levels. As in the 2009 economic recovery legislation and the FY2010 regular appropriations, the President's budget requested that states use 20% of their capitalization grants for "green infrastructure" projects and also use 30% of assistance in the form of additional subsidization (such as loan forgiveness) to communities that face difficulties in paying for infrastructure projects. One item that drew some congressional attention was the President's request for Great Lakes restoration. This funding would continue the initiative created in the FY2010 budget to target the most significant environmental problems of the Great Lakes ecosystem and to coordinate the work of multiple federal agencies in restoring the lakes. The budget requested $300 million for these activities in FY2011, because most of the $475 million appropriated in FY2010 was still uncommitted and unspent as of February 2010, when the FY2011 budget request was submitted. Only 8% of the 2010 funds had been obligated by that time, and some of that year's funds won't be spent until 2011, according to EPA. 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, 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 on September 30 ( P.L. 111-242 ). Two other short-term continuing resolutions were passed after December 3 ( P.L. 111-290 and P.L. 111-317 ), while the House and Senate attempted to resolve appropriations issues for some portion or all of the remainder of FY2011. At the end of December, Congress passed a fourth continuing resolution that extends FY2010 funding levels for EPA and other agencies and departments through March 4, 2011 ( P.L. 111-322 ). Thus, final resolution of FY2011 appropriations will occur early in the 112 th Congress. <4.4.1. Appendix. Current Clean Water SRF Allotment and Proposed Senate Revision>

Although much progress has been made in achieving the ambitious goals that Congress established more than 35 years ago in the Clean Water Act (CWA) to restore and maintain the chemical, physical, and biological integrity of the nation's waters, long-standing problems persist, and new problems have emerged. Water quality problems are diverse, ranging from pollution runoff from farms and ranches, city streets, and other diffuse or "nonpoint" sources, to toxic substances discharged from factories and sewage treatment plants. There is little agreement among stakeholders about what solutions are needed and whether new legislation is required to address the nation's remaining water pollution problems. For some time, efforts to comprehensively amend the CWA have stalled as interests have debated whether and exactly how to change the law. Congress has instead focused legislative attention on enacting narrow bills to extend or modify selected CWA programs, but not any comprehensive proposals. For several years, the most prominent legislative water quality issue has concerned financial assistance for municipal wastewater treatment projects. House and Senate committees have approved bills on several occasions, but, for various reasons, no legislation has been enacted. At issue has been how the federal government will assist states and cities in meeting needs to rebuild, repair, and upgrade wastewater treatment plants, especially in light of capital costs that are projected to be as much as $390 billion. In the 111th Congress, interest in increased investment in public works infrastructure—including wastewater—in order to stimulate the faltering U.S. economy brought greater attention to water infrastructure issues. Acting quickly, in February 2009, Congress passed and the President signed the American Recovery and Reinvestment Act (P.L. 111-5). Among its provisions, the legislation appropriated $4.0 billion in additional CWA assistance for wastewater projects. In addition, in March 2009, the House passed legislation to reauthorize the CWA's State Revolving Fund (SRF) program to finance wastewater infrastructure and several related provisions of the act (H.R. 1262). A companion bill was approved by the Senate Environment and Public Works Committee (S. 1005). No legislation was enacted. Programs that regulate activities in wetlands also have been of interest, especially CWA Section 404, which has been criticized by landowners for intruding on private land-use decisions and imposing excessive economic burdens. Environmentalists view this regulatory program as essential for maintaining the health of wetland ecosystems, and they are concerned about court rulings that narrowed regulatory protection of wetlands and about related administrative actions. Many stakeholders desire clarification of the act's regulatory jurisdiction, but they differ on what solutions are appropriate. In the 111th Congress, the Senate Environment and Public Works Committee approved a bill that sought to clarify but not expand the CWA's geographic scope (the Clean Water Restoration Act, S. 787). A companion bill was introduced in the House (H.R. 5088). Because some stakeholders believe that the bills would expand federal jurisdiction—not simply clarify it—the bills were controversial, and no legislation was enacted. The 111th Congress considered a number of water quality issues through oversight and legislation. Two bills amending the CWA were enacted and are discussed. One dealt with extending a moratorium for CWA permitting of certain vessels (P.L. 111-215), and the other dealt with ensuring that federal agencies and departments pay localities for reasonable costs associated with managing stormwater pollution from federal properties (P.L. 111-378).

<1. What is Outsourcing?1> The term "outsourcing" has recently assumed a prominent place in the public debate over economic policy. In general, the debate concerns the impact various federal policies are thought to have on outsourcing, including the policy that is the focus of this report, taxes. But "outsourcing" is not a formally-defined term of economic theory, and has no specific meaning in economics. And its usage in the popular debate varies. Thus, the first step in applying economic analysis to the outsourcing debate is to clarify the term's meaning to define it, using terms that do have a precise meaning in economic theory. In one common usage, outsourcing simply means the use by a firm of inputs produced outside the firm, either by foreigners or unrelated domestic firms the important fact is simply that someone else performs the function. Here, a firm's manager might speak of "outsourcing" a task, meaning that another firm does that particular job. Similarly, outsourcing sometimes refers to the use by government agencies of services provided by the private sector for example, legislation has recently been introduced in Congress that would "outsource" certain debt-collection functions of the Internal Revenue Service. The focus of this report, however, is the international economy; its analysis is confined to what might be termed "offshore" outsourcing. But here, too, the term's usage varies. For example, one focus of the recent public debate has been the use by U.S. firms of skilled foreign technological workers who reside and work abroad, but who provide services to customers in the United States. A prominent example of this usage is in the 2004 Economic Report of the President , which cited "the increased use of offshore outsourcing in which a company relocates labor-intensive service industry functions to another country." The report, along with a subsequent statement by the President's chief economic advisor that such outsourcing "is just a new way of doing international trade" sparked a heated debate in Congress and elsewhere. In economic terms, this particular usage of outsourcing refers to international trade, specifically the importation of services. A second use of "outsourcing" has also referred to international trade, but to flows of goods rather than services. This use may have been more frequent in past years than in the current debate. For example, a 1983 Fortune magazine article that was among the first sources to use the term described an increasing tendency for U.S. automakers to "buy more and more parts abroad" and further stated that "to a large extent the products to be out-sourced are low-technology items such as window cranks, seat fabrics, and plastic knobs." Another use of the term in the current debate refers to foreign investment rather than trade. Here, the term refers to a U.S. firm that shifts its domestic production of an item to a foreign location or to a U.S. firm that establishes a new production facility abroad rather than in the United States. One example of this type of outsourcing that has been prominently featured by the media is the closing of a Chicago plant by Radio Flyer, Inc. maker of a popular children's wagon and the moving of production to China. In a usage that directly applies to taxes, Senator John Kerry called for the closing of "loopholes in international tax law that encourage outsourcing." (The question of whether the U.S. tax system does, in fact, encourage this type of outsourcing is one focus of this report, and is addressed below.) In economic terms the three popular usages of outsourcing that are mentioned here can be described respectively as the import of services from abroad, the import of goods from abroad, and the use of domestic capital in foreign locations. Given this economic view of outsourcing, the analysis in the following sections of this report looks at the impact of taxes on two key economic variables: trade and investment. The basic analysis of taxes and trade is the same whether the trade is in services or goods; thus, it is important to look at the first two examples of outsourcing together, combining our assessment of the direct use of foreign labor with that of the importation of goods. The analysis continues by assessing the impact of taxes on foreign investment, the third type of outsourcing. The results of the following analysis are summarized briefly in advance. First, according to economic theory, tax policy does not alter the country's balance of trade, as long as it does not also produce a change in foreign investment flows. In terms of the outsourcing debate, taxes do not affect the net amount of the first type of outsourcing identified above, the use of foreign labor services or inputs made by foreign firms. Taxes can, however, alter both the composition and level of trade and reduce economic efficiency and economic welfare if they distort either how much a country trades or what it trades. Second, tax policy can affect the extent to which firms invest abroad; in terms of outsourcing, it can affect the extent to which firms use overseas production facilities to produce inputs for their domestic operations. Current U.S. tax law poses a mix of incentives and disincentives towards overseas investment; its net result is uncertain. However, in a manner similar to trade, economic theory suggests that taxes best promote world economic efficiency when they are neutral towards investment location. In a divergence from trade theory, investment theory suggests taxes can promote national economic welfare (though not world welfare) if they pose a small impediment to overseas investment. An underlying concern of the outsourcing debate is employment. The debate is sometimes conducted in terms of the export of jobs, yet the economic analysis just summarized does not mention employment effects of outsourcing. In part, this is because the focus of this report is on how taxes affect outsourcing, not how outsourcing, in turn, affects variables such as employment. The last section of the report does, however, briefly turn to employment questions and summarizes how economic theory applies to outsourcing and employment. Economic theory indicates that outsourcing does not play an important role in determining the aggregate level of employment in the economy, although it can affect the division of income in broad terms between labor on the one hand, and owners of investment capital, on the other. <2. Taxes and Outsourcing Through Trade> In its discussion of outsourcing through trade in services, the 2004 Economic Report of the President used the example of a U.S. firm that might use a call-center in India to answer customer service-related questions. For goods, an example might be a U.S. firm that uses foreign-made components as part of an overall product made in the United States. Importantly, in this usage of the term "outsourcing" we rule out items produced by the U.S. firm's own foreign facilities. In economic terms, we are thus assessing the impact of taxes on trade, while at least initially holding investment flows constant. In this setting, economic theory indicates that taxes have little impact on the country's balance of trade the excess of imports over exports. As applied to the outsourcing debate, theory thus indicates that taxes have little impact on the extent to which the economy as a whole engages in this type of outsourcing, at least as compared to the country's level of exports. (In the context of the outsourcing debate, we might term a country's trade balance its "net" outsourcing.) This result is an important one, and since it may counter the reader's intuition, it is worth examining more closely. First, economics points out that a country's trade deficit is the excess of what a country uses over what it produces. And just as an individual who spends more than he earns must necessarily borrow to finance the difference, a country that uses more than it produces and that runs a trade deficit must borrow from other countries to finance the deficit. In terms of the international economy, the borrowing consists of imports or inflows of investment capital from abroad. It follows from this fact of economic life that a country's trade balance mirrors its balance on capital account. Countries normally both import and export investment capital. But if a country runs a trade deficit, it must likewise import more capital than it exports, with the difference making the trade deficit possible. The trade deficit (or surplus) thus moves in parallel with the balance on the capital account and net imports can increase only if net capital inflows also increase; identically, net exports can only increase if net capital outflows increase. In effect, if an economy does not increase its own production, it can increase its use of goods and services only if it borrows to do so. The mechanism by which this identity is enforced in the current international economy is exchange rate adjustments. If there is no change in capital flows and some factor, such as taxes, changes so as to increase imports or exports, exchange rates will eventually adjust so as to offset any impact the factor might otherwise have on the trade balance. An example using outsourcing is useful here; we use the case of a hypothetical domestic industry (we'll call it Industry A) whose firms typically employ staffs of technical support personnel who are on call to answer customer questions. Suppose the home country implements a tax policy that inadvertently encourages firms to shift from using domestic service employees to using foreign ones. For example, the home country might implement more stringent depreciation rules for a certain type of equipment the home-country technical services personnel use. Since foreign operations of foreign firms are generally beyond the U.S. tax jurisdiction, imported services would not be directly affected by such a change. For illustration's purposes, we shall say that the new depreciation rules increase the cost of using domestic personnel to such an extent that Industry A finds it advantageous to begin importing the services it previously obtained domestically. Industry A, in other words, increases its outsourcing, which may initially be reflected in an increase in the home country's trade deficit (its net outsourcing). But this is where exchange rate adjustments occur, neutralizing any changes in the balance of trade. In order to pay the foreign service providers, the firms in the home country's Industry A must increase their purchases of foreign currency. The increase in demand for foreign currency, in turn, will normally drive up the price of the foreign currency, which, in turn, makes all the home country's imports more expensive while at the same time making the home country's exports cheaper for foreign buyers. In the aggregate, the home country's exports increase while its imports recede from their initial expansion, and when the adjustment is complete, the initial increase in the trade deficit is completely offset by increases in aggregate exports and reductions in aggregate imports induced by the exchange rate movements. Because the exchange rate adjustments apply to all the home country's traded goods and services, not just to Industry A's imports, and because we assumed that only one home-country industry was subject to increased taxes, only part of Industry A's initial increase in outsourcing would likely be offset by exchange rate movements before the adjustments run their course. A part of Industry A's initial increase in outsourcing is, in other words, likely to remain. But the crucial point is this: if there is an increase in outsourcing in one sector, it will be offset by reduced outsourcing, reduced imports of other products, and increased exports in other sectors. While taxes do not alter the trade balance, they can affect other aspects of trade, including its composition, its level, and what economists call the "terms of trade." First, composition: even from the simple example here, it is clear that a tax that causes uneven changes in price across industries can alter what is traded the exact mix of goods and services that a country imports and exports. In our example, we assumed that because of a tax change, a particular industry in the home country increased its service imports but other home-country imports fell and exports increased because of exchange rate adjustments. In general terms, the composition of trade depends on the particular pattern of relative costs within the domestic economy; when tax burdens within the economy are uneven, they distort relative costs and change what is traded. Taxes can likewise alter the overall level of trade even where the balance of trade does not change. To illustrate, in our example the increase in imports triggered by the tax change was partly offset by exchange rate adjustments, but because part of the adjustment necessary to maintain the trade balance was absorbed by increased exports, the overall level of imports remained higher than before. Again in general terms, the changed tax policy did encourage a higher reliance on imports by industry A, but to pay for the imports (again assuming no capital flows or added borrowing) the home country also increased its exports; the overall level of trade increased. The "terms of trade" is an economic term denoting the price of home-country exports compared to the price of its own imports; it measures the amount of exports a country must provide foreigners in order to obtain a given amount of foreign products. Taxes can alter the terms of trade by reducing the price foreigners pay for exports or by increasing the price of imports. A prominent example in tax policy was the impact of the U.S. extraterritorial tax exclusion (ETI) tax benefit for exports that was at the heart of a controversy between the United States and the European Union. The ETI benefit was designed to boost U.S. exports by cutting taxes on export income. In order to sell more exports, however, U.S. producers necessarily pass on part of their own tax savings to foreign consumers in the form of reduced prices, thus registering what economists term a "worsening" of the terms of trade. (The terms of trade effect of our earlier outsourcing examples are ambiguous, and would depend on market conditions.) We have thus far looked at a type of outsourcing where the U.S. firm that imports its inputs does not itself produce the imported items in an overseas production facility. Our specific examples have consisted of trade in services, although the same general analysis applies to trade in goods. In terms of economic variables, we have also assumed there is no outflow of capital that accompanies the outsourcing; we have focused exclusively on trade rather than investment. But as described at the report's outset, a part of the outsourcing debate has concerned overseas production by U.S. firms, and so the next section shifts the focus from trade to capital flows. <3. Taxes and Overseas Production by U.S. Companies> We have seen that economic theory indicates that if taxes do not alter capital flows, they have no impact on the balance of trade, although they may affect the level and composition of trade. Absent changes in foreign investment, in other words, taxes do not affect what might be called net outsourcing. Theory also indicates, however, that taxes can affect investment: they can alter the relative attractiveness of foreign and domestic locations for multinationals, leading them to change their allocation of capital between the domestic and foreign economies. Thus, if we define a second type of outsourcing as the use of overseas rather than domestic production facilities, taxes can have an impact. An example of this second type of outsourcing might consist of a U.S.-owned factory in a foreign country that produces tangible goods shipped back to the United States. Taxes enter the investment equation as follows: according to economic theory, firms allocate their investment resources between foreign and domestic locations by comparing the rate of return investment produces in either location. In general, they invest in each location up to the point where the rate of return on an additional increment of investment is the same at home and abroad. Since firms are concerned with their aftertax profits, they equate the return of foreign and domestic investment after taxes, rather than before them. The basic impact of taxes results: other factors remaining constant, taxes will induce firms to shift more investment than they otherwise would from the domestic economy to foreign locations if the tax burden on foreign investment is lower than that on domestic investment. Taxes will shift investment from foreign locations to the domestic economy if taxes are relatively lower on domestic investment, and taxes will have no impact on (will be "neutral" towards) the location of investment if their burden is the same in each location. We can make this general result more concrete by constructing another example. Here, we shall say that a domestic manufacturing industry (Industry B) uses a particular part say, a door handle as a component of its final product. We will also say that the home-country government again introduces more stringent depreciation rules, in this case for the equipment used to manufacture the door handle, thus effectively increasing the cost of the part for Industry B. We return below to some possible trade effects of the tax policy change, but here focus on the investment impact. Since the new depreciation rules do not apply to investment abroad, the policy change will have the effect of increasing the tax burden on domestic investment compared to investment abroad. Rather than importing the door handle in this case, we will say that Industry B establishes its own foreign operations, conducted by foreign subsidiary corporations unaffected by the tax change. Here, then, the outsourcing consists of production overseas by U.S. firms, using investment funds flowing from the domestic economy to foreign locations. Before looking at how specific features of the existing U.S. tax system affect investment, we return briefly to trade. As noted in the first section, taxes do not affect the trade balance unless they alter capital flows, and our analysis there held capital flows constant. In the present section, however, we have seen how taxes can, in fact, alter capital flows. Since the trade balance moves in parallel with the balance on capital account, taxes can therefore temporarily alter the balance of trade indirectly through their impact on capital flows. The direction of the impact is perhaps counter to intuition; an increase in capital outflows reduces the trade deficit, since capital outflows are, in effect, exports. In terms of the outsourcing debate, in other words, an increase of our second type of outsourcing the type that consists of overseas investment actually reduces the net amount of the first type of outsourcing the type consisting of imports. As before, this result occurs because of exchange rate adjustments. When U.S. firms increase their overseas investments, they supply additional dollars as they increase their purchases of foreign assets. The price of the dollar accordingly declines; U.S. exports become less expensive for foreigners and U.S. imports become more expensive. Imports shrink, exports increase, and the trade deficit net outsourcing through trade diminishes. While this is an attention-getting result because of its irony (outsourcing through investment reducing outsourcing through trade), it should not be emphasized because it is temporary: the increased flow of capital abroad lasts only until U.S. firms achieve their new desired level of capital stock abroad. A more persistent impact of tax policy on the trade balance may occur if tax policy affects the federal budget deficit and thus alters federal borrowing requirements a development that would likely change net capital flows. For example, repeal of the ETI export tax subsidy would, in isolation, increase federal tax receipts and thus reduce the budget deficit. The resulting decline in federal borrowing requirements would (again, in isolation) reduce capital inflows, which would reduce the trade deficit. The importance one attaches to this effect depends on whether one assumes that a given change in tax policy is matched by another change that offsets its revenue effect for example, whether repeal of a provision such as ETI is matched by revenue-losing changes occurring elsewhere. We do not offer a conclusion on this subject here. Further, it can be argued that federal budget deficits must ultimately be offset by a surplus at some point in the future, so this effect, too, may be temporary. <4. The Impact of the Current System and Recent Legislation> In the preceding section we saw how taxes can have an impact on the overall level and composition of trade, though not the trade balance; they can also alter the type of outsourcing that consists of overseas production by U.S. firms. We do not provide a detailed assessment here of the impact of the current tax system on the level and composition of trade (again, the system does not have a direct impact on the balance of trade). We can note, however, that the existing system may well reduce the level of trade by virtue of its use of a "classical" system for taxing corporate income. Under such as system, income from corporate investment is taxed twice, once at the corporate level and once when it is received by stockholders as capital gains or dividends. In contrast, the principal types of non-corporate investment, owner-occupied housing and non-corporate business, are taxed only once, if at all. Given that goods and services in the "tradables" sector consist more frequently of corporate rather than non-corporate products, the double-taxation of corporate investment may shift resources from tradables to non-tradables, thus reducing the level of trade. We look at the impact of the existing U.S. system on investment flows in more detail. Again, the key factor for taxes' impact on investment is how the tax burden on foreign investment compares with that on domestic projects. Other CRS products provide more detailed descriptions of the U.S. international tax system and how it affects the relative tax burden on foreign and domestic investment. Here, however, we note only its essential features. In general, the U.S. system produces no single, overall impact on investment flows that is readily discernable; different parts of the system, viewed in isolation, produce different results. The so-called "deferral" principle, for example, permits an indefinite postponement of U.S. tax for overseas operations conducted through foreign subsidiary corporations rather than branches of U.S. parent firms. Deferral poses a tax incentive for investment in countries with low tax rates, resulting in more U.S. investment in those locations than would otherwise occur. The U.S. tax system also permits its investors to claim a foreign tax credit for foreign taxes they pay, a feature that reduces double-taxation of overseas income; in some cases the foreign tax credit can result in even tax treatment of foreign and domestic investment, producing tax neutrality. The foreign tax credit, however, is limited to U.S. tax on foreign and not domestic income, a feature that poses a disincentive for investment in countries with high tax rates, resulting in less U.S. investment in those locations than would otherwise occur. <4.1. The Tax Increase Prevention and Reconciliation Act of 2006 (TIPRA; P.L. 109-222)> The principal features of TIPRA extension of reduced rates for capital gains and minimum tax relief were not directly related to international taxation. Early versions of the legislation also contained extension of a large number of temporary tax benefits ("extenders") that expired at the end of 2005. Most extenders were not included in the final act, but were addressed in Congress's December 2006 session. However, two extenders that were not excised from TIPRA were international tax provisions. One provision extended through 2008 the exclusion of active financing income (income from banking, insurance, and similar activities) from Subpart F's anti-deferral regime. A second provision excluded from Subpart F through 2008 income of a type that would ordinarily be included in the regime dividends, interest, and similar income but that is paid by a related foreign corporation out of active business income. <4.2. American Jobs Creation Act of 2004 (AJCA; P.L. 108-357)> For a variety of reasons, congressional interest in tax provisions related to the types of outsourcing outlined in this report was particularly high in 2004, and resulted in legislation much broader in scope than that included in TIPRA. In 2004, both the House and Senate passed major tax bills with a variety of provisions that were relevant to offshore outsourcing. In part, the bills H.R. 4520 and S. 1637 addressed a trade controversy between the United States and the European Union by repealing the extraterritorial income (ETI) tax benefit the United States provides to its exporters. Beyond this, however, the bills each contained a variety of provisions with the potential to affect the relative tax treatment of domestic and overseas investment, and that therefore might affect the volume of outsourcing through foreign investment. In October, both chambers approved a conference committee version of the legislation, containing the above provisions, that became P.L. 108-357 , the American Jobs Creation Act of 2004 (AJCA). As with the overall impact of the current tax system, the likely combined impact of the act's various provisions is uncertain. However, the impact several of the measure's most prominent features are likely to have, in isolation, is more clear. <4.2.1. Deduction for Domestic Production> For domestic investment, the act contains a 9% tax deduction from income for domestic (and not foreign) production activities. The deduction applies to corporations and non-corporate businesses alike. To illustrate its effect, for a firm in the top corporate tax bracket of 35%, the deduction has an effect similar to a reduction in the tax rate to 31.85% (i.e., 35% X [100% - 9%]). Because the deduction is restricted to domestic investment, the deduction (in isolation) poses an incentive for firms to invest in the United States rather than abroad. In this respect, the deduction's impact on investment is similar to the extraterritorial income (ETI) tax benefit for exporting that was repealed by the AJCA in order to solve a trade dispute with the European Union. Export tax benefits necessarily favor domestic over foreign investment, since export production by definition requires domestic rather than foreign production. The domestic production deduction, in fact, was partly intended to compensate for the economic impact of ETI's repeal. In contrast to the repealed ETI benefit, however, the incentive is not confined to investment in the export sector. <4.2.2. Less Restrictive Foreign Tax Credit Rules> The act made a variety of changes in rules relating to the foreign tax credit. The general thrust of the provision was to relax foreign tax credit rules, principally in areas related to the credit's limitation. By far the most important of the changes was a change in the rules for allocating interest expense between foreign and domestic sources an allocation firms must make in calculating their foreign tax credit limitation. While the act reduced taxes only for firms with foreign tax credits and was thus confined to firms with foreign investment, the reduction nonetheless applied more to multinationals' domestic than to foreign investment. The provision was likely to thus probably reduce the tax burden on domestic investment relative to foreign investment and will reduce net outsourcing through foreign investment. The remaining foreign tax credit provisions, while likely smaller in impact that the interest allocation rules, was likely to reduce the relative tax burden on foreign investment, thus likely increasing the flow of investment abroad. <4.2.3. Changes Related to Deferral> As with the foreign tax credit, the act contains several provisions related to the ability of U.S. firms to defer U.S. tax on foreign income. The general thrust of the provisions was to expand the scope of deferral, in most cases by restricting the applicability of subpart F's denial of deferral. The impact of these provisions, in isolation, was likely to reduce the relative tax burden on foreign investment, thus likely increasing the flow of foreign investment abroad. <4.2.4. Tax Cut for Repatriated Foreign Earnings> An additional international provision was a temporary tax cut for earnings that repatriate from foreign subsidiaries. As described above, the deferral of U.S. tax lasts only as long as foreign earnings are reinvested abroad; U.S. taxes ultimately apply when the earnings are repatriated to the United States as dividends. The act provided a temporary reduction in the U.S. tax that applies upon repatriation; the provision had the effect of reducing the tax rate to 5.25% (the normally applicable corporate rate is 35%). The temporary period was one year. A number of researchers have subsequently studied the impact of the reduction in the tax on repatriated earnings that came out of the American Jobs Creation Act. The studies have generally focused on two particular responses: the level of repatriations and the impact on economic growth. In short, the studies generally conclude that the reduction in the tax rate on repatriated earnings led to a sharp increase in the level of repatriated earnings, but that the repatriations did not increase domestic investment or employment. They further conclude that much of the repatriations were returned to shareholders through stock repurchases. <5. Policy Perspectives> Economic theory has developed frameworks for evaluating tax policy towards both international trade and international investment in terms of economic efficiency and economic welfare. These frameworks can be applied to tax policy towards both types of outsourcing assessed in this report. <5.1. Tax Policy and Trade> As described above, taxes affect the trade balance (what we have termed "net outsourcing") only if they also alter capital flows. Thus, for example, economic theory holds that tax policies designed to curtail imports (e.g., tariffs) or encourage exports (e.g., export subsidies) do not change the trade balance, although they can alter the level and composition of trade. For example, tariffs may shrink the overall level of trade or outsourcing, but because of exchange rate adjustments, declines in imports are accompanied by reduced exports so that the trade balance is not altered. Similarly, export subsidies cannot increase an economy's trade surplus but do expand the overall level of trade. Thus, economic theory indicates that taxes are powerless to alter the net level of outsourcing that occurs through importing. This is not necessarily a bad result: economic theory points out that imports are not inherently "bad" and exports are not inherently "good," and so policies that restrict imports or promote exports may miss the point. International trade is indeed "trade" in the most literal sense the exchange of some items for others to enhance mutual well-being. Exports are thus not a key to the economy's wellbeing, but rather the goods that are given to foreigners in exchange for the imported foreign goods the economy uses. Classic economic theory says that such exchange occurs, and makes an economy better off, because it enables economies to specialize in the production of goods they produce most efficiently. For example, an economy might be able to produce wheat more efficiently than watches. If its consumers nonetheless desire a certain amount of watches, it might behoove the country to shift resources out of watch production into wheat, and trade wheat for watches made by a foreign country that produces watches more efficiently than wheat. The important point its that it is not the exports that make the economy better off, but the ability to specialize by trading exports for imports. From the point of view of the economy's efficiency, and thus, general economic welfare, there is an optimal level of international specialization. There is, in other words, a level of trade (imports plus exports) at which an economy is specializing enough in what it does efficiently to improve its welfare, but not specializing so much that it exports goods it produces inefficiently and imports items that it could produce domestically at little resource cost. It is here that economic theory provides an insight about the results of taxes' impact on trade. To the extent that taxes distort trade by either changing the mix of what an economy trades or the level at which it trades, taxes are believed to impair economic efficiency and reduce the overall economic welfare of the economy's participants. The application of this principle to tax policies designed to alter trade policies designed to shrink imports or expand exports is straightforward. As previously noted, economists believe that neither tariffs nor export subsidies alter the balance of trade, but rather can change the composition and/or level of trade, with tariffs shrinking trade and export subsidies expanding it. To the extent any of these tax policies shift the economy away from its optimal level of trade, they make the economy's participants as a whole worse off in terms of economic welfare. Such arguments, however, focus on the economy as a whole and are sometimes difficult to see when only a particular sector of the economy is the focus. The idea that a tariff probably makes the economy as a whole worse off would likely be hard to explain to an employee who has just been laid off because his firm has started relying on imported inputs. (The employment effects of outsourcing are discussed in the following section.) Trade theory does not deny that increases in imports (or reductions in exports) can cause economic dislocation in particular sectors of the economy. But because of the efficiency gains an economy realizes from trade, the welfare gain to the economy as a whole are held to outweigh the sum of sector-specific losses. In principle, the "winners" from a country's international trade can compensate those made worse off by providing transition relief or other transfers to those made worse off by trade. Such relief could, in principle, be provided through the tax code, although mechanisms such as unemployment insurance or subsidized job-training might be more effective. The message of economic theory on the basic relation of taxes and trade, however, is clear: tax policies that distort trade make the economy worse off. In terms of the outsourcing debate, economic theory asserts that tax policies designed to curtail the type of outsourcing that occurs through trade probably make an economy as a whole worse off. <5.2. Tax Policy and Foreign Investment> Economic theory also provides a framework for interpreting taxes' impact on foreign investment from the perspective of economic efficiency and economic welfare. Here, the results are slightly more ambiguous than those for trade because the framework distinguishes between policies that promote world economic welfare and those that promote national economic welfare but that are not optimal for world welfare. We first ignore taxes and note that a central tenet of economics holds that as capital investment in an economy increases, the product added by each additional increment of capital declines in terms of economic theory, there is a declining marginal product of capital. Given this physical property of capital, firms will generally allocate investment between foreign and domestic locations until the return on an additional unit of overseas investment (the marginal product of capital employed abroad) is equal to that of an additional domestic investment an outcome seen above in the discussion of how taxes affect investment decisions. Here, we also note that where capital is allocated so that the marginal product of foreign and domestic capital is equal, every unit of capital is necessarily being used in its most productive location. Given the declining marginal product of capital in both locations, if an increment of capital were shifted away from this point, the shifted capital would necessarily earn a lower return in its new location than its old one. At this point, therefore, the firm's entire capital stock is employed in its most productive location. More generally, again ignoring taxes, when firms equate the marginal product of domestic and foreign capital, the world economy's capital resources are employed in their most productive location and world economic welfare is maximized. But taxes can change things. Profit maximizing firms focus on the after tax return to capital and invest so that the aftertax return to additional investment is the same in each location. If taxes on investment are the same in every location, this point will be no different from the allocation of investment without taxes. But if taxes are different at home and abroad, the allocation of investment will be distorted. Capital will therefore not be employed in its most productive location and world economic welfare is not maximized. In short, theory indicates that tax policy best promotes world economic welfare when it applies at the same rate at home and abroad, and is therefore neutral towards firms' investment decisions. In economic parlance, such a tax policy possesses "capital export neutrality" it is neutral towards the export of capital. A tax policy that maximizes world economic welfare is not necessarily that which maximizes a nation's own welfare. When an increment of capital is employed in the domestic economy, it is the home country that collects and uses the tax revenue produced by the investment. Thus, the home country's residents benefit from the investment's entire pre-tax return, not just the aftertax return. In contrast, when capital is employed abroad, foreign governments normally are entitled to taxes on the investment they host and the home country benefits only from the aftertax return to the investment. Accordingly, the home country's economic welfare is maximized when firms equate the pretax return of marginal domestic investment with the aftertax return of foreign investment. This outcome suggests that the home country (but not the world economy) is better off when it allows only a deduction for foreign taxes rather than a credit. Allowing only a deduction for foreign taxes would result in higher taxes on foreign investment than domestic investment. Importantly, however, the benefit from such a policy may be offset if foreign countries retaliate. A third type of tax policy termed "capital import neutrality" is sometimes promoted by business leaders and others. It recommends a policy that enables U.S. firms to compete in foreign markets on an even footing with firms from foreign countries. This policy would consist of an exemption for foreign investment from home-country taxes, but is not neutral in its effect on investment and does not promote economic efficiency. As described above, the U.S. tax system in some cases poses incentives towards overseas investment, and in other cases is either neutral or poses a disincentive. The average impact of the system is, however, uncertain, and so whether the system as a whole comes closest to capital export neutrality, national neutrality, or competitive neutrality is likewise uncertain. Likewise, whether the legislation Congress enacted in 2004 nudged the system in the direction of a particular standard is uncertain. The impact of certain features of the system, considered in isolation, is, however, more clear. For example, the foreign tax credit generally promotes capital export neutrality because it alleviates double taxation. While the credit's limitation is likely necessary to protect the U.S. tax base, it permits the overall tax rate on investment in high-tax countries to exceed the U.S. tax rate, thus permitting a tax disincentive towards foreign investment to exist. In a sense, then, the limitation is consistent with national neutrality, although as a general matter, permitting firms only to deduct rather than credit foreign taxes would closely approach national neutrality. The deferral principle is consistent with capital import neutrality, since it can reduce the tax burden on foreign investment to a level lower than the domestic tax rate. In contrast, the current taxation that applies to branch operations or under subpart F is consistent with capital export neutrality as long as foreign tax credits are also permitted. <6. Outsourcing and Domestic Employment> The preceding economic analysis concluded that taxes best promote economic efficiency and economic welfare when they neither encourage nor discourage outsourcing, whether that outsourcing consists of imports of goods or services or exports of capital investment. But much of the debate over outsourcing has concerned its perceived impact of jobs, with some participants expressing fears that outsourced jobs destroy domestic jobs and reduce domestic employment. The absence of employment from a prominent role in the preceding discussion indirectly suggests what economic theory indicates about outsourcing and employment: outsourcing has no profound effect on long-term aggregate employment in the domestic economy, although it can trigger short-term sector-specific job losses. Nonetheless, given the prominence of employment considerations in the outsourcing debate, we provide a brief summary of economic theory in this area. First, mainstream contemporary economic theory holds that economies generally tend toward "full employment" or are moving in that direction. The labor market is thought to ordinarily be at equilibrium, where the supply of labor is equal to demand. Monetary policy set by the Federal Reserve is generally set so as to keep the economy at full employment and to avoid shocks to the system that might temporarily jar the economy from equilibrium. This is not to say there is never unemployment in fact, unemployment is always present due in part to transitions within the economy (some of which may result from outsourcing). This persistent, minimum level of unemployment is termed the "natural" rate of unemployment by economists and is viewed as an unavoidable consequence of maintaining an efficient, flexible, and adaptable economy. Nonetheless, given appropriate monetary policy, an economy is thought to generally absorb displaced workers and tend towards full employment. Against this backdrop, we return to the foregoing analysis of trade, which indicated that, absent changes in capital flows, the balance of trade cannot change; economists believe that an exogenous increase in imports (i.e., outsourcing) will ultimately be matched by an increase in exports and a mitigation of the initial increase in imports. Here, the mix of what the economy produces has indeed been changed, and an increase in unemployment in the import-competing sector may occur. Nonetheless, if the economy is tending towards full employment, new jobs will be created in other sectors of the economy that will, in time, offset those lost in the sector where outsourcing occurred. If the economy is not tending towards full employment, the transition period may be lengthened. In short, when we view outsourcing as a trade phenomenon, its employment effects will be confined to the near-term. The employment analysis of outsourcing that occurs through investment that is, where capital outflows occur is somewhat different. As with trade, there may be near-term and sector specific unemployment as a result, for example, a factory that shuts down in a particular U.S. city and that moves to a foreign location can certainly cause increased unemployment in the original U.S. location. Again, however, the economy as a whole is seen as tending towards full employment and the absorption of dislocated labor. There may also, however, be a shift in the shares of national income accruing to labor and capital respectively. This outcome is based on the basic economic precept that labor's earnings depend on its productivity, which in turn depends on the amount of capital it has to work with. The larger the economy's stock of capital for a given supply of labor, the higher will be labor productivity and the higher will be labor earnings. It follows, then, that when capital shifts abroad, domestic labor earnings fall from the level they otherwise would attain. As noted in the discussion above on efficiency, in principle those that gain from outsourcing can compensate those that lose and, because of the efficiency gains embedded in outsourcing, still be better off than before. In principle, the economic harm to workers from outsourcing can be mitigated by appropriate redistributive and retraining policies. Theory maintains, however, that these policies are most efficiently effected as general transitional relief than as policies designed to limit outsourcing. <7. Summary and Conclusions> A recent focus of tax policy debate has been the impact of taxes on the extent to which firms use imported inputs rather than domestic goods and services and whether taxes encourage U.S. firms to establish operations abroad rather than in the United States. In the current debate, the phenomena are frequently referred to as offshore or foreign "outsourcing." In economic terms, the debate concerns the impact of taxes on two aspects of the international economy: trade and foreign investment. Economic theory maintains that taxes can alter the composition and level of trade, but do not alter the balance of trade (the excess of imports over exports). In contrast, taxes can alter the extent to which firms invest abroad rather than in the United States. The current U.S. tax system produces a patchwork of effects on investment so that its net impact, whether it encourages or discourages overseas investment, is uncertain. Economic theory also provides frameworks for evaluating the impact of tax policy on trade and investment from the perspective of economic efficiency and economic welfare. Theory suggests, in general, that tax policy best promotes efficiency and national economic welfare when it neither encourages nor discourages imports or exports. In terms of the outsourcing debate, theory holds that taxes best promote economic welfare when they do not distort the level or composition of outsourcing. With outsourcing that occurs through investment, theory similarly indicates taxes best promote world economic efficiency and economic welfare when they do not distort investment flows. A policy that poses a small impediment to overseas investment may, in contrast, best promote national welfare, although such a policy may make foreign economic actors worse off and may be offset by retaliation.

The impact of taxes on international trade and investment has been debated for decades. Most recently, a variety of bills addressing international taxation were introduced in the 110th Congress—some would have cut taxes for U.S. firms overseas, while others would have increased taxes on foreign investment. The debate over taxes and foreign outsourcing has tended to grow more heated during times of domestic economic weakness and high unemployment; questions arise over whether taxes contribute to such weakness by discouraging exports (or encouraging imports) or by encouraging U.S. firms to move abroad. The debate over international taxation has again become prominent as a part of the wider debate over "outsourcing." With taxes, the debate asks how the current system affects outsourcing, and whether policies designed to limit the phenomenon might be desirable. The precise meaning of the term "outsourcing" varies, depending on the context. In one usage, outsourcing simply refers to the use by domestic firms of inputs produced by other firms. Other usages, however, refer exclusively to the international sector. The analysis in this report focuses on two types of such "offshore" outsourcing: the use by domestic firms of imported foreign inputs, including both the use of foreign technical services and the use of foreign-made goods; and the shifting by U.S. firms of domestic operations abroad. The analysis of the first of these types of outsourcing focuses primarily on how taxes affect trade while investment is held constant. The assessment of the second type looks at how taxes affect investment. Taxes probably have little impact on the balance of trade (what might be termed "net" outsourcing), apart from indirect effects that may result from their impact on investment flows. In the language of the outsourcing debate, taxes likely do not change the extent to which the economy as a whole engages in the use of foreign, rather than domestic, inputs (compared to the extent the economy exports). In contrast, taxes can affect the flow of direct investment abroad—that is, the establishment of overseas production facilities by U.S. firms. Thus, if outsourcing is taken to mean the use by U.S. firms of foreign rather than domestic labor, taxes can have an impact. The current U.S. system, however, produces a variety of incentives, disincentives, and neutrality towards overseas investment, and the net impact of the system on the flow of investment is not clear. Similarly, the likely impact of recently enacted legislation is not clear. Economic theory provides frameworks for evaluating the efficiency effect of taxes on international trade and investment, and their subsequent impact on economic welfare. According to theory, taxes best promote economic efficiency—and thus best promote economic welfare—when they do not distort the level or composition of trade or alter the allocation of investment between foreign and domestic uses. In short, taxes best promote economic efficiency and aggregate economic welfare when they do not distort the level of outsourcing, in the sense it is used in this report. With respect to employment, outsourcing may cause sector-specific and near-term job losses but likely does not have a substantial long-run impact on overall employment. This report will be updated only when major legislative developments occur.

By some estimates there are approximately 1.2 billion Muslims in the world, of which 60% live in Asia. Only 15% of Muslims are Arab, while almost one third live in South Asia. The four nations with the largest Muslim populations, Indonesia (194 million), India (150 million), Pakistan (145 million), and Bangladesh (130 million), are in Asia. China also has a population of 39 million Muslims. Despite this, the Muslims of Asia are perceived to be on the periphery of the Islamic core based in the Arab Middle East. Muslims are a majority in Kirgizstan, Uzbekistan, Tadjikistan and Turkmenistan in Central Asia, Afghanistan, Pakistan, and Bangladesh in South Asia and Malaysia, Brunei, and Indonesia in Southeast Asia. (See map below) There are also significant minority populations in Khazakstan, India, Thailand, and the Philippines. Sizable Muslim communities are also found in Sri Lanka, China, Burma, and Singapore. Islam is by some estimates the world's fastest growing religion. Mecca, in Saudi Arabia, is the spiritual center of Islam because Mohammad founded the religion there in 610. In 2002, Muslims constituted approximately 19% of the world's population as compared to 30% that were Christian. These percentages are projected by some to shift to 25% Christian and 30% Muslim by the year 2025. Islam in Southeast Asia is relatively more moderate in character than in much of the Middle East. This moderation stems in part from the way Islam evolved in Southeast Asia. Islam came to Southeast Asia with traders rather than through military conquest as it did in much of South Asia and the Arab Middle East. Islam also was overlaid on animist, Hindu, and Buddhist traditions in Indonesia, which are said to give it a more syncretic aspect. Islam spread throughout much of Southeast Asia by the end of the seventeenth century. Islam in Asia is more politically diverse than in the Middle East. Islam has been undergoing a revival in Asia. RAND analyst Angel Rabasa points to several factors that contribute to this Islamic resurgence in Asia. These include both domestic and external factors. Internally, the forces of globalization and the impact of Western culture have played a role, especially the effect of rapid industrialization and resulting urbanization. The Asian financial crisis of 1997 resulted in the overthrow of the authoritarian Suharto regime and created political space for Islamists in Indonesia. Muslim separatist insurgents have continued their struggle in the Philippines and Thailand while the Parti Islam se Malaysia has worked through the political system to promote an Islamist agenda while in opposition in Malaysia. External factors include the current situation in Iraq and Afghanistan, the Arab-Israeli conflict, the 1979 Islamic revolution in Iran, the export of Saudi-backed Wahhabi Islamic fundamentalism, the conflict between India and Pakistan over Kashmir, and the Afghan war against the Soviets. <1. Different Schools of Islamic Tradition> The majority of Muslims are of the Sunni tradition, while 10-15% are Shiite. This difference stems from disagreement over the succession to the prophet Mohammad. In South and Southeast Asia, Shiites are a significant portion of the population in only Afghanistan and Pakistan. The puritanical Sunni sect of Wahhabism has played an important role in the resurgence of Islam in Asia. It stems from a 18 th Century movement founded by Muhammad ibn Abd al-Wahhab that preached a literal interpretation of the Quran and an orthodox practice of Islam. Historically there has been a close relationship between Wahhabism and the Saudi dynasty. Sufism is another more "mystical" variant of Islam, though its presence in Asia is small except for parts of South Asia. The decline of Islamic power in the wake of European colonial expansion provoked two key schools of thought within Islam that continue to have relevance today. The traditionalist school believed that the cause for the decline of Islam could be traced to "moral laxity and departure from the true path of Islam." As a result, their response was to call for an Islamic revival. Others, known as reformers, felt that the decline was due to "a chronic failure to modernize their societies and institutions." The path of the reformers presents the question of whether it is possible to modernize without Westernizing. At its core this is a struggle over values: "... how to protect a society's cultural heritage and traditional practices in an age of globalization and how to develop a creative coexistence between modernization and traditionalism without Westernization." It is thought by some analysts that if the United States and the West seek to make common cause with moderate elements within the Islamic world against violent extremists they would be well advised to do so in a way that is not perceived to be a threat to the Islamic world. The United States, through its association with globalization and a globalizing culture, is perceived as a threat by many leaders of the Islamic world who are seeking to preserve, or restore, traditional culture even as segments of the populations they lead are drawn to American culture. The disconnect between Muslim elites and their people in Asia can also be seen in the decreasing popularity of United States's foreign policy even as regional leaders seek to maintain close ties. Some analysts believe that as long as the Muslim world views the U.S.-led war against terror as a war against Islam there will be significant limits on the extent to which Muslim states will be able to cooperate with the United States in the war against terror. The problem is exacerbated by widespread Muslim opposition to United States policy on the Arab-Israeli conflict. <2. Islamic Revival, Political Islam, Extremists, and Terrorists> The Islamic revival is changing the face of political Islam in Asia. The distinction to be drawn is between revivalists, who see religious change as an end in itself, and political Islam, or Islamists, who seek the Islamic revival as a means to the end of transforming the state. A further distinction is to be drawn between those who would work through the political process and those who would use violence to achieve their ends. The Islamic revival has a complex relationship to the level of extremism in Asia. While Islam in Southeast Asia has been moderate in character, it is undergoing a process of revivalist change in some segments of society. The resurgence is in part inspired by links to the Middle East, Afghanistan, and Pakistan. Some Southeast Asians returning from Islamic religious schools in the Middle East and Pakistan have returned with a new, radical, militant, Islamist, and extremist form of Islam that is more likely to be anti-American or anti-Western in character. There is also a significant number of violent extremists of returned Southeast Asians, and a larger number of South Asians, who had participated in the war against the Soviet Union in Afghanistan. Some of the South and Southeast Asians who have been radicalized through these experiences have gone on to spread extremist ideology, particularly by linking with local Muslim extremist groups who tend to have more nationally or regionally defined goals and who are largely opposed to local moderate Muslims. From one perspective "the most effective policies towards Muslim Asia will be those that contain extremism while working with, rather than against, the Muslim majority's aspirations for social and economic improvement." Connections between Islamic extremism and terrorist organizations in South Asia appear to be more extensive than they are in Southeast Asia. This stems in large part from closer interaction with the Middle East, strengthened recently by the presence of Al Qaeda in Afghanistan and Pakistan. It is also a function of long term conflict in Afghanistan and in Kashmir. The extremist Taliban regime gave sanctuary to Al Qaeda until it was crushed. Since that time remnant Al Qaeda forces have linked up with other Sunni extremist groups in South Asia including Lashkar-e-Taiba, Jaish-e-Mohammad, Sipah-e-Sahaba Pakistan and Lashkar-i-Jhangvi. Pakistan has also experienced Sunni-Shiite conflict. An extensive array of Islamic schools known as madrassas , including some that teach a militant anti-Western and anti-Hindu perspective, operate in Pakistan. A coalition of Islamist political parties controls approximately 20% of the seats in Pakistan's legislature, as well as the Northwest Frontier Province. They also lead a coalition in Baluchistan. It has been reported that Al Qaeda fighters escaped to Bangladesh after the fall of Afghanistan to American and Afghan Northern Alliance forces and that Bangladesh veterans of the conflict in Afghanistan have played a role in establishing radical madrassas in Bangladesh. In India, while there exists significant inter-communal strife between Hindus and Muslims it is largely domestically focused with the exception of Pakistani based groups operating in Kashmir. There are a number of Islamist groups in Southeast Asia that have linkages, either direct or indirect, to terrorist organizations. The Moro Islamic Liberation Front (MILF), and Abu Sayyaf are examples of groups in the Philippines where Islamist ideology, secessionism, criminality, and linkages to international terrorist networks are evident. The terrorist Jemaah Islamiya (JI) organization, which seeks to establish an Islamic Khalifate across much of Southeast Asia and establish Islamic law, has ties to Al Qaeda. In Indonesia, the now reportedly disbanded Lashkar Jihad incited inter-communal strife between Muslims and Christians in Sulawezi and the Moluccas that created a struggle that can be exploited by terrorist groups such as JI. Lashkar Jundullah is another group that has been involved in inter-communal violence in the Moluccas and Sulawezi. The extremist Kampulan Mujahidin Malaysia (KMM) is an example of an organization in Southeast Asia established by veterans of the fight against the Soviets in Afghanistan. In Thailand, separatists have mounted an insurrection in the Muslim southern provinces. The relatively few Muslims of Northeast Asia are found in China for the most part. China is home to an estimated 17.5 to 36 million Muslims. The largest, most concentrated group is the Uighurs of Xinjiang Province in western China. The Uighur minority has experienced unrest of an Islamic character in recent years. Many Uighurs seek autonomy within China. Demographic trends arising from Han-Chinese in-migration are projected to make the Uighurs a minority in their home province. The scope of the Islamic revival in Asia, and the extent to which increased religious fervor will translate into extremist positions or political power that will express itself in violent ways towards the West, is debated. Some see this phenomenon manifesting itself more in terms of increased piety among individuals within society without necessarily expressing itself politically. Karen Armstrong, author of Islam: A Short History , believes that because fear feeds extremism the war against terror should include a better appreciation of Islam in the West. It has been observed that U.S. counter-terrorism policy "tends to conflate political Islam and terrorism worldwide." A key distinction for some in this debate is the distinction between cultural or religious identity and political identity. An Islamic revival that finds its expression through cultural or religious means is not necessarily a threat, even as some in the Islamic world would manipulate it to their anti-American or anti-Western ends. An examination of recent developments with political Islam in Malaysia and Indonesia illustrate this point. Radical Islamist or extremist parties have not demonstrated broad appeal among Indonesian or Malaysian voters in recent elections even as some segments of these societies have experienced a resurgence of Islamic belief. The Islamist Parti Islam se Malaysia experienced significant electoral setbacks in the 2004 elections to the relatively more secular Barisan National Coalition of Prime Minister Badawi, who is himself regarded as a respected Islamic scholar. In Indonesia, Islamist parties, such as the Prosperous Justice Party (PKS), made small gains based not on their Islamist agenda but on their anti-corruption and good governance policies. Secular and nationalist parties clearly are preferred by voters in Indonesia and Malaysia even as Islam remains a core value of the people. There are also fundamentalists in Southeast Asia that would introduce strict Islamic law but would not advocate the use of violence to do so. There is also a distinction to be made between those who would focus primarily on sub-national, national and regional objectives, such as secession for a Muslim province, rather than focus on the international agenda advocated by Al Qaeda. Alienation and humiliation appear to be key concepts for understanding the Islamic resurgence in Asia and for understanding why individuals are drawn to terrorist groups. In discussing madrassas and pesantren in Indonesia, from which extremists have been recruited, Zachary Abuza has taken the position that the "radical fringe (of Islam) will continue to grow, as modernization leaves people more isolated and the political process leaves people more disenfranchised. The Islamists and their supporters will continue to gain in power unless the more secular Muslim community again provides a successful model of tolerant and modernist Islam that it has done fairly successfully for forty years." In this way, some analysts believe frustration from diminished expectations driven by economic malaise, the lack of effective political participation, and a sense of humiliation are at the core of why many Asian Muslims have become radicalized. It is thought by some that U.S. policies can help best by assisting moderate elements in Asia to "respond to mainstream Muslims' hopes for economic improvement and political participation ... education, balanced development, participatory governance, and civil peace" that will give hope to alienated individuals who might otherwise drift towards radicalism. Some observers feel that diminishing the ranks of alienated Asian Muslims will in turn restrict room for maneuver by extremists and terrorists by limiting active or passive support from the societies within which they operate.

There exists much diversity within the Islamic world. This is particularly evident in Asia. This diversity is to be found in the different ethnic backgrounds and in the different practices of Islam. The Muslim world of Asia has been experiencing an Islamic revival. This has had an effect on moderate as well as radical Muslims. An understanding of the dynamics of Islam in Asia should help inform United States' policy to develop respect between America and Muslim peoples, to foster economic policies to encourage development of open societies, to support education in Muslim states, and to identify and prioritize terrorist sanctuaries in order to pursue more effectively the war against terror. This report will be updated.

<1. Introduction> <2. Introduction> The President is responsible for appointing individuals to positions throughout the federal government. In some instances, the President makes these appointments using authorities granted by law to the President alone. Other appointments are made with the advice and consent of the Senate via the nomination and confirmation of appointees. Presidential appointments with Senate confirmation are often referred to with the abbreviation PAS. This report identifies, for the 113 th Congress, all nominations submitted to the Senate for executive-level full-time positions in the 15 executive departments for which the Senate provides advice and consent. It excludes appointments to regulatory boards and commissions as well as to independent and other agencies, which are covered in other CRS reports. Information for this report was compiled using the Senate nominations database of the Legislative Information System (LIS) ( http://www.lis.gov/nomis/ ) , the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents , telephone discussions with agency officials, agency websites, the United States Code , and the 2012 Plum Book ( United States Government Policy and Supporting Positions ). Related Congressional Research Service (CRS) reports regarding the presidential appointments process, nomination activity for other executive branch positions, recess appointments, and other appointments-related matters may be found at http://www.crs.gov . <2.1. Appointments During the 113th Congress> Table 1 summarizes appointment activity, during the 113 th Congress, related to full-time PAS positions in the 15 executive departments. President Barack H. Obama submitted 273 nominations to the Senate for full-time positions in executive departments. Of these 273 nominations, 162 were confirmed; 8 were withdrawn; and 103 were returned to the President under the provisions of Senate rules. <2.2. Length of Time to Confirm a Nomination> The length of time a given nomination may be pending in the Senate has varied widely. Some nominations were confirmed within a few days, others were confirmed within several months, and some were never confirmed. This report provides, for each executive department nomination confirmed in the 113 th Congress, the number of days between nomination and confirmation ("days to confirm"). For confirmed nominations, a mean of 119.2 days elapsed between nomination and confirmation. The median number of days elapsed was 92.0. Under Senate Rules, nominations not acted on by the Senate at the end of a session of Congress (or before a recess of 30 days) are returned to the President. The Senate, by unanimous consent, often waives this rule although not always. This report measures the "days to confirm" from the date of receipt of the resubmitted nomination, not the original. <2.3. Organization of this Report> <2.3.1. Executive Department Profiles> Each of the 15 executive department profiles provided in this report is divided into two parts: (1) a table listing the organization's full-time PAS positions as of the end of the 113 th Congress and (2) a table listing appointment action for vacant positions during the 113 th Congress. Data for these tables were collected from several authoritative sources, as listed earlier. In each department profile, the first of these two tables identifies, as of the end of the 113 th Congress, each full-time PAS position in that department and its pay level. For most presidentially appointed positions requiring Senate confirmation, pay levels fall under the Executive Schedule. As of the end of the 113 th Congress, these pay levels ranged from level I ($201,700) for Cabinet-level offices to level V ($147,200) for lower-ranked positions. The second table, the appointment action table, provides, in chronological order, information concerning each nomination. It shows the name of the nominee, position involved, date of nomination or appointment, date of confirmation, and number of days between receipt of a nomination and confirmation. It also notes actions other than confirmation (e.g., nominations returned to or withdrawn by the President). The appointment action tables with more than one nominee to a position also list statistics on the length of time between nomination and confirmation. Each appointment action table provides the average days to confirm in two ways: mean and median. Although the mean is a more familiar measure, it may be influenced by outliers in the data. The median, by contrast, does not tend to be influenced by outliers. In other words, a nomination that took an extraordinarily long time might cause a significant change in the mean, but the median would be unaffected. Examining both numbers offers more information with which to assess the central tendency of the data. For a small number of positions within a department, the two tables may contain slightly different titles for the same position. This is because the title used in the nomination the White House submits to the Senate, the title of the position as established by statute, and the title of the position used by the department itself are not always identical. The first table listing incumbents at the end of the 113 th Congress uses data provided by the department itself. The second table listing nomination action within each department relies primarily upon the Senate nominations database of the LIS. This information is based upon the nomination sent to the Senate by the White House. Any inconsistency in position titles between the two tables is noted in the notes following each appointment table. <2.3.2. Additional Appointment Information> Appendix A provides two tables. Table A-1 relists all appointment action identified in this report and is organized alphabetically by the appointee's last name. Table entries identify the agency to which each individual was appointed, position title, nomination date, date confirmed or other final action, and duration count for confirmed nominations. The table also includes the mean and median values for the "days to confirm" column. Table A-2 provides summary data for each of the 15 executive departments identified in this report. The table summarizes the number of positions, nominations submitted, individual nominees, confirmations, nominations returned, and nominations withdrawn for each department. It also provides the mean and median values for the numbers of days taken to confirm nominations within each department. A list of department abbreviations can be found in Appendix B . <3. Department of Agriculture> <4. Department of Commerce> <5. Department of Defense> <6. Department of Education> <7. Department of Energy> <8. Department of Health and Human Services> <9. Department of Homeland Security> <10. Department of Housing and Urban Development> <11. Department of the Interior> <12. Department of Justice> <13. Department of Labor> <14. Department of State> <15. Department of Transportation> <16. Department of the Treasury> <17. Department of Veterans Affairs> Appendix A. Presidential Nominations, 113 th Congress Appendix B. Abbreviations of Departments

The President makes appointments to positions within the federal government, either using the authorities granted by law to the President alone, or with the advice and consent of the Senate. There are some 351 full-time leadership positions in the 15 executive departments for which the Senate provides advice and consent. This report identifies all nominations submitted to the Senate during the 113 th Congress for full-time positions in these 15 executive departments. Information for each department is presented in tables. The tables include full-time positions confirmed by the Senate, pay levels for these positions, and appointment action within each executive department. Additional summary information across all 15 executive departments appears in the Appendix. During the 113 th Congress, the President submitted 273 nominations to the Senate for full-time positions in executive departments. Of these 273 nominations, 162 were confirmed, 8 were withdrawn, and 103 were returned to him in accordance with Senate rules. For those nominations that were confirmed, a mean (average) of 119.2 days elapsed between nomination and confirmation. The median number of days elapsed was 92.0. Information for this report was compiled using the Senate nominations database of the Legislative Information System (LIS) ( http://www.lis.gov/nomis/ ) , the Congressional Record (daily edition), the Weekly Compilation of Presidential Documents , telephone discussions with agency officials, agency websites, the United States Code , and the 2012 Plum Book ( United States Government Policy and Supporting Positions ). This report will not be updated.

<1. Scope of the Agriculture Appropriations Bill> The Agriculture appropriations bill formally known as the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act provides funding for the following agencies and departments: all of the U.S. Department of Agriculture (except the Forest Service, which is funded by the Interior appropriations bill), the Food and Drug Administration (FDA) in the Department of Health and Human Services, and in the House, the Commodity Futures Trading Commission (CFTC). In the Senate, CFTC appropriations are handled by the Financial Services Appropriations Subcommittee. Jurisdiction for the appropriations bill rests with the House and Senate Committees on Appropriations, particularly each committee's Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies. These subcommittees are separate from the agriculture authorizing committees the House Committee on Agriculture and the Senate Committee on Agriculture, Nutrition, and Forestry. <1.1. USDA Activities and Relationships to Appropriations Bills> The U.S. Department of Agriculture (USDA) carries out widely varied responsibilities through about 30 separate internal agencies and offices staffed by about 100,000 employees. USDA spending is not synonymous with farm program spending. USDA also is responsible for many activities outside of the Agriculture budget function, such as conservation and nutrition. USDA's budget authority for FY2010 was $126.6 billion, before supplemental appropriations. Food and nutrition programs are the largest mission area, with $83 billion, or 65% of the total, to support the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps), the Women, Infants, and Children (WIC) program, and child nutrition programs ( Figure 1 ). The second-largest USDA mission area, with $23 billion (19%) in budget authority, is farm and foreign agricultural services. This broad mission area includes the farm commodity price and income support programs of the Commodity Credit Corporation, crop insurance, certain mandatory conservation and trade programs, farm loans, and foreign food aid programs. Other USDA mission areas include natural resource and environmental programs (8% of the total), rural development (3%), research and education programs (2%), marketing and regulatory programs (2%), and food safety (1%). About 60% of the budget for natural resources programs (the third-largest slice in Figure 1 ) goes to the Forest Service (about $6 billion), which is funded through the Interior appropriations bill. The Forest Service is the only USDA agency not funded through the Agriculture appropriations bill; it also accounts for about one-third of USDA's personnel, with over 36,000 staff years in FY2010. Comparing USDA's organization and budget data to the Agriculture appropriations bill in Congress is not always easy. USDA defines its programs using "mission areas" that do not always correspond to categories in the Agriculture appropriations bill ( Figure 2 ). Spending may not correspond between USDA summaries and the appropriations bill for other reasons. For example: Foreign agricultural assistance is a separate title in the appropriations bill (Title V in Figure 2 ). Foreign assistance is joined with domestic farm support in USDA's "farm and foreign agriculture" mission area (second-largest slice in Figure 1 ). Conversely, USDA has separate mission areas for agricultural research, marketing and regulatory programs, and food safety (three of the smaller slices in Figure 1 ). These are joined with other domestic farm support programs in Title I of the appropriations bill (the second-largest slice in Figure 2 ). The type of funding (mandatory vs. discretionary) also is important in how it is summarized. Conservation in the appropriations bill (Title II in Figure 2 ) includes only discretionary programs. The mandatory funding for conservation programs is included in Title I of the appropriations bill. Conversely, USDA's natural resources mission area in Figure 1 includes both discretionary and mandatory conservation programs (and the Forest Service). <1.2. Related Agencies> In addition to the USDA agencies mentioned above, the Agriculture Appropriations Subcommittees have jurisdiction over appropriations for two related agencies: The Food and Drug Administration (FDA) of the Department of Health and Human Services (HHS), and The Commodity Futures Trading Commission (CFTC, an independent financial markets regulatory agency) in the House only. The combined share of FDA and CFTC funding in the overall Agriculture and Related Agencies appropriations bill is about 2% (see Title VI in Figure 2 ). Jurisdiction over CFTC appropriations is assigned differently in the House and Senate. In the House, appropriations jurisdiction for CFTC remains with the Agriculture Appropriations Subcommittee. In the Senate, jurisdiction moved to the Financial Services Appropriations Subcommittee with the FY2008 appropriations cycle. Prior to 2008, it was with the Senate Agriculture Appropriations Subcommittee. Final placement in recent appropriations acts has alternated annually between the subcommittees. The FY2010 and FY2008 appropriations put CFTC funding in the Agriculture bill; the consolidated FY2009 appropriation put CFTC in the Financial Services bill. These agencies are included in the Agriculture appropriations bill because of their historical connection to agricultural markets. However, the number and scope of non-agricultural issues has grown at these agencies in recent decades. Some may argue that these agencies no longer belong in the Agriculture appropriations bill. But despite the growing importance of non-agricultural issues, agriculture and food issues are still an important component of FDA's and CFTC's work. At FDA, medical and drug issues have grown in relative importance, but food safety responsibilities that are shared between USDA and FDA have been in the media during recent years and are the subject of legislation and hearings. At CFTC, the market for financial futures contracts has grown significantly compared with agricultural futures contracts, but volatility in agricultural commodity markets has been a subject of recent scrutiny at CFTC and in Congress. <1.3. Discretionary vs. Mandatory Spending> Discretionary and mandatory spending are treated differently in the budget process. Discretionary spending is controlled by annual appropriations acts and consumes most of the attention during the appropriations process. The subcommittees of the House and Senate Appropriations Committees originate bills each year that provide funding and direct activities among discretionary programs. Eligibility for participation in mandatory programs (sometimes referred to as entitlement programs) is usually written into authorizing laws, and any individual or entity that meets the eligibility requirements is entitled to the benefits authorized by the law. Congress generally controls spending on mandatory programs through authorizing committees that set rules for eligibility, benefit formulas, and other parameters, not through appropriations. Just under 20% of the Agriculture appropriations bill is for discretionary programs, and the remaining balance of about 80% is classified as mandatory. Major discretionary programs include certain conservation programs, most rural development programs, research and education programs, agricultural credit programs, the Supplemental Nutrition Program for Women, Infants, and Children (WIC), the Public Law (P.L.) 480 international food aid program, meat and poultry inspection, and food marketing and regulatory programs. The discretionary accounts also include FDA and CFTC appropriations. The vast majority of USDA's mandatory spending is for food and nutrition programs primarily the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) and child nutrition (school lunch) along with the farm commodity price and income support programs, the federal crop insurance program, and various agricultural conservation and trade programs (nearly all of Figure 1 's largest two pie pieces). Some mandatory spending, such as the farm commodity program, is highly variable and driven by program participation rates, economic and price conditions, and weather patterns. Formulas are set in the 2008 farm bill ( P.L. 110-246 ). But in general, mandatory spending has tended to rise over time, particularly as food stamp participation and benefits have risen in recent years because of the recession, rise in unemployment, and food price inflation. See " Historical Trends " in a later section on funding. Although these programs have mandatory status, many of these accounts receive funding in the annual Agriculture appropriations act. For example, the food stamp and child nutrition programs are funded by an annual appropriation based on projected spending needs. Supplemental appropriations generally are made if these estimates fall short of required spending. The Commodity Credit Corporation operates on a line of credit with the Treasury, but receives an annual appropriation to reimburse the Treasury and to maintain its line of credit. <1.4. Outlays, Budget Authority, and Program Levels> In addition to the difference between mandatory and discretionary spending, four other terms are important to understanding differences in discussions about the federal spending: budget authority, obligations, outlays, and program levels. 1. Budget authority = How much money Congress allows a federal agency to commit to spend. It represents a limit on funding and is generally what Congress focuses on in making most budgetary decisions. It is the legal basis to incur obligations. Most of the amounts mentioned in this report are budget authority. 2. Obligations = How much money agencies commit to spend. Activities such as employing personnel, entering into contracts, and submitting purchase orders. 3. Outlays = How much money actually flows out of an agency's account. Outlays may differ from appropriations (budget authority) because, for example, payments on a contract may not flow out until a later year. For construction or delivery of services, budget authority may be committed (contracted) in one fiscal year and outlays may be spread across several fiscal years. 4. Program level = Sum of the activities supported or undertaken by an agency. A program level may be much higher than its budget authority for several reasons. User fees support some activities (e.g., food or border inspection). The agency makes loans; for example, a large loan authority (program level) is possible with a small budget authority (loan subsidy) because the loan is expected be repaid. The appropriated loan subsidy makes allowances for defaults and interest rate assistance. Transfers from other agencies, or funds are carried forward from prior years. <2. Action on FY2011 Appropriations> For the FY2011 Agriculture appropriations bill, no separate floor action and limited formal committee action occurred in the 111 th Congress. The full Senate Appropriations Committee reported an Agriculture appropriations bill ( S. 3606 , S.Rept. 111-221 ) on July 15, 2010. The House Agriculture Appropriations Subcommittee marked up its draft on June 30, 2010, but the bill did not see full committee action nor was it reported. In the 112 th Congress, a full-year continuing resolution ( P.L. 112-10 ) was enacted with many line-item changes on April 15, 2011. Table 1 summarizes the steps in the passage of the bill in each chamber. The FY2011 Agriculture appropriation is somewhat similar to the FY2009 bill in that neither chamber acted on the Agriculture bill as a stand-alone measure ( Table A-1 in the appendix). Conversely, Agriculture appropriations were enacted as stand-alone bills in FY2010 and FY2006. Omnibus appropriations were used as recently as FY2008 and FY2009. FY2007 saw a year-long continuing resolution. Table A-1 has links to each appropriation and annual CRS report. <2.1. House Action> On April 11, 2011, the House passed H.R. 1473 , a Defense appropriation and full-year continuing resolution for the other 11 appropriations bills (vote of 260-167, Table 1 ). On February 19, 2011, the House passed H.R. 1 , a full-year continuing resolution for FY2011 covering all 12 regular appropriations bills (vote of 235-189). The bill was introduced on February 11, going directly to the floor without formal committee or subcommittee markup. In the 111 th Congress, the House did not move the FY2011 Agriculture appropriations bill beyond subcommittee. The House Agriculture Appropriations Subcommittee marked up the FY2011 Agriculture appropriations bill on June 30, 2010, but the markup did not see full committee action, nor was it reported. Thus no full-text version of the bill or report language was made public. The subcommittee, however, did release an eight-page summary by the committee chairwoman and a funding table of discretionary appropriations at the agency level. <2.2. Senate Action> On April 14, 2011, the Senate passed H.R. 1473 (vote of 81-19). The President signed the bill on April 15, 2011 ( P.L. 112-10 ). On March 9, 2011, the Senate voted on H.R. 1 , but failed to pass it by a vote of 44-56. Later on March 9, 2011, the Senate also voted on a substitute amendment to H.R. 1 , S.Amdt. 149 . It failed by a vote of 42-58. Both bills were debated on the Senate floor without formal committee or subcommittee action. In the 111 th Congress, the Senate Appropriations Committee reported its version of the FY2011 Agriculture appropriations bill ( S. 3606 , S.Rept. 111-221 ) on July 15, 2010. The full committee bypassed subcommittee action by "polling" the bill out of subcommittee a procedure that permits a bill to advance if subcommittee members independently agree to move it along. This expedited committee procedure was formerly uncommon for the Agriculture appropriations bill, but was used for the FY2009 and FY2010 Agriculture appropriations bills as well. <2.3. Continuing Resolutions> Seven short-term continuing resolutions were enacted after October 1, 2010, to continue funding the government before the final agreement was reached: P.L. 111-242 (October 1 through December 3, 2010), P.L. 111-290 (through December 18, 2010), P.L. 111-317 (through December 21, 2010), P.L. 111-322 (through March 4, 2011), P.L. 112-4 (through March 18, 2011), P.L. 112-6 (through April 8, 2011), and P.L. 112-8 (through April 15, 2011). The continuing resolutions covered all 12 appropriations bills and were necessary because, in the 111 th Congress, the House Appropriations Committee reported only two FY2011 bills, both of which the House passed, and the Senate Appropriations Committee reported 11 of its 12 bills, but with none getting to the floor. The two bills that saw House action were Military Construction and Veterans Affairs; and Transportation and Housing and Urban Development. The only bill not reported by the full committee in the Senate was Interior and Environment. The premise behind most continuing resolutions is that prior-year funding and instructions continue into the current year, unless changed. Mandatory programs, including those in the agricultural appropriations bill are allowed to operate at required levels. The first four CRs (through March 4, 2011) continued discretionary agricultural appropriations at FY2010 levels. The fifth and sixth CRs, though, began trimming discretionary appropriations levels. Across all 12 appropriations bills, these two CRs cut $10 billion from selected accounts, on an annualized basis, from FY2010 appropriated levels at a rate of $2 billion per week. For Agriculture accounts, these two CRs reduced FY2010 appropriated levels by $532 million ( Table 4 ), mostly though not exclusively targeted to accounts that had earmarks in FY2010 (see later discussion in " Reductions in Short-Term Continuing Resolutions "). The Office of Management and Budget (OMB) allocates funding to departments and agencies under the continuing resolution, but sometimes in a limited way that makes operations more restricted than might otherwise occur when continuing last year's funding levels. <2.4. Detailed Funding Levels> <2.4.1. FY2011 Funding Summary> <2.4.1.1. Administration Request> For FY2011, the Administration requested a total of $132.3 billion for accounts in the Agriculture appropriations bill (including CFTC), 9% higher than the enacted FY2010 appropriation, but mostly because of mandatory spending. For mandatory amounts, the Administration requested $109.1 billion, 11% more than FY2010. The increase in mandatory spending was for domestic nutrition assistance in the food stamp and child nutrition accounts. For the discretionary amount, the Administration requested $23.2 billion, which is $187 million less than (-0.8%) the official FY2010 amount. However, the FY2010 appropriation included two large items that are not in the FY2011 budget: $350 million of supplemental dairy assistance, and $173 million for a rural housing program that was replaced by user fees in a FY2010 supplemental appropriation. If these two items totaling $523 million are excluded from FY2010 for comparison, the Administration's discretionary request was $336 million more than the FY2010 adjusted total (+1.5%). <2.4.1.2. Full-Year Continuing Resolution> P.L. 112-10 provided $19.9 billion in discretionary appropriations for accounts in the Agriculture appropriations bill, resulting in a $3.4 billion reduction from FY2010 levels (-15%) ( Table 2 ). Discretionary agriculture-related programs fell to $6.89 billion, 6% below FY2010; discretionary conservation programs fell to $889 million, 12% below FY2010; rural development fell to $2.64 billion, 11% below FY2010; discretionary nutrition assistance fell to $7.13 billion, 7% below FY2010; and foreign assistance fell to $1.89 billion, 9% below FY2010. CFTC increased to $202 million, 20% above FY2010 ( Table 3 ). Table 2 summarizes the totals of the FY2011 Agriculture appropriations bill by title or broad program. Table 3 provides more detail within each title by including accounts and agencies. Table 3 also shows the Administration's request and the Senate-reported bill in the 111 th Congress. Supplemental appropriations are not included in the fiscal year totals because the primary purpose of this report is to compare the regular annual appropriation across years. <2.4.2. Reductions in Short-Term Continuing Resolutions> Before final agreement was reached on the full-year appropriation, seven short-term continuing resolutions (CRs) were enacted. Two of these, P.L. 112-4 and P.L. 112-6, began trimming discretionary appropriations levels in order secure votes for passage. Accounts in the Agriculture appropriations bill were reduced below FY2010 appropriated levels by $532 million, although not all of these cuts were maintained in the final full-year CR. The subset of 12 accounts cut in the short-term CRs were reduced by a smaller $481 million in the full-year CR. ( Table 4 ). Most of the reductions in the short-term CR were targeted to accounts that had earmarks in FY2010 and are noted in the Table 4 with an asterisk (*). Regardless of these reductions, however, all FY2010 earmarks are not continued and "have no legal effect," as discussed in the section on earmarks. Other accounts were reduced because of policy issues. For example, funding for rural broadband was targeted in H.R. 1, eliminated in the short-term CR, but ultimately reduced by a smaller amount in the full-year CR. Budget authority for rural housing guaranteed loans also was eliminated, though not to cancel the program, but because the program is now self-funding after higher fees are being charged to banks (Sec. 102 in P.L. 111-212 ). <2.4.3. Historical Trends> After years of growth, Agriculture appropriations peaked in absolute terms in FY2010. This section offers perspective on type of funding (mandatory or discretionary), purpose (nutrition vs. other), relationship to inflation, and other variables over the period FY1995 through FY2011. Figure 3 shows total discretionary appropriations levels in the Agriculture appropriations bill. The total amount is divided between discretionary domestic nutrition assistance programs and the rest of the bill. Over the past 10 years (FY2001 through FY2011), the total of the Agriculture appropriations bill has increased at a 5.3% average annualized rate ( Table 5 ). Figure 4 shows the Agriculture appropriations bill total divided between mandatory and discretionary spending. Mandatory appropriations have increased at 5.8% average annualized rate, and discretionary appropriations have increased at a 3.0% average annualized rate. Figure 5 shows the same bill total as in Figure 4 , but divided between domestic nutrition and other program spending. The share going to domestic nutrition generally is increasing, rising from 46% in FY2000 to 72% in FY2011 ( Table 6 ). Since FY2001, total nutrition spending has increased at an average 10% annual rate, compared to a -1.3% average annual change for the "rest of the bill" (the rest of USDA but excluding the Forest Service, plus FDA and CFTC). Although sensitive to time periods and economic conditions, nutrition program spending has increased faster than non-nutrition spending for the most recent 5-, 10-, and 15-year periods ( Table 5 ). Most nutrition program spending is mandatory spending, primarily in the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) and child nutrition (school lunch). Figure 6 takes the orange-colored bars from Figure 5 (total domestic nutrition programs) and divides them into mandatory and discretionary. Over the past 10 years, mandatory nutrition spending rose at an average rate of 10.8% per year, while the discretionary portion increased at about 4.8% per year. Spending on the non-nutrition programs in the bill is more evenly divided between mandatory and discretionary spending, more variable over time, and generally changing at a slower rate than nutrition spending. Figure 7 divides the yellow-colored bars in Figure 5 into mandatory and discretionary. This subtotal of mandatory spending has shown a -2.8% average annual change over 10 years, and +3.1% per year over 15 years. Discretionary spending on this component arguably where appropriators have the most control has grown at a 2.9% annual rate since 2006, and was reduced by 17% in the most recent year compared to a 6.9% one-year reduction in discretionary nutrition appropriations ( Table 5 ). The Agriculture appropriations totals can also be viewed in inflation-adjusted terms and in comparison to other economic variables ( Figure 8 through Figure 11 ). If the general level of inflation is subtracted, total Agriculture appropriations still have experienced positive "real" growth that is, growth above the rate of inflation ( Table 6 ). The total of the annual bill has increased at an average annual 3.1% real rate over the past 10 years ( Figure 8 ). Within that total, nutrition programs have increased at a higher average annual real rate of 7.8%, while the rest of the bill had a -3.4% average annual real change over 10 years. Comparing Agriculture appropriations to the entire federal budget authority, the Agriculture bill's share has declined from 4.4% of the federal budget in FY1995 to 2.7% in FY2009, before rising again to about 3.4% in FY2010-FY2011 ( Figure 9 ). The share of the federal budget for nutrition programs has declined (from 2.5% in FY1995 to 1.8% in FY2008), although the increase in FY2010-FY2011 returns the share (2.5%) to levels last seen in FY1997. The share for the other agriculture programs also has declined from 1.8% in FY1995 and 2.1% in FY2001, to about 1.0% in FY2011. As a percentage of gross domestic product (GDP), Agriculture appropriations have been fairly steady at just under 0.75% of GDP from FY2000-FY2009, but have risen to about 0.83% of GDP in FY2010-FY2011 ( Figure 10 ). Nutrition programs have been rising as a percentage of GDP since FY2000 (0.33% in FY2001 to 0.59% in FY2011), while non-nutrition agricultural programs have been declining (0.42% in FY2000 to 0.24% in FY2011). Finally, on a per capita basis, inflation-adjusted total Agriculture appropriations have risen slightly over the past 10 to 15 years ( Figure 11 ). Nutrition programs have risen more steadily on a per capita basis, while the non-nutrition "other" agricultural programs have been more steady over a 15-year period and declining over a 10-year period. <2.5. Limits on Mandatory Program Spending and Other Rescissions> In recent years, appropriators have placed limitations on mandatory spending that was authorized in the farm bill. These limitations are also known as CHIMPS, "changes in mandatory program spending." Mandatory programs usually are not part of the annual appropriations process since the authorizing committees set the eligibility rules and payment formulas in multi-year authorizing legislation (such as the 2008 farm bill). Funding for mandatory programs usually is assumed to be available based on the authorization without appropriations action. Passage of a new farm bill in 2008 made more mandatory funds available for programs that appropriators or the Administration may want to reduce, either because of policy preferences or jurisdictional issues between authorizers and appropriators. Historically, decisions over expenditures are assumed to rest with the appropriations committees. The division over who should fund certain agriculture programs appropriators or authorizers has roots dating to the 1930s and the creation of the farm commodity programs. Outlays for the farm commodity programs were highly variable, difficult to predict and budget, and based on multi-year programs that resembled entitlements. Thus, a mandatory funding system the Commodity Credit Corporation (CCC) was created to remove the unpredictable funding issue from the appropriations process. This separation worked for many decades. But the dynamic changed particularly in the late 1990s and the 2002 farm bill when authorizers began writing farm bills using mandatory funds for programs that typically were discretionary. Appropriators had not funded some of these programs as much as authorizers had desired, and agriculture authorizing committees wrote legislation with the mandatory funding at their discretion. Thus, tension arose over who should fund these typically discretionary activities: authorizers with mandatory funding sources at their disposal, or appropriators having standard appropriating authority. Some question whether the CCC, which was created to fund the hard-to-predict farm commodity programs, should be used for programs that are not highly variable and are more often discretionary. The programs affected by these limits include conservation, rural development, bioenergy, and research programs. The limits have not affected the farm commodity programs or the nutrition assistance programs such as food stamps, both of which are generally accepted by appropriators as legitimate mandatory programs. When the appropriators limit mandatory spending, they do not change the authorizing law. Rather, appropriators have put limits on mandatory programs by using appropriations language such as: "None of the funds appropriated or otherwise made available by this or any other Act shall be used to pay the salaries and expenses of personnel to carry out section [ ... ] of Public Law [ ... ] in excess of $[ ... ]." These provisions usually have appeared in Title VII, General Provisions, of the Agriculture appropriations bill. For FY2011, P.L. 112-10 contains $924 million in reductions from six mandatory programs (the same as proposed in H.R. 1 and more than in S.Amdt. 149 ). The final FY2010 reduction in farm bill programs of $924 million is 81% higher than the FY2010 amount ( Table 7 ). In addition to the reductions to these farm bill programs, the FY2011 appropriation also makes unusually large rescissions to unobligated balances in other program accounts (e.g., building accounts and rural broadband) that totaled over $1 billion. These are often one-time savings from cancelling unobligated budget authority that in some cases may no longer have been spent. In total, the FY2011 appropriation contains $2 billion in rescissions and savings from farm bill limitations (Title VII in Table 3 ). These cuts were used to meet the discretionary budget allocation and avoid deeper cuts to regular discretionary accounts. Of the $3.4 billion total reduction in discretionary programs, about half of the cut ($1.7 billion) was the increase in the amount of rescissions and farm bill limitations. <2.6. Earmarks> Congress adopted earmark disclosure rules in 2007 that require appropriations acts to disclose "earmarks and congressionally directed spending items." The disclosure self-identified by Congress includes the agency, project, amount, and requesting Member(s). Prior to FY2008, earmark lists were subject to agency or analyst definitions as to what constituted an earmark. Earmarks specified in the explanatory statement accompanying the final version of the bill generally are not considered to have the same force of law as if they were in the text of the law itself. But in the past, executive branch agencies usually have followed such directives since, when they testify before Congress, they do not wish to explain why congressional directives were not followed. Beginning in FY2009 appropriations acts, appropriations earmarks became more formal by being incorporated, at least by reference, in the text of the bill. For FY2011, the final, full-year CR contains no earmark disclosure lists. Moreover, the short-term CRs were the first to cancel the effect of the FY2010 earmarks. That is, the language of short-term CR P.L. 112-4 said that the FY2010 earmarks "have no legal effect." This statement is true regardless of the FY2011 funding available to an agency or program that administered the earmarks. All of the agricultural programs with earmarks in FY2010 were reduced in the last short-term CR ( P.L. 112-6 ) by the amount of FY2010 earmarks (that is, many of the reductions listed in Table 4 correspond to the amount of FY2010 earmarks). As discussed and shown in Table 4 , however, some accounts were not held to that initial level of reduction. The "no legal effect" language in the CRs makes all of the earmarks nonbinding (nonstatutory) in FY2011; agencies are not legally required to continue to fund earmarks, regardless whether funding was reduced. Nonetheless, agencies retain discretion to allocate funding under regular program rules, and could decide to fund projects that received earmarks in FY2010 not necessarily because of earmark instructions, but for other merit- or formula-based criteria. <3. Selected USDA Programs> The following tables compare the effect of the FY2011 appropriation within three USDA program areas at a more detailed level than in Table 3 . These include the agricultural research mission area ( Table 8 ), farm loan programs ( Table 9 ), and rural development mission area ( Table 10 ) and its three agencies ( Table 11 through Table 13 ). <3.1. Appendix.>

The Agriculture appropriations bill provides funding for all of the U.S. Department of Agriculture (USDA) except the Forest Service, plus the Food and Drug Administration (FDA) and, in some cases, the Commodity Futures Trading Commission (CFTC). Appropriations jurisdiction for the CFTC is split between two subcommittees—the House Agriculture Appropriations Subcommittee and the Senate Financial Services Appropriations Subcommittee. For the FY2011 Agriculture appropriations bill, no separate floor action and limited formal committee action occurred in the 111th Congress. The full Senate Appropriations Committee reported an Agriculture appropriations bill (S. 3606, S.Rept. 111-221) on July 15, 2010. The House Agriculture Appropriations Subcommittee marked up its draft on June 30, 2010, but the bill did not see full committee action nor was it reported. None of the 12 appropriations bills was enacted in 2010. In the 112th Congress, the House passed H.R. 1, a full-year continuing resolution for FY2011, by a vote of 235-189 on February 19, 2011. For Agriculture, H.R. 1 would have made $5.3 billion in cuts to discretionary programs (-23%), reducing them from $23.4 billion in FY2010 to $18.1 billion for FY2011. On March 9, 2011, the Senate voted on H.R. 1, but failed to pass it by a vote of 44-56. Later on March 9, 2011, the Senate also voted on a substitute amendment, S.Amdt. 149; it failed by a vote of 42-58. S.Amdt. 149 would have reduced discretionary Agriculture appropriations by $1.7 billion (-7%) from the FY2010 level of $23.4 billion to $21.7 billion. On April 15, 2011, a final, full-year continuing resolution was enacted as Division B of the Department of Defense appropriation, P.L. 112-10. Seven short-term continuing resolutions (CRs) were enacted in between, some with spending reductions, to prevent a government shutdown before the final agreement was reached for the full-year continuing resolution. P.L. 112-10 provides $19.9 billion of discretionary funding for Agriculture appropriations, a 15% reduction (-$3.4 billion) from FY2010 levels. Mandatory appropriations for farm programs and domestic nutrition increased a net 7% to $105.1 billion. Thus, the total Agriculture appropriation (mandatory plus discretionary) for FY2011 is $125.0 billion, 3% greater than FY2010. Discretionary agriculture-related programs fell to $6.89 billion, 6% below FY2010; discretionary conservation programs fell to $889 million, 12% below FY2010; rural development fell to $2.64 billion, 11% below FY2010; discretionary nutrition assistance fell to $7.13 billion, 7% below FY2010; and foreign assistance fell to $1.89 billion, 9% below FY2010. FDA increased to $2.46 billion, 4% above FY2010, and CFTC increased to $202 million, 20% above FY2010. Cuts to individual agricultural agencies' operating budgets would have been even bigger had it not been for usually large amounts of rescissions of unobligated prior-year balances and limitations on mandatory farm bill programs. Of the $3.4 billion total reduction in discretionary appropriations from FY2010, about half of the cut was the increase in the amount of rescissions and farm bill limitations.

In the consolidated cases of Boumediene v. Bush and Al Odah v. United States , decided June 12, 2008, the Supreme Court held in a 5-4 opinion that aliens designated as enemy combatants and detained at the U.S. Naval Station in Guantanamo Bay, Cuba, have the constitutional privilege of habeas corpus . The Court also found that 7 of the Military Commissions Act (MCA), which limited judicial review of executive determinations of the petitioners' enemy combatant status, did not provide an adequate habeas substitute and therefore acted as an unconstitutional suspension of the writ of habeas . The immediate impact of the Boumediene decision is that detainees at Guantanamo may petition a federal district court for habeas review of the circumstances of their detention. <1. Background> Following the terrorist attacks of 9/11, Congress passed the Authorization to Use Military Force (AUMF), which authorized the President "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 in Guantanamo Bay, Cuba, for detention and possible prosecution for war crimes. In the 2004 case of Hamdi v. Rumsfeld , a majority of the Supreme Court recognized that, as a necessary incident to the AUMF, the President was authorized to detain persons captured while fighting U.S. forces in Afghanistan for the duration of the conflict. The Department of Defense thereafter established Combatant Status Review Tribunals (CSRTs) to assess whether persons detained at Guantanamo constituted "enemy combatants" who could be detained for the duration of the "war on terror" and prosecuted in military commissions for any war crimes committed. On the same day that Hamdi was decided, the Court issued an opinion in the case of Rasul v. Bush , holding that the federal habeas statute, 28 U.S.C. 2241, extended statutory habeas jurisdiction with respect to persons held in Guantanamo. Immediately thereafter, dozens of habeas petitions were filed on behalf of Guantanamo detainees in the U.S. District Court for the District of Columbia (District Court), where judges reached conflicting conclusions as to whether the detainees had any enforceable rights to challenge their treatment and detention. Shortly after the Supreme Court granted certiorari to hear a challenge by one of the detainees to his trial by military tribunal, Congress passed the Detainee Treatment Act of 2005 (DTA). The DTA divested the courts of jurisdiction to hear challenges by Guantanamo detainees based on their treatment or living conditions, and eliminated federal courts' jurisdiction under 28 U.S.C. 2241 to consider habeas claims by aliens challenging their detention at Guantanamo. The DTA provided the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit) with exclusive jurisdiction to review detainee status determinations made by CSRTs or military commissions. In the 2006 case of Hamdan v. Rumsfeld , the Court interpreted these provisions as being inapplicable to habeas cases pending at the time the DTA was enacted. In response, Congress passed the MCA, which amended the federal habeas statute to expressly eliminate court jurisdiction over all pending and future causes of action, other than pursuant to the limited review permitted under the DTA. The petitioners in Boumediene are aliens detained at Guantanamo who sought habeas review of their continued detention and designation as enemy combatants by CSRTs in District Court. On appeal, the D.C. Circuit held that the MCA stripped it and all other federal courts of jurisdiction to consider petitioners' habeas applications. Relying upon its earlier opinion in Al Odah v. United States and the 1950 Supreme Court case Johnson v. Eisentrager , in which the Supreme Court found that the constitutional writ of habeas did not apply to enemy aliens detained in post-WWII Germany, the D.C. Circuit held that the MCA's "court-stripping" provision did not operate as an unconstitutional suspension of the writ , because aliens held by the U.S. in foreign territory do not have a constitutional right to habeas . Although the Supreme Court initially denied the petitioners' request for review, it subsequently reversed itself and granted certiorari in June 2007 to consider the consolidated cases of Boumediene and Al Odah . In an opinion by Justice Kennedy that was joined by Justices Breyer, Ginsburg, Souter, and Stevens, the Court reversed the D.C. Circuit and held that petitioners had a constitutional right to habeas that was withdrawn by the MCA in violation of the Constitution's Suspension Clause. Chief Justice Roberts and Justice Scalia wrote separate dissenting opinions, which were joined by the other and Justices Alito and Thomas. Justice Souter also wrote a brief concurring opinion, joined by Justices Breyer and Ginsburg, briefly disputing the dissenting opinions' purported characterization of the majority's decision. <2. Application of MCA to Pending Habeas Actions> Before assessing petitioners' constitutional claims, the Court briefly addressed petitioners' argument that MCA 7 did not deny federal courts jurisdiction to consider habeas actions like those of petitioners, which were pending at the time that the MCA was enacted. The Court rejected this argument, finding that the structure of MCA 7 and the act's legislative history demonstrated that the MCA was intended to deprive federal courts of jurisdiction to consider habeas cases pending at the time of enactment. <3. Constitutional Privilege to Habeas> The Court next turned to the question of whether petitioners possess a constitutional privilege to seek the writ of habeas corpus . Petitioners argued that they possess a constitutional right to habeas , and that the MCA deprived them of this right in contravention of the Suspension Clause, which prohibits the suspension of the writ of habeas except "when in Cases of Rebellion or Invasion the public Safety may require it." The MCA did not expressly purport to be a formal suspension of the writ of habeas , and the government did not make such a claim to the Court. Instead, the government argued that aliens designated as enemy combatants and detained outside the de jure territory of the United States have no constitutional rights, including the constitutional privilege to habeas , and that therefore stripping the courts of jurisdiction to hear petitioners' habeas claims did not violate the Suspension Clause. The Court began its analysis by surveying the history and origins of the writ of habeas , emphasizing the importance placed on the writ for the Framers. The Court noted that protection of the habeas privilege was one of the few safeguards to individual liberty contained in the Constitution prior to the addition of the Bill of Rights, and the Suspension Clause permits suspension of the writ only in the rare instance where public safety may require it as a result of invasion or rebellion. The Court characterized the Suspension Clause as not only a "vital instrument" for protecting individual liberty, but also a means to ensure that the judiciary branch would have, except in cases of formal suspension, "a time-tested device, the writ, to maintain the delicate balance of governance" between the branches and prevent "cyclical abuses" of the writ by the executive and legislative branches. The Court stated that the separation-of-powers doctrine and the history shaping the design of the Suspension Clause informed its interpretation of the reach and purpose of the Clause and the constitutional writ of habeas . While the Court considered the history and function of the writ to be central to its analysis of the writ's application, it also sought guidance from founding-era authorities as to whether the constitutional writ of habeas was understood to cover foreign nationals apprehended and detained abroad during a time of serious threat to the country's security. While the Court cautioned that its jurisprudence had "been careful not to foreclose the possibility that the protections of the Suspension Clause have expanded along with post-1789 developments that define the present scope of the writ," at minimum the Clause would be deemed to protect the writ as it was recognized at the time the Constitution was drafted and ratified. The Court found the historical record to be inconclusive in resolving the issue before it, and suggested that "given the unique status of Guantanamo Bay and the particular dangers of terrorism in the modern age ... common-law courts simply may not have confronted cases with close parallels to this one." Nonetheless, the Court interpreted the Suspension Clause as having full effect at Guantanamo, rejecting the government's position that the Clause did not cover petitioners because the United States did not assert legal sovereignty over the territory where they were detained. While the Court did not question the government's position that Cuba maintains legal sovereignty over Guantanamo under the terms of the 1903 lease giving the U.S. plenary control over the territory, it disagreed with the government's position that "at least when applied to non-citizens, the Constitution necessarily stops where de jure sovereignty ends." Instead, the Court characterized its prior jurisprudence as recognizing that the Constitution's extraterritorial application turns on "objective factors and practical concerns." Here, the Court emphasized the functional approach taken in the Insular Cases , where it had assessed the availability of constitutional rights in incorporated and unincorporated territories under the control of United States. Although the government argued that the Court's subsequent decision in Eisentrager stood for the proposition that the constitutional writ of habeas does not extend to enemy aliens captured and detained abroad, the Court found this reading to be overly constrained. According to the Court, interpreting the Eisentrager ruling in this formalistic manner would be inconsistent with the functional approach taken by the Court in other cases concerning the Constitution's extraterritorial application, and would disregard the practical considerations that informed the Eisentrager Court's decision that the petitioners were precluded from seeking habeas . The Court also found that accepting the government's sovereignty-based approach to the Constitution's applicability would raise significant separation-of-powers concerns, as the political branches would be free "to govern without legal constraint" in a territory like Guantanamo, where the U.S. disclaimed legal sovereignty but exercised plenary control: The Constitution grants Congress and the President the power to acquire, dispose of, and govern territory, not the power to decide when and where its terms may apply. Even when the United States acts outside its borders, its powers are not absolute and unlimited but are subject to such restrictions as are expressed in the Constitution.... To hold that the political branches may switch the Constitution on and off at will would lead to a regime where they, not this Court, say what the law is.... These concerns have particular bearing upon the Suspension Clause ... for the writ is itself an indispensable mechanism for monitoring the separation of powers. The test for determining the scope of this provision must not be subject to manipulation by those whose power it is designed to restrain. Based on the language found in the Eisentrager decision and other cases concerning the extraterritorial application of the Constitution, the Court deemed at least three factors to be relevant in assessing the extraterritorial scope of the Suspension Clause: (1) the citizenship and status of the detainee and the adequacy of the status determination process; (2) the nature of the site where the person is seized and detained; and (3) practical obstacles inherent in resolving the prisoner's entitlement to the writ. Applying this framework, the Court characterized petitioners' circumstances in the instant case as being significantly different from those of the detainees at issue in Eisentrager . Among other things, the Court noted that unlike the detainees in Eisentrager , the petitioners denied that they were enemy combatants, and the government's control of the post-WWII, occupied German territory in which the Eisentrager detainees were held was not nearly as significant nor secure as its control over the territory where the petitioners are located. The Court also found that the procedural protections afforded to Guantanamo detainees in CSRT hearings are "far more limited [than those afforded to the Eisentrager detainees tried by military commission], and, we conclude, fall well short of the procedures and adversarial mechanisms that would eliminate the need for habeas corpus review." While acknowledging that it had never before held that noncitizens detained in another country's territory have any rights under the U.S. Constitution, the Court concluded that the case before it "lack[ed] any precise historical parallel." In particular, the Court noted that the Guantanamo detainees have been held for the duration of a conflict that is already one of the longest in U.S. history, in territory that, while not technically part of the United States, is subject to complete U.S. control. Based on these factors, the Court concluded that the Suspension Clause has full effect at Guantanamo. In a dissenting opinion joined by Chief Justice Roberts and Justices Alito and Thomas, Justice Scalia argued that the constitutional writ of habeas "does not, and never has, run in favor of aliens abroad; the Suspension Clause thus has no application, and the Court's intervention in this military matter is entirely ultra vires ." Justice Scalia further argued that the judiciary is ill-equipped to address the national security concerns raised by the detention of enemy combatants. According to the dissent, the procedural and evidentiary rules likely to be employed by the judiciary in reviewing a detainee's status would increase the likelihood that enemy combatants would mistakenly be released back into hostilities. In a concurring opinion joined by Justices Breyer and Ginsburg, Justice Souter claimed that the Court's interpretation of the extraterritorial scope of the constitutional writ of habeas was not nearly as surprising as Justice Scalia's dissent suggested, given Court dictum in Rasul v. Bush stating that "[a]pplication of the habeas statute to persons detained at [Guantanamo] is consistent with the historical reach of the writ of habeas corpus." <4. Adequacy of Habeas Corpus Substitute> Having decided that petitioners possessed a constitutional privilege to habeas corpus , the Court next assessed whether the court-stripping measure of MCA 7 was impermissible under the Suspension Clause. Because the MCA did not purport to be a formal suspension of the writ, the question before the Court was whether Congress had provided an adequate substitute for habeas corpus . The government argued that the MCA complied with the Suspension Clause because it applied the DTA's review process to petitioners, which the government claimed was a constitutionally adequate habeas substitute. Because the D.C. Circuit had found that the constitutional writ of habeas did not run to petitioners, it did not consider whether an adequate substitute was provided. While the Court noted that it generally remands cases back to the lower court for consideration of issues not addressed in the first instance, it found that the "exceptional" circumstances of the present case including the separation-of-powers issues it raised and the fact that petitioners had been denied meaningful access to a judicial forum for a number of years warranted a departure from ordinary practice. The Court also noted that an interim order by a three-judge D.C. Circuit panel in the case of Bismullah v. Gates provided it with guidance as to the appellate court's construction of key DTA provisions. The Court found its prior rulings addressing the adequacy of habeas substitutes enacted by Congress provided little guidance in assessing the adequacy of the jurisdiction-stripping provisions of the MCA and DTA. Prior congressional enactments typically attempted to streamline rather than circumscribe habeas review. In contrast, the intent of the MCA and DTA was to establish a more limited review procedure than habeas , as evidenced by, inter alia , the MCA's unequivocal jurisdiction-stripping language; the legislative history of both enactments; a comparison of the review permitted by the DTA and the unamended federal habeas statute; and the lack of a savings provision under either the DTA or MCA preserving habeas review as an avenue of last resort. Though the Court declined to "offer a comprehensive summary of the requisites for an adequate substitute for habeas corpus ," it nonetheless deemed the habeas privilege, at minimum, as entitling a prisoner "to a meaningful opportunity to demonstrate that he is being held pursuant to 'the erroneous application or interpretation' of relevant law," and empowering a court "to order the conditional release of an individual unlawfully detained," though release need not be the exclusive remedy or appropriate in every instance where the writ is granted. Additionally, the necessary scope of habeas review may be broader, depending upon "the rigor of any earlier proceedings." The Court noted that petitioners identified numerous alleged deficiencies in the CSRT process which limited a detainee's ability to present evidence rebutting the government's claim that he is an enemy combatant. Among other things, cited deficiencies include constraints upon the detainee's ability to find and present evidence at the CSRT stage to challenge the government's case; the failure to provide a detainee with assistance of counsel; limiting the detainee's access to government records other than those that are unclassified, potentially resulting in a detainee being unaware of critical allegations relied upon by the government to order his detention; and the fact that the detainee's ability to confront witnesses may be "more theoretical than real," given the minimal limitations placed upon the admission of hearsay evidence. While the Court did not determine whether the CSRTs, as presently constituted, satisfy due process standards, it agreed with petitioners that there was "considerable risk of error in the tribunal's findings of fact." "[G]iven that the consequence of error may be detention for the duration of hostilities that may last a generation or more, this is a risk too serious to ignore." The Court held that for either the writ of habeas or an adequate substitute to function as an effective remedy for petitioners, a court conducting a collateral proceeding must have the ability to (1) correct errors in the CSRT process; (2) assess the sufficiency of the evidence against the detainee; and (3) admit and consider relevant exculpatory evidence that was not introduced in the prior proceeding. The Court held that the DTA review process is a facially inadequate substitute for habeas review. It listed a number of potential constitutional infirmities in the review process, including the absence of provisions (1) empowering the D.C. Circuit to order release from detention; (2) permitting petitioners to challenge the President's authority to detain them indefinitely; (3) enabling the appellate court to review or correct the CSRT's findings of fact; and (4) permitting the detainee to present exculpatory evidence discovered after the conclusion of CSRT proceedings. The Court declined to read into the DTA each of the necessary procedures identified. As a result, the Court deemed MCA 7's application of the DTA review process to petitioners as failing to provide an adequate substitute for habeas , therefore effecting an unconstitutional suspension of the writ. In light of this conclusion, the Court held that petitioners could immediately pursue habeas review in federal district court, without first obtaining review of their CSRT designations from the D.C. Circuit as would otherwise be required under the DTA review process. While prior jurisprudence recognized that prisoners are generally required to exhaust alternative remedies before seeking federal habeas relief, the Court found that petitioners in the instant case were entitled to a prompt habeas hearing, given the fact that they had been detained for years without access to judicial oversight to which they were constitutionally privileged. The Court stressed, however, that except in cases of undue delay, federal courts should generally refrain from considering habeas petitions of detainees being held as enemy combatants until after the CSRT had an opportunity to review their status. Acknowledging that the government possesses a "legitimate interest in protecting sources and methods of intelligence gathering," the Court announced that it expected courts reviewing Guantanamo detainees habeas claims to use "discretion to accommodate this interest to the greatest extent possible," so as to avoid "widespread dissemination of classified information." In a dissenting opinion, Chief Justice Roberts joined by Justices Alito, Thomas, and Scalia argued that the DTA review process adequately protects any constitutional rights that aliens detained abroad as enemy combatants may enjoy, and criticized the majority for replacing the DTA review system with "a set of shapeless procedures to be defined by federal courts at some future date." Chief Justice Roberts argued that the Court should not have granted certiorari to review petitioners' claims until the D.C. Circuit had the opportunity to assess whether the remedies available under the DTA review process vindicated whatever constitutional and statutory rights petitioners' may possess. In a concurring opinion, Justice Souter argued that the dissenting justices' criticism of the majority's decision to permit detainees to immediate petition for habeas failed to sufficiently consider the duration that petitioners' had been denied meaningful judicial review of their claims. <5. Implications of Boumediene> As a result of the Boumediene decision, detainees currently held at Guantanamo may petition a federal district court for habeas review of status determinations made by a CSRT. However, the full consequences of the Boumediene decision are likely to be significantly broader. While the petitioners in Boumediene sought habeas review of their designation as enemy combatants, the Court's ruling that the constitutional writ of habeas extends to Guantanamo suggests that detainees may also seek judicial review of claims concerning unlawful conditions of treatment or confinement or to protest a planned transfer to the custody of another country. Some 250 habeas petitions have been filed on behalf of Guantanamo detainees in the U.S. District Court for the District of Columbia. In the aftermath of the Boumediene ruling, the District Court adopted a resolution for the coordination and management of Guantanamo cases. The resolution calls for all current and future Guantanamo cases to be transferred by the judge to whom they have been assigned to Senior Judge Thomas F. Hogan, who has been designated to coordinate and manage all Guantanamo cases so that they could be "addressed as expeditiously as possible as required by the Supreme Court in Boumediene v. Bush ...." Judge Hogan is responsible for identifying and ruling on procedural issues common to the cases. The transferring judge will retain the case for all other purposes, though Judge Hogan is to confer with those judges whose cases raise common substantive issues, and he may address those issues with the consent of the transferring judge. District Court Judges Richard J. Leon and Emmet G. Sullivan have declined to transfer their cases for coordination, and it is possible that the three judges may reach differing opinions regarding issues common to their respective cases. The conduct of trials before military commissions at Guantanamo may also be affected by Boumediene , as enemy combatants may now potentially raise constitutional arguments against their trial and conviction. Aliens convicted of war crimes before military commissions may also potentially seek habeas review of their designation as an enemy combatant by the CSRT, a designation that served as a legal requisite for their subsequent prosecution before a military commission. Although the Boumediene Court held that DTA review procedures were an inadequate substitute for habeas , it expressly declined to assess "the content of the law that governs" the detention of aliens at Guantanamo. The majority opinion noted that it made "no judgment as to whether the CSRTs, as currently constituted, satisfy due process standards," and emphasized that "both the DTA and the CSRT process remain intact." Whether these procedures violate due process standards, facially or as applied in a given case, and whether a particular detainee is being unlawfully held, are issues to be addressed by the District Court when reviewing the habeas claims of Guantanamo detainees. Prior to the DTA and MCA's elimination of statutory jurisdiction over Guantanamo detainees' habeas claims, District Court judges reached inconsistent conclusions regarding the degree to which detainees could challenge their treatment and detention. In the aftermath of Boumediene , it is possible that continued disagreement between lower court judges concerning the scope of rights and remedies owed to Guantanamo detainees will eventually lead to a more definitive pronouncement by the Supreme Court. Another question left unresolved in the Court's discussion of the extraterritorial application of the Constitution is the degree to which the writ of habeas and other constitutional protections apply to aliens detained in foreign locations other than Guantanamo (e.g., at military facilities in Afghanistan and elsewhere, or at any undisclosed U.S. detention sites overseas). The Boumediene Court indicated that it would take a functional approach in resolving such issues, taking into account "objective factors and practical concerns" in deciding whether the writ extended to aliens detained outside U.S. territory. Practical concerns mentioned in the majority's opinion as relevant to an assessment of the writ's extraterritorial application include the degree and likely duration of U.S. control over the location where the alien is held; the costs of holding the Suspension Clause applicable in a given situation, including the expenditure of funds to permit habeas proceedings and the likelihood that the proceedings would compromise or divert attention from a military mission; and the possibility that adjudicating a habeas petition would cause friction with the host government. Interestingly, the Boumediene did not overrule the Court's prior decision in Eisentrager , in which it found that enemy detainees held in post-WWII Germany were precluded from seeking habeas relief. Whether enemy aliens are held in conditions that more closely resemble those of the detainees at issue in Eisentrager or Boumediene may influence a reviewing court's assessment of whether they are owed the constitutional writ of habeas , as well as its assessment of the merits of any habeas claim deemed cognizable. Although Boumediene deemed the limitations on judicial review imposed by the DTA and MCA to be an unconstitutional suspension of the writ of habeas , the Court did not foreclose all legislation altering the scope of review available in cases involving Guantanamo detainees. For example, the Court suggested that it would be a "legitimate objective" to channel all future cases involving Guantanamo detainees to one district court so as to reduce the administrative burdens upon the government. The Court further acknowledged the government as having a legitimate interest in limiting the dissemination of classified intelligence-gathering information during the course of judicial hearings involving Guantanamo detainees. While the Court urged reviewing courts to use their discretion to protect this interest "to the greatest extent possible," some in Congress may want to consider legislation to provide a statutory framework for the dissemination of classified information in cases involving Guantanamo detainees. The Court's ruling in Boumediene did not necessarily bar all legislation that would limit judicial review of Guantanamo detainees' claims. Such legislation limiting judicial review a similar degree as the DTA or MCA might be deemed permissible if Congress also formally suspended the writ of habeas from being applied to Guantanamo detainees. It is far from certain, however, that a reviewing court would deem such legislation as compatible with Suspension Clause requirements. Assuming that the requirements of the Suspension Clause constituted a justiciable question, a reviewing court's assessment of the constitutionality of habeas-suspending legislation would likely turn on whether Al Qaeda's terrorist attacks upon the United States qualified as a "rebellion or invasion," and whether the court found that "the public safety" was therefore deemed to require the suspension of the writ in Guantanamo, where a number of suspected Al Qaeda members and supporters are being detained. Congress may still be able to impose some limitations upon judicial review of CSRT determinations if it strengthens the procedural protections afforded to detainees in CSRT status hearings. The Supreme Court identified a number of potential deficiencies in the status review process that necessitated habeas review of CSRT determinations, including the detainee's lack of counsel during the hearings; the presumption of validity accorded to the government's evidence; procedural and practical limitations upon the detainee's ability to present evidence rebutting the government's charges against him and to confront witnesses; potential limitations on the detainee's ability to introduce exculpatory evidence; and limitations on the detainee's ability to learn about the nature of the government's case against him to the extent that it is based upon classified evidence. Legislation addressing some or all of these potential procedural inadequacies in the CSRT process might permit judicial review of CSRT determinations to be further streamlined. For discussion of litigation challenging detention policy, see CRS Report RL33180, Enemy Combatant Detainees: Habeas Corpus Challenges in Federal Court , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].

In the consolidated cases of Boumediene v. Bush and Al Odah v. United States, decided June 12, 2008, the Supreme Court held in a 5-4 opinion that aliens designated as enemy combatants and detained at the U.S. Naval Station in Guantanamo Bay, Cuba, have the constitutional privilege of habeas corpus. The Court also found that § 7 of the Military Commissions Act (MCA), which limited judicial review of executive determinations of the petitioners' enemy combatant status, did not provide an adequate habeas substitute and therefore acted as an unconstitutional suspension of the writ of habeas. The immediate impact of the Boumediene decision is that detainees at Guantanamo may petition a federal district court for habeas review of the circumstances of their detention. This report summarizes the Boumediene decision and analyzes several of its major implications for the U.S. detention of alien enemy combatants and legislation that limits detainees' access to judicial review. For discussion of litigation challenging detention policy, see CRS Report RL33180, Enemy Combatant Detainees: Habeas Corpus Challenges in Federal Court, by [author name scrubbed], [author name scrubbed], and [author name scrubbed].

<1. Background on the Blockade> Israel withdrew from the Gaza Strip in 2005, but retained control of the territory's borders. Hamas emerged as the predominant force in the territory. In January 2006, Hamas won the Palestinian Authority (PA) legislative elections and established itself as a major actor in domestic politics. Some countries and organizations, including Turkey, consider Hamas a democratically elected, legitimate representative of the Palestinian people. Israel considers Hamas to be a terrorist group, and the U.S. State Department designates it as a Foreign Terrorist Organization (FTO). Hamas has criticized peace talks with Israel in line with its commitment to resistance, has perpetrated terrorist attacks against Israel, and has launched rockets from Gaza into Israel. Hamas's participation in politics heightened its rivalry with Fatah, which had led all previous Palestinian governments. It also prompted the United States to end all direct foreign aid to the Palestinians. Under pressure from Saudi Arabia, Hamas and Fatah formed a unity government in February 2007, which proved to be short-lived. In what it considered a pre-emptive act to prevent Fatah from striking it first, Hamas took control of the Gaza Strip by force in June 2007. This "coup" prompted PA President Mahmud Abbas to dissolve the Hamas-led government and replace it with the current one under Prime Minister Salam Fayyad, who administers only the West Bank. Hamas remains in control of Gaza. Israel and the United States reestablished relations with the new PA government, and Israel imposed a tight land, sea, and air blockade on the Gaza Strip, in what it describes as an act of self-defense to prevent arms from reaching Hamas. With the blockade, Israel also hoped to turn Gazans against Hamas by contrasting Hamas rule with the better life of Palestinians in the West Bank. Instead, the blockade isolated the territory and helped to strengthen Hamas's control. From December 2008 to January 2009, Israeli forces carried out a major military offensive, called Operation Cast Lead, against Hamas in order to stop rocket fire into southern Israel and to weaken or overthrow Hamas. The campaign resulted in more than 1,000 Palestinian deaths and the destruction of much of the Gaza Strip's infrastructure and many buildings. Afterwards, Israel tightened the blockade and conditioned its end on the release of Israeli Defense Forces (IDF) Sergeant Gilad Shalit, who had been captured in 2006. The blockade has severely affected the humanitarian situation in the Gaza Strip, although Israel and its critics differ about the effects. The Israeli government maintains that there is no humanitarian crisis in Gaza, and the IDF issues a detailed Weekly Summary of Humanitarian Aid Transferred into Gaza to support that position. The Ministry of Defense Coordinator of Government Activities in the Territories (COGAT) issues a similar Gaza Strip Merchandise and Humanitarian Aid Report . They provide information on the number of trucks and persons allowed to enter Gaza and list the cargos of food, medicine, and other supplies. The United Nations Office for the Coordination of Humanitarian Aid (OCHA) issues contrasting regular reports on the situation in Gaza. It summarily states that the blockade has "worsened conditions of life of Palestinians, deepened poverty and food insecurity, prevented reconstruction, and increased aid dependence by destroying livelihoods and economic activity." It refers to the blockade as "collective punishment." U.S. non-governmental humanitarian aid organizations, such as CARE and Mercy Corps, report difficulties experienced in rebuilding Gaza more than a year after Cast Lead, as well as obstacles that their workers face in trying to provide assistance because they cannot simultaneously accommodate U.S., Israeli, and Hamas rules and Hamas is in control. Gazans have been unable to repair public infrastructure hospitals, schools, electric systems, or sewage treatment plants because Israel will not permit the delivery of materials such as steel, concrete, and tiles that could be used both for rebuilding and for the manufacture of weapons or other military purposes. In recent years, humanitarian aid groups have sent supply ships and activists to Gaza. However, Israel directs them to land at its port of Ashdod for inspection before delivery to Gaza. In addition to the deliveries allowed by Israel, Egypt intermittently opens the border crossing at Rafah with Gaza that it sealed in 2007. Moreover, the smuggling of goods (and weapons) via a network of tunnels under the border also relieves the blockade somewhat, but smuggled goods create economic distortions by fueling a large informal economy. Israeli planes often bomb the tunnels, but these attacks have not put a stop to the activity. <2. Raid on the MV Marmara> On May 22, 2010, the MV Mavi Marmara , a former Istanbul passenger ferry owned by the Turkish Humanitarian Relief Foundation (more fully the Foundation for Human Rights and Freedoms and Humanitarian Relief (IHH)), left Istanbul and, after stopping in the Mediterranean port of Antalya to pick up more than 500 passengers, met up at sea with five other ships south of Cyprus. IHH also sent two cargo vessels. Several ships from the Free Gaza Movement had departed from the Greek port of Piraeus. A six-ship flotilla then set sail for the Gaza Strip with the intent to deliver 10,000 tons of humanitarian aid and to break the Israeli blockade. In all, about 700 activists from 38 countries participated in the expedition, including approximately 11 Americans, some European parliamentarians, and Swedish writer Henning Mankell. On May 30, the ships refused Israel's offer to unload at the port of Ashdod so that their cargos could be inspected before delivery accompanied by representatives of the non-governmental organizations. On May 31, when the ships were in international waters between 80 and 100 miles from the Israeli coast, Israeli navy zodiac boats intercepted them and naval commandos took over five ships, reportedly without incident. However, the Marmara resisted and commandos rappelled from helicopters onto that ship and were confronted by some passengers/activists. The IDF released videos showing that individuals attacking the commandos were armed with iron rods, knives, broken glass bottles, and sling shots, and equipped with gas masks, night vision goggles, and life vests. The IDF says that the passengers also seized a commando's side arm. IHH President Bulent Yildirim admitted that activists had used iron rods, but claimed that they threw seized Israeli weapons into the sea. It is not clear if the commandos, who had paintball guns and firearms, struck first or in response to an attack from the passengers, and each side has given a different account. Nine passengers were killed, including eight Turks and a Turkish-American; 24 were injured, including one American, and 10 commandos were injured. The dead were members of or volunteers for IHH, which hailed them as "martyrs." All of the ships were taken to Ashdod, where the passengers were detained and the cargo was unloaded, inspected, and trucked to the Kerem Shalom border crossing between Israel and Gaza. Hamas initially refused to allow the aid to be transferred into Gaza and the Israeli Defense Ministry stored it at a military base while it consulted international organizations. On June 15, it was announced that the U.N. would distribute the aid. By June 3, Israel had deported all the detainees, including all alleged perpetrators of the attacks on its military personnel, except for a few severely wounded who were repatriated a few days later. Israeli officials claim to have found Molotov cocktails, detonators, wood and metal clubs, slingshots and rocks, large hammers, and sharp metal objects on the Marmara , but no rockets. <3. IHH and the Free Gaza Movement> The flotilla was the idea of the Free Gaza Movement, which teamed up with the IHH. The Free Gaza Movement is a Cyprus-based coalition or alliance formed to oppose Israel's blockade of the Gaza Strip and is said to have roots in the International Solidarity Movement, a non-violent movement dedicated to ending the Israeli occupation of Palestinian territory. Its members had sailed to Gaza several times before, and Israel had let them dock there five times. After Operation Cast Lead, however, Israel began intercepting Free Gaza Movement ships before they reached Gaza. This year, Free Gaza decided to cooperate with other groups, including the IHH, in a "freedom" flotilla. Free Gaza Movement founder Greta Berlin said that former Malaysian Prime Minister Mahathir Mohammed had raised 300,000 (approximately $367,000) to enable the Movement's participation in the convoy. She said that it will continue to send ships to Gaza, and Israel peacefully intercepted another one, the MV R achel Corrie , on June 5. IHH is a humanitarian aid organization founded in 1995 that is said to have ties to the International Red Cross; holds special consultative status with the U.N. Economic, Social, and Cultural Organization (UNESCO); and operates in more than 100 countries. It has provided humanitarian aid to Bosnia and Chechnya as well as to victims of Hurricane Katrina and the earthquake in Haiti, among other activities. IHH's involvement with the aid flotilla is in line with its previous aid to Gaza, where it has an office. In addition to the Mavi Marmara , IHH contributed two cargo ships to the May convoy. Days before the raid, an Israeli think tank released a report linking IHH to radical Islamist networks, including Hamas and the Muslim Brotherhood, and to "global jihad elements" in the 1990s. It cited a French intelligence report claim that IHH President Bulent Yildirim had recruited Muslims for jihad in Bosnia, Chechnya, and Afghanistan in the 1990s, but also stated that IHH engages in "legitimate humanitarian activities." Since the incident, the think tank has released additional reports, including one alleging that IHH employed violence on the Mavi Marmara with premeditation. IHH openly supports Hamas, which led Israel to outlaw it in 2008. It is not a U.S. State Department-designated terrorist group, although it is part of a Saudi-based, Hamas-created umbrella group of Muslim charities called Union of Good that the U.S. Treasury has designated as a terrorist organization. IHH has influential connections in Turkey. In his remarks at the Marmara 's departure from Istanbul, Yildirim thanked the ruling Justice and Development Party (AKP) and two small Islamist parties for their support. IHH is believed to be close to the conservative Islamist Felicity Party (SP). While there was no direct Turkish government involvement in the aid mission, government administrators facilitated IHH's purchase of the ferry from the Istanbul municipality, which AKP controls, and its departure from Turkish ports. Yildirim also mentioned recent instances of IHH aid workers' "martyrdom" in Afghanistan and imprisonment in Israel, and IHH leaders have referred to those killed on the Marmara as "martyrs." IHH is said to have had about 40 to 50 members aboard the Marmara . <4. Views from Israel> While there is a multiplicity of views in Israel concerning the blockade of Gaza and the raid on the Marmara , most Israelis equate security with survival and peace. Israel's leaders appear to believe that the blockade of the Gaza Strip, the security barrier that Israel has constructed in the West Bank, the successes of the Palestinian security forces and economy in the West Bank, and what it views as enhanced deterrence in the aftermath of military campaigns against Hezbollah in Lebanon in 2006 and Hamas in the Gaza Strip from December 2008 to January 2009 have brought about a kind of quiet, if not peace. As of the date of the incident, no Israeli had been killed in a terrorist attack or a cross-border rocket attack in Israel in more than a year. Therefore, the government is unwilling to abandon a tactic (i.e., the blockade) that has worked and is still working from its perspective. Prime Minister Benjamin Netanyahu insists that the blockade is necessary to prevent weapons from reaching Gaza. He maintains, "(I)t's our obligation as well as our right in accordance to international law and to common sense to prevent these weapons from entering by air, sea, and land." He cites two earlier examples of Israel's seizure of ships that were discovered to be carrying arms. The prime minister claimed that the flotilla intercepted in May intended to break the naval blockade, not to bring goods, and said Israel allows goods and cargo to enter Gaza. He added, "Had the blockade been breached, this flotilla would have been followed by dozens, by hundreds of ships. The amount of weapons that can be transported aboard a ship is totally different from what we saw get through the tunnels (beneath the Gaza-Egypt border). Hundreds of missiles and rockets, and an innumerable number of weapons can be smuggled aboard a ship." Netanyahu argued that the consequences of Israel's failure to maintain the blockade would be "an Iranian port in Gaza, only a few dozen kilometers from Tel Aviv and Jerusalem." Israeli officials refer to those killed on the Marmara as "terrorists" and, as noted above, Israel banned the IHH in 2008. <5. Views from Turkey> As noted, several Turkish political parties, including the ruling AKP, supported the IHH effort to aid the Palestinians. However, the Turkish government claims it was not directly involved. Foreign Minister Ahmet Davutoglu said afterwards that the government had tried to convince the non-governmental organizations in charge of the flotilla to take the aid to Israeli ports, but it was not successful. The government also urged Israel to let the ships land in Gaza. The Turkish government, all political parties, and people were outraged by the Israeli attack. After the raid, mass demonstrations occurred in Ankara and Istanbul, and officials made repeated, dramatic, if not hyperbolic, statements about Israel's actions. The Turkish Foreign Ministry first protested Israel's use of force "in the strongest terms," charging that "Israel has once again clearly demonstrated that it does not value human lives and peaceful initiatives through targeting innocent civilians." Turkey called for an emergency meeting of the U.N. Security Council on which it holds a non-permanent seat that Foreign Minister Davutoglu attended on May 31. Turkey also called for NATO permanent representatives in Brussels and the Organization of the Islamic Conference (OIC), which it chairs, to meet on the issue. At the Security Council session, Davutoglu called Israel's actions "banditry and piracy ... murder conducted by a state ... and barbarism." He stated that the use of force was "inappropriate" and "disproportionate" and that international law dictates that "even in wartime, civilians are not to be attacked or harmed." He argued that the doctrine of self-defense could not justify the actions of Israeli forces. Finally, he called on the council to condemn Israel's "act of aggression," demand an urgent inquiry, and call for the punishment of all responsible authorities and persons. Prime Minister Recep Tayyip Erdogan described Israel's actions as a "bloody massacre" deserving "every kind of curse." He said, "This insolent, irresponsible, reckless, and unfair attack by the Israeli government which trampled on every kind of human value must be punished by all means." These quotes are characteristic of his many unsparing, trenchant remarks. The most offensive and inflammatory may have been his blaming Israel for increasingly common global comparisons of the "Zionist star" (i.e., Star of David) with the Nazi swastika. For some time, Turkish officials' anti-Israeli rhetoric have gained them considerable regional influence. Erdogan is very popular with Arab publics and his fervor and rage also benefit him with voters. While the heat of the first days after the raid may dissipate, the anger will remain. The prime minister may be feeding or exploiting it for domestic political purposes in the run-up to national elections next year, or earlier, as he cannot afford to lose votes to either more Islamist parties or the reviving secular opposition. <6. International Reactions> There has been near-universal condemnation of Israel's actions. Nicaragua broke off relations with Israel, while Ecuador and South Africa recalled their ambassadors and many other governments called in Israeli ambassadors to protest. The European Union reiterated its demand for an immediate opening of Gaza's border crossings. China urged Israel to end the blockade and condemned the Israeli raid on the ship. Russia called on Israel to lift the blockade and for an impartial investigation. U.N. Secretary General Ban Ki-moon condemned the violence and called for a full investigation. The U.N. Human Rights Council voted to launch an independent, international inquiry into the events, although the United States voted against it. On June 1, a compromise Statement by the President of the Security Council at the U.N. regretted "the loss of life and injuries resulting from the use of force during the Israeli military operation in international waters against the convoy sailing to Gaza.... The Council ... condemns those acts which resulted in the loss of at least ten civilians and many wounded." It called for a "prompt, impartial, credible, and transparent investigation conforming to international standards." In addition, the council reiterated its "grave concern at the humanitarian situation in Gaza" and stressed "the need for sustained regular flow of goods and people to Gaza as well as unimpeded provision and distribution of humanitarian assistance throughout Gaza." It again called for a two-state solution to the Israeli-Palestinian conflict and expressed support for the ongoing proximity talks (that are being mediated by U.S. Special Envoy for Middle East Peace George Mitchell). British Prime Minister David Cameron called Israel's actions "unacceptable." He said that Britain remained committed to Israel's security and urged Netanyahu to respond constructively to "legitimate" international criticism and to lift the blockade. German Chancellor Angela Merkel expressed her "deep concern" to both Netanyahu and Erdogan, and her spokesman said, "Every German government has always recognized and supported the right of Israel to defend itself, but this right must of course be within the bounds of proportionality." French President Nicolas Sarkozy condemned "the disproportionate use of force" and said, "All possible light must be shed on the circumstances surrounding this tragedy, which highlights the urgent need for the peace process to be relaunched." On June 14, the Council of the European Union adopted conclusions regretting the loss of life during Israel's military operation in international waters against the flotilla sailing to Gaza and condemned the use of violence. It called of an immediate, full, and impartial inquiry with credible international participation. It called for "the immediate, sustained, and unconditional opening of crossings for the flow of humanitarian aid, commercial goods, and person to and from Gaza" and "for a solution that addresses Israel's legitimate security concerns." <7. Investigations/Inquiries> In response to international calls for an investigation of the incident, Israel has launched several probes. On June 7, Israel Defense Forces (IDF) Chief of Staff Lt. Gen. Gabi Ashkenazi appointed former head of the National Security Council Maj. Gen. Giora Eiland (Ret.) to head an external military probe that will report by July 4. Three other retired senior officers are on the panel that is tasked with drawing operational conclusions. It reportedly will delve into the choice of unit to carry out the operation, possible alternative tactics that might have been used to stop the flotilla, military decision-making leading up to the operation, and intelligence matters. Eiland has already defended the commandos' right to self-defense and said, "(T)here was a mistake, but not on the soldiers' part. The mistake lay in underestimating who the Turkish ship's passengers were." On June 13, Prime Minister Netanyahu announced the establishment of a special, independent public commission to inquire into the events of May 31. It will be chaired by retired Supreme Court Justice Jacob Turkel, who still sits on a military appeals court panel, and, as members, Shabtai Rosen, a professor of international law and former diplomat, and Maj. Gen. Amos Horen (Ret.), a former president of Technion (Israel Institute of Technology). The panel includes two foreign observers: Lord David Trimble, the former first minister of Northern Ireland, and Brig. Gen. Ken Watkin, former judge advocate general of the Canadian Forces. The commission has a limited mandate. It will investigate whether Israel's blockade of the Gaza Strip and the enforcement of it conform to international law. It also will consider the actions and identities of those who organized and participated in the flotilla. Military personnel will not be required to testify. Instead, the IDF will provide it with summaries of the Eiland investigation. Israel had coordinated its approach to the investigation with the Obama Administration, which had urged the inclusion of an "international component" to enhance the inquiry's credibility. Hence, the White House reaction to the Israeli announcement was positive: We believe that Israel, like any other nation, should be allowed to undertake an investigation into events that involve its national security. Israel has a military justice system that meets international standards and is capable of conducting a serious and credible investigation, and the structure and terms of reference of Israel's proposed independent public commission can meet the standard of a prompt, impartial, credible, and transparent investigation. But we will not prejudge the process or its outcome, and will await the conduct and findings of the investigation before drawing further conclusions. However, Turkish Foreign Minister Davutoglu was not satisfied. He declared, The crime was committed in international waters, not in Israel's territorial waters. A commission which will conduct an inquiry into an attack staged in international waters should be international. We demand that an international commission should be formed under the supervision of the U.N. with participation of Turkey and Israel . We believe that Israel, as a country which attacked on a civil convoy in international waters, will not conduct an impartial inquiry. He also said that "international participation in a commission established by Israel does not give it an international quality." Finally, Davutoglu stated that if an international commission were not set up, then Turkey would unilaterally review its ties with Israel and implement sanctions against it. Israel's State Comptroller Micha Lindenstrauss will carry out yet another investigation into the legality of the government's decision-making as well as intelligence and public relations issues. The probe will not duplicate that of the IDF or the Turkel group. Meanwhile, U.N. Secretary General Ban Ki-moon took note of the Israeli announcement, but added that his own proposal for an international inquiry remains on the table and he hoped for a positive Israeli response. Turkey accepted Ban's proposal and called on Israel to do so. However, Israeli Defense Minister Ehud Barak said, after meeting the Secretary General and providing details concerning new steps to ease the blockade (see " The Blockade ," below) "we consider an [international probe] while organizations that support terror are trying to send more ships to Gaza to be an irresponsible act." On June 17, the Turkish Foreign Ministry announced that a panel headed by the foreign and justice ministers "will assess the national and international dimensions" of the raid and prepare the ground for a possible international investigation. <8. U.S. Position> <8.1. Policy> The United States is caught between two long-time allies Israel and Turkey and the Obama Administration seems interested in finding a path between them that will not antagonize either party. It is a challenging task. State Department spokesman P.J. Crowley reported that, before the raid, the Administration had urged caution and restraint on Israel given the anticipated presence of civilians, including American civilians. Afterwards, the Administration's first reaction was circumspect, if not muted. The White House issued a statement saying, "The President expressed deep regret at the loss of life in today's incident and concern for the wounded.... The President also expressed the importance of learning all the facts and circumstances surrounding this morning's tragic events as soon as possible." The Administration negotiated with Turkey concerning the Security Council President's statement that condemned "acts" resulting in the loss of life, but not Israel per se. The statement also did not call for an international investigation because of recent experience with what Israel and the Administration considered to be the one-sided U.N. Goldstone Commission investigation of Operation Cast Lead. The State Department's Crowley indicated that the United States believes "Israel is in the best position to conduct an investigation." U.S. Deputy Permanent Representative at the U.N. Alejandro D. Wolff also criticized the attempt to break the blockade, saying, "Direct delivery by sea is neither appropriate nor responsible, and certainly not effective, under the circumstances." Yet, he further said that the situation in Gaza was "unsustainable." Secretary of State Hillary Rodham Clinton made the same observation. The White House said that President Obama "affirmed the importance of finding better ways to provide humanitarian assistance to the people of Gaza without undermining Israel's security." Vice President Biden maintained that because Israel is at war with Hamas, it "has a right to know whether or not arms are being smuggled in." He also stated that the Administration had been "cajoling" Israel to allow building materials into Gaza. The Administration likely does not want its reaction to the flotilla incident to further disrupt what has become an uneasy bilateral relationship with Israel. It needs a better relationship with the Netanyahu government in order to make progress in the Israeli-Palestinian peace talks, which U.S. officials believe to be in America's national security interests. Strains had developed due to President Obama's and Netanyahu's differing views regarding West Bank settlement activity and, especially, Jerusalem. The Administration does not want Israel to take any actions that could prejudge a final settlement with the Palestinians, who seek a state in the West Bank and Gaza with east Jerusalem as its capital. The incident at sea led Prime Minister Netanyahu to cancel a June 1 meeting with President Obama at the White House, but it has been rescheduled for July 6. At the same time, the Administration needed to consider the strength of its desire for Turkey's support in the Security Council for sanctions on Iran. It is usually believed that unanimity or a large number of votes in the council lends greater weight on such issues. It is possible, however, that the Administration had decided to proceed without Turkey's support, given the announcement in Tehran on May 17 of an agreement with Iran and Brazil on an exchange in Turkey of some of Iran's low enriched uranium for medical grade uranium a deal that the Administration found deficient. Turkey voted against sanctions, which its officials maintain was because of the Tehran deal and not related to the events of May 31 and their aftermath. <8.2. Aid> On June 9, at a meeting with Palestinian Authority (PA) President Abbas, President Obama promised $400 million in aid for the West Bank and Gaza Strip. None of the aid requires new congressional action as all was appropriated in FY2009 and FY2010 legislation. Most is not for Gaza. That slated in some way for Gaza includes $40 million to support the United Nations Relief and Works Agency's (UNRWA) Emergency Appeal for Gaza and the West Bank to help improve educational and health services, increase job creation, and repair shelters in Gaza, while also addressing core humanitarian needs in the West Bank; $14.5 million for school rehabilitation, small-scale agriculture, the repair of a hospital and other community infrastructure in Gaza; $10 million for the construction of five new UNRWA schools in Gaza; and $5 million to complete five USAID-funded projects to repair water distribution and wastewater collection systems in Gaza. <9. Implications for the Future> <9.1. The Blockade> There is an international consensus that something must be done to lift or ease Israel's blockade of Gaza and to reestablish a fully functioning economy there for its residents. Yet, there was a dearth of ideas from those who called on Israel to end the blockade concerning creative ways for Israel to do that and to continue to prevent the arming of Hamas and its development as a more deadly threat to Israel. Hamas is exploiting the flotilla incident as a propaganda victory. It is not in the group's interest to not attempt to rearm or to help lessen Israel's international isolation. It is in the United States' and international community's interest to find a solution to this problem. President Obama described the situation in Gaza as "unsustainable." He stated "we agree that Israelis have the right to prevent arms from entering into Gaza that can be used to launch attacks into Israeli territory. But it is important for us to explore new mechanisms so that we can have goods and services, and economic development, and the ability of people to start their own businesses, and to grow the economy and provide opportunity within Gaza." He added, "there should be ways of focusing narrowly on arms shipments, rather than focusing in a blanket way on stopping everything and then in a piecemeal way allowing things into Gaza." The Israeli government discussed ways to ease procedures at land crossings. Prime Minister Netanyahu insisted that the sea blockade is essential. Foreign Minister Avigdor Lieberman suggested that Israel offer to ease the crossings in exchange for monthly International Red Cross visits to Sergeant Gilad Shalit. However, Hamas restated its position that any movement on Shalit depends solely on Israel's release of more than 1,000 Palestinian prisoners, as it has long demanded, and is not related to any other issue. One suggestion was for Israel to publish a limited list of goods prohibited for security reasons and let all other goods enter the Gaza Strip. Former British Prime Minister Tony Blair, the Quartet Representative, and the European Union urged Israel to adopt the practice and it did "in principle." On June 17, Prime Minister Netanyahu's office announced that the Israeli security cabinet had agreed to "liberalize the system by which civilian goods enter Gaza; expand the inflow of materials for civilian projects that are under international supervision; continue existing security procedures to prevent the inflow of weapons and war materiel; and to decide in the coming days on additional steps to implement this policy." However, the naval blockade would not be lifted. The White House welcomed the move as "a step in the right direction. On June 20, the Prime Minister's Office announced the following steps to be implemented "as quickly as possible": Publish a list of items not permitted into Gaza that is limited to weapons and war materiel, including problematic dual-use items. All items not on the list will be permitted. Enable and expand the inflow of dual-use construction materials for Palestinian Authority-approved projects (schools, health facilities, water, sanitation, etc.) that are under international supervision and for U.N. housing projects. Expand operations at the existing operating land crossings, thereby enabling the processing of a significantly greater volume of goods and the expansion of economic activity. Add substantial capacity at the existing operating land crossings and, as necessary, add additional land crossings. Streamline the policy of permitting the entry and exit of people for humanitarian and medical reasons and that of employees of international aid organizations recognized by the government of Israel. Continue the inspection and delivery of goods bound for Gaza through the port of Ashdod. The White House responded, "Once implemented, we believe these arrangements should significantly improve conditions for Palestinians in Gaza, while preventing the entry of weapons." It also wanted to "explore additional ways to improve the situation in Gaza, including freedom of movement and commerce between Gaza and the West Bank." The measures have not put an end to calls for a complete lifting of the blockade. The Turkish Foreign Ministry said that they were "a positive step but not enough." Meanwhile, Sergeant Shalit's father charged that the Israeli government had surrendered an important tool to gain his son's release. Shortly after the Marmara incident Egypt announced the opening of the Rafah crossing "indefinitely," although it only allowed travelers with special permits and continued to restrict potentially dual use goods. Some PA officials are concerned that efforts to lift the blockade will lead to a more autonomous Gaza Strip that is permanently separate from the West Bank. Such concerns may have animated Prime Minister Fayyad's suggestion, also proposed by Tony Blair and others, to reinstate the 2005 Agreement on Movement and Access, which called, inter alia , for the Rafah border crossing to operate with EU monitors and Israeli surveillance as well as for a link between Gaza and the West Bank. PA forces also were situated at the border. The EU Border Assistance Mission (EU-BAM) operated until suspended when Hamas took over the Gaza Strip in 2007. Its revival would be a way for the PA to reestablish its forces at the border. However, a Hamas spokesman quickly declared, "any international intervention, especially by the Europeans, must come through the government of Gaza," which would be problematic for both the PA and the Europeans. New attempts to break the blockade are expected. The Iranian Red Crescent announced plans to send three ships and one airplane bearing supplies for Gaza, but delivery may be made via the Egyptian Red Crescent. The European Campaign to End the Siege on Gaza says that it is organizing another aid flotilla. A ship with women activists carrying food and medicine already has set sail from Lebanon and others from Reporters without Borders and the Free Palestine Movement plan to leave from there as well. The IHH announced that it has assembled six ships for another flotilla due to sail in the second half if July that it invited others to join. The Israeli Foreign Ministry spokesman said that ships from Iran and Lebanon are from "enemy states" and would get different treatment. The U.S. State Department has tried to discourage these efforts, stating, "everyone who wants to help the people of Gaza should work through established channels." <9.2. Israeli-Palestinian Peace Talks> Many observers believe that the best response to the current crisis and the way to prevent future ones is Israeli-Palestinian peace and the creation of an independent Palestinian state that would deprive Hamas of its resistance rationale and lead to better lives for the Palestinians. U.S. Special Envoy for Middle East Peace George Mitchell says that the proximity talks that have been underway for several weeks between Prime Minister Netanyahu and President Abbas will continue. Abbas also has stated that the talks will not be broken off. However, few are optimistic about the prospects for peace given the uncompromising territorial ambitions of right-wing nationalists in the Netanyahu government and the divided Palestinian rule between Gaza and the West Bank. Even if an accord can be achieved, many wonder how successfully it can be implemented. <9.3. Turkish-Israeli Relations> The current crisis is undoubtedly a turning point in Turkish-Israeli relations. President Abdullah Gul declared, "Turkish-Israeli relations can never be as before from now on." Yet, this change is not dramatic; it has been coming for some time. The picture of Turkish-Israeli friendship was drawn in the 1990s when their bilateral relations improved in tandem with Israeli-Palestinian peace talks and when both governments viewed Syria, then their common neighbor, as an adversary. Cordiality was aided by the Turkish military's appreciation of Israeli arms for use in the fight with Kurdistan Workers Party (PKK) insurgents. Joint military exercises became routine. Surprising to some, relations did not deteriorate when the Justice and Development Party (AKP), which has Islamist roots, came to power in 2002. Prime Minister Erdogan visited Israel and Israeli President Shimon Peres addressed the Turkish parliament. Israel trusted Ankara enough to allow it to mediate indirect peace talks with Syria in 2008. However, Israel's suspicions of the AKP may have been sparked when the party hosted Hamas Politburo Chief Khalid Mish'al in 2006, after the Palestinian Authority legislative elections. Turkish officials repeatedly refer to Hamas as a democratically elected group that was denied the chance to govern, and call on the international community to engage Hamas. Moreover, Israel is aware of Turkey's close relations with Iran, its defense of that country's right to develop nuclear energy, and its charge that the international community uses a double standard when it fails to castigate Israel for its nuclear weapons. Erdogan and other Turkish officials almost always refer to Israel's nuclear weapons when countering international concern about the possibility that Iran seeks such weapons; Erdogan has described that notion as "gossip." Turkish officials do not, as Israeli officials do, refer to Iranian President Mahmud Ahmadinejad's vow to "wipe Israel off the map" or to Iran's support for anti-Israel terrorists. In other words, a gap has been widening between the two erstwhile friends. Bilateral relations have been deteriorating rapidly since Israel's military campaign against Hamas from December 2008 to January 2009. Prime Minister Erdogan has said that he was insulted that then Israeli Prime Minister Ehud Olmert had failed to inform him of the anticipated offensive while in Turkey for consultations regarding the Turkish-mediated Israeli-Syrian peace talks just days before launching the offensive. In January 2009, Erdogan took offense at President Peres's defense of Operation Cast Lead at the World Economic Forum and stormed off the stage. Erdogan's action gained him popularity throughout the Arab world. Shortly thereafter, a Turkish television series depicted Israeli soldiers as barbarians. Erdogan has repeatedly criticized Prime Minister Netanyahu's government. In October 2009, Turkey cancelled Israel's participation in a multilateral military exercise some suggested that this was due to concerns that Israel would use it to prepare for an attack on Iran. In January 2010, Israeli Deputy Prime Minister Dani Ayalon insulted Turkey's ambassador to Israel while complaining about the television series. Turkey demanded and received an apology. Erdogan is unrelenting in his repeated references to what he refers to as Israel's inhumane conduct of the Gaza campaign and of its continuing ill treatment of the Palestinians in Gaza, which he calls an "open air prison." He also has warned Israel not to try to change the character of Jerusalem and questioned the Jews' ties to certain religious sites. After Israel's raid on the flotilla, Erdogan said "Today is a turning point in history. Nothing will be the same again," speaking of relations with Israel. Turkey recalled its ambassador from Israel and cancelled three joint military drills, cooperation in the fields of energy and water, and soccer matches. It also is demanding that Israel apologize and compensate the victims. Foreign Minister Davutoglu says that relations will not improve until the results of an international probe of the Israeli raid are implemented and Israel lifts the siege of Gaza. Defense Minister Vecdi Gonul said that Turkey did not plan to cancel military contracts for the purchase of Israeli arms, including Heron drones, radars, and avionic systems, and joint production of mine-resistant ambush-protected (MRAP) vehicles. Most of the Herons have been delivered and Israel has been compensated for them. However, after the flotilla incident, Israeli defense industries withdrew engineers and flight officers who were training Turkish forces for the Heron. The companies also claimed that the deal had not been cancelled and, on June 22, a Turkish military delegation arrived in Israel to test the last four drones scheduled for delivery. Much of the Turkish-Israeli bilateral trade worth $2.5 billion in 2009 has been Turkey's purchase of military equipment from Israel and it was anticipated to increase before the incident. The two countries signed a free trade agreement in 1996. Observers do not believe that any new deals should be expected. Aside from criticizing Israel's plans for its own inquiry into the incident, Foreign Minister Davutoglu declared that Turkey would work to isolate Israel in every international platform if an international investigation were not established. <9.4. U.S.-Turkish Relations> The flotilla crisis may have added to a developing rift in the foreign policies of Turkey and the United States. The Administration does not want to harm relations with Turkey, which is important to U.S. geostrategic interests, particularly in Iraq and Afghanistan. President Obama called Prime Minister Erdogan to convey his condolences for the tragedy at sea. However, some in Turkey want the Administration to choose between Israel and Turkey, and believe that the United States must choose Turkey. As that is unlikely, some Turks may remain unsatisfied. Despite its NATO membership and European Union candidacy, Turkey is an increasingly independent actor on the international stage, reflective of its growing economic and regional power and ambition to be a world power. It is conforming less automatically than in the past to the views of the United States and other Western allies, and developing what Foreign Minister Davutoglu has described as a "multidirectional" foreign policy. Ankara also is less reluctant to criticize its American ally publicly. With regard to the flotilla incident, Davutoglu expressed disappointment with Washington's "cautious reaction to the events." He stated, "We expect full solidarity with us. It should not seem like a choice between Turkey and Israel. It should be a choice between right and wrong, between legal and illegal." He also complained that the United States had delayed and watered down the U.N. Security Council President's statement. This crisis came on the heels of a disagreement between Washington and Ankara over Turkey's agreement with Brazil and Iran concerning Iran's uranium. Davutoglu insists that Turkey followed guidance in an October 2009 letter from President Obama to Prime Minister Erdogan in formulating the deal, but the U.S. State Department had observed several weeks before the agreement was announced in Tehran that those parameters needed updating. The Foreign Minister also sought to place the agreement with Iran in the context of President Obama's policies of engagement and multilateralism in order to deprive United States of room to maneuver in its effort to get harsher sanctions imposed on Iran. As noted above, Turkey voted against sanctions. Recent events suggest U.S. policy makers should expect additional and increasing examples of Turkey's developing autonomous foreign policy. It may be a challenge for U.S. officials to accommodate their views to Turkey's "multidirectionalism" or to address it constructively. <10. Legislation> S.Res. 548 , introduced and referred to the Committee on Foreign Relations on June 9, 2010. To express the sense of the Senate that Israel has an undeniable right to self-defense, and to condemn the recent destabilizing actions by extremists aboard the Mavi Marmara . H.R. 5501 , American Stands with Israel Act, introduced and referred to the Committee on Foreign Affairs on June 10, 2010. To prohibit the United States participation on the U.N. Human Rights Council and prohibit contributions to the U.N. for the purpose of paying for any U.N. investigation into the flotilla incident.

Israel unilaterally withdrew from the Gaza Strip in 2005, but retained control of its borders. Hamas, a U.S. State Department-designated Foreign Terrorist Organization (FTO), won the 2006 Palestinian legislative elections and forcibly seized control of the territory in 2007. Israel imposed a tighter blockade of Gaza in response to Hamas's takeover and tightened the flow of goods and materials into Gaza after its military offensive against Hamas from December 2008 to January 2009. That offensive destroyed much of Gaza's infrastructure, but Israel has obstructed the delivery of rebuilding materials that it said could also be used to manufacture weapons and for other military purposes. Israel, the U.N., and international non-governmental organizations differ about the severity of the blockade's effects on the humanitarian situation of Palestinian residents of Gaza. Nonetheless, it is clear that the territory's economy and people are suffering. In recent years, humanitarian aid groups have sent supply ships and activists to Gaza. However, Israel directs them to its port of Ashdod for inspection before delivery to Gaza. In May 2010, the pro-Palestinian Free Gaza Movement and the pro-Hamas Turkish Humanitarian Relief Fund organized a six-ship flotilla to deliver humanitarian aid to Gaza and to break Israel's blockade of the territory. The ships refused an Israeli offer to deliver the goods to Ashdod. On May 31, Israeli naval special forces intercepted the convoy in international waters. They took control of five of the ships without resistance. However, some activists on a large Turkish passenger vessel challenged the commandos. The confrontation resulted in eight Turks and one Turkish-American killed, more than 20 passengers injured, and 10 commandos injured. Israel considered its actions to be legitimate self-defense. Turkey, whose nationals comprised the largest contingent in the flotilla and among the casualties, considered them to be unjustifiable and in contravention of international law. There was near-universal international condemnation of Israel's actions. The U.N. Security Council in a U.S.-Turkish compromise condemned "the acts" that resulted in lost lives and called for an impartial inquiry. Several inquiries are underway in Israel, but Turkey will not be satisfied unless there is an international one under U.N. auspices. The Obama Administration tried to walk a fine line between two allies, Israel and Turkey, and not allow the incident to derail efforts to ameliorate relations with Israel in order to protect Israeli-Palestinian talks now underway. It urged Israel to include international participants in its probe of the incident, and announced an aid package for the Palestinians that does not require new appropriations. However, the Administration's reaction displeased Turkey, and may contribute to that country's ongoing pursuit of a more independent foreign policy course. Turkish-Israeli relations, which had been deteriorating for some time, have reached a low point. In the aftermath of the incident, Israel has eased restrictions on the passage of goods and people into Gaza, while continuing to prevent shipments of weapons and dual-use items to Hamas.

<1. Introduction> The Trump Administration requested $75.1 billion for the Department of Transportation (DOT) for FY2018, 2.6% ($2 billion) less than DOT received in FY2017. The Administration proposed significant cuts in funding for competitive grant programs, zeroing out the TIGER infrastructure investment grant program and the Essential Air Service (EAS) program, and reducing spending on public transportation capital grants and Amtrak's long-distance trains by half or more. Around 75% of DOT's funding is mandatory budgetary authority drawn from trust funds; the Administration's request would have drawn a slightly larger portion (78%) from mandatory budget authority, reducing the amount of discretionary budget authority in DOT's budget from $19.3 billion in 2017 to $16.4 billion for FY2018. On July 21, 2017, the House Committee on Appropriations reported H.R. 3353 . The committee recommended $77.5 billion for DOT, a 0.5% ($430 million) increase over the comparable FY2017 amount and 3% ($2.4 billion) above the Administration request. On July 27, 2017, the Senate Committee on Appropriations reported S. 1655 . It recommended a total of $78.6 billion in new budget authority for DOT for FY2018 ($78.5 billion after scorekeeping adjustments), 2% ($1.6 billion) above the comparable FY2017 amount and 4.7% ($3.5 billion) over the Administration request. Conflicts over funding levels and spending limits for federal agencies delayed action on final FY2018 appropriations until March 2018. Until that time, a series of continuing resolutions provided temporary funding for federal agencies. Finally, after passing legislation raising the spending limits for federal agencies for FY2018, Congress passed an omnibus spending bill, P.L. 115-141 , which included increased spending for most agencies. Title I of Division L, the DOT Appropriations Act, provided $86.2 billion, 11.8% ($9.1 billion) more than in FY2017. <2. Understanding the DOT Appropriations Act> DOT's funding arrangements are unusual compared to those of most other federal agencies, in that most of its funding is mandatory budget authority coming from trust funds, and most of its expenditures take the form of grants to states and local government authorities. Discretionary appropriations constitute most, if not all, of the annual funding for most federal agencies. But roughly three-fourths of DOT's funding has come from mandatory budget authority derived from trust funds. A significant increase in discretionary funding for DOT in its FY2018 appropriation changed that proportion slightly, increasing the share of discretionary funding to almost a third of DOT's budget. Table 1 shows the shift in the breakdown between the discretionary and mandatory funding in DOT's budget from FY2017 to FY2018. Two large trust funds, the Highway Trust Fund and the Airport and Airway Trust Fund, have typically provided around 90% of DOT's annual funding in recent years (92% in FY2017), but in FY2018 a significant increase in discretionary budget authority resulted in the proportion drawn from trust funds dropping to 83%, despite the actual amount increasing by $1 billion; see Table 2 . The scale of the funding coming from these trust funds is not entirely obvious in DOT budget tables, because most of the funding from the Airport and Airway Trust Fund is categorized as discretionary budget authority and so is combined with the discretionary budget authority provided from the general fund. Approximately 80% of DOT's funding is distributed to states, local authorities, and Amtrak in the form of grants (see Table 3 ). Of DOT's largest sub-agencies, only the Federal Aviation Administration, which is responsible for the operation of the air traffic control system and employs roughly 83% of DOT's 56,252 employees, many as air traffic controllers, has a budget whose primary expenditure is not grants. <2.1. Reauthorization of Air Transportation Programs> Since most DOT funding comes from trust funds whose revenues typically come from taxes, the periodic reauthorizations of the taxes supporting these trust funds, and the apportionment of the budget authority from those trust funds to DOT programs, are a significant aspect of DOT funding. The highway, transit, and rail programs are currently authorized through FY2020, but the authorization for the federal aviation programs was scheduled to expire at the end of FY2017; it was extended to the end of FY2018. Reauthorization of this program may affect both its structure and funding level. <2.2. DOT Funding Trend> In current (nominal) dollars, DOT's nonemergency annual funding has risen from a recent low of $70 billion in FY2012 to $86 billion in FY2018. However, adjusting for inflation tells a different story. DOT's inflation-adjusted funding peaked in FY2010 at $87.5 billion (in constant 2018 dollars) and declined from that point until FY2015, then began rising again in FY2016 (see Figure 1 ). DOT's real funding, adjusted for inflation, was roughly the same in FY2016 and FY2017 as in FY2006; from FY2012-FY2017, DOT's inflation-adjusted funding was lower than during the FY2007-FY2011 period. <3. DOT FY2018 Appropriations> Table 4 presents a selected account-by-account summary of FY2018 appropriations for DOT, compared to FY2017. <3.1. Selected Issues> <3.1.1. Highway Trust Fund Solvency> Virtually all federal highway funding and most federal transit funding comes from the Highway Trust Fund, whose revenues come largely from the federal motor fuels excise tax ("gas tax"). For several years, annual expenditures from the fund have exceeded revenues; for example, for FY2018, revenues and interest are projected to be approximately $41 billion, while authorized outlays are projected to be approximately $54 billion, and this shortfall is expected to continue. Congress transferred about $143 billion, mostly from the general fund of the Treasury, to the Highway Trust Fund during the period FY2008-FY2016 to keep the trust fund solvent. One reason for the shortfall in the fund is that the federal gas tax has not been raised since 1993. The tax is a fixed amount assessed per gallon of fuel sold, not a percentage of the cost of the fuel sold: Whether a gallon of fuel costs $1 or $4, the highway trust fund receives 18.3 cents for each gallon of gasoline and 24.3 cents for each gallon of diesel. Meanwhile, the value of the gas tax has been diminished by inflation (which has reduced the purchasing power of the revenue raised by the tax) and increasing automobile fuel efficiency (which reduces growth in gasoline sales as vehicles are able to travel farther on a gallon of fuel). The Congressional Budget Office (CBO) has forecast that gasoline consumption will be relatively flat through 2024, as continued increases in the fuel efficiency of the U.S. passenger fleet are projected to offset increases in the number of miles driven. Consequently, CBO expects Highway Trust Fund revenues of $39 billion to $41 billion annually from FY2018 to FY2027, well short of the annual level of projected expenditures from the fund. <3.1.2. National Infrastructure Investment (BUILD/TIGER Grants)7> The Administration did not request any funding for TIGER grants for FY2018. The House committee likewise recommended no funding for FY2018, while the Senate committee recommended $550 million. The Senate bill also recommended that the portion of funding allocated to projects in rural areas be increased from 20% to 30%; the same change was included in the Senate-passed DOT appropriations bills in FY2016 and FY2017, but was not enacted. The enacted bill provided $1.5 billion for the program, increased the portion for projects in rural areas to 30%, and made planning an eligible expense. It also directed DOT to award the grants within 270 days of enactment. The Transportation Investments Generating Economic Recovery (TIGER) grant program originated in the American Recovery and Reinvestment Act ( P.L. 111-5 ), where it was called "national infrastructure investment" (as it has been in subsequent appropriations acts). It is a discretionary grant program intended to address two criticisms of the current structure of federal transportation funding: that virtually all of the funding is distributed to state and local governments, which select projects based on their individual priorities, making it difficult to fund projects that have national or regional impacts but whose costs fall largely on one or two states; and that most federal transportation funding is divided according to mode of transportation, making it difficult for projects in different modes to compete for funds on the basis of comparative benefit. The TIGER program provides grants to projects of national, regional, or metropolitan area significance in various modes on a competitive basis, with recipients selected by DOT. Although the program is, by description, intended to fund projects of national, regional, and metropolitan area significance, in practice its funding has gone more toward projects of regional and metropolitan area significance. In large part this is a function of congressional intent, as Congress has directed that the funds be distributed equitably across geographic areas, between rural and urban areas, and among transportation modes, and has set relatively low minimum grant thresholds ($5 million for urban projects, $1 million for rural projects). Congress has continued to support the TIGER program through annual DOT appropriations. It is heavily oversubscribed; for example, DOT announced that it received applications totaling $9.3 billion for the $500 million available for FY2016 grants. The U.S. Government Accountability Office (GAO) has reported that, while DOT has selection criteria for the TIGER grant program, it has sometimes awarded grants to lower-ranked projects while bypassing higher-ranked projects without explaining why it did so, raising questions about the integrity of the selection process. DOT has responded that while its project rankings are based on transportation-related criteria, such as safety and economic impact, it must sometimes select lower-ranking projects over higher-ranking ones to comply with other selection criteria established by Congress, such as geographic balance and a balance between rural and urban awards. Some critics argue that TIGER grants go disproportionately to urban areas, but for several years Congress directed that at least 20% of TIGER funding should go to projects in rural areas, which roughly equals the proportion of the U.S. population that lives in rural areas (19%, according to the 2010 Census ). In recent years, the Senate had pushed to increase that proportion to 30%, and for FY2018 grants the portion for rural areas was increased to 30%. As Table 5 illustrates, the TIGER grant appropriation process has followed a pattern for several years, with the Obama Administration requesting as much as or more than Congress had previously provided; the House zeroing out the program or proposing a large cut; the Senate proposing an amount similar to the previous appropriation; and Congress agreeing on a final enacted amount similar to the previously enacted amount. The FY2018 appropriations process changed the pattern slightly, in that the Trump Administration requested no funding for TIGER grants. <3.1.3. Additional Infrastructure Funding> The FY2018 enacted legislation included significant increases in funding for infrastructure for aviation, highways, passenger rail, and transit, in some cases beyond the authorized levels, in other cases provided in newly created accounts. <3.1.4. Essential Air Service14> The Essential Air Service program is funded through a combination of mandatory and discretionary budget authority. In addition to the annual discretionary appropriation, there is a mandatory annual authorization, estimated at $119 million for FY2018, financed by overflight fees collected from commercial airlines by FAA. These overflight fees apply to international flights that fly through U.S. airspace, but do not land in or take off from the United States. The fees are to be reasonably related to the costs of providing air traffic services to such flights. As Table 7 shows, the Trump Administration requested no discretionary funding for the EAS program in FY2018, proposing to use only the available mandatory funding for the program; it estimated that $119 million in mandatory funding would be available in FY2018. That would result in a reduction of 56% ($153 million) from the total FY2017 appropriation. The House committee bill recommended a $150 million discretionary appropriation, as was provided in FY2017; combined with the estimated mandatory funding, that would represent a 2.3% ($6 million) increase over FY2017. The Senate committee bill recommended a $155 million discretionary appropriation; combined with the estimated mandatory funding, that would result in a 4.2% ($11 million) increase. The enacted bill provided $155 million in discretionary funding, identical to the Senate bill; combined with an increase in the mandatory funding, EAS received a total of $286 million, a $22 million (8.7%) increase over FY2017. The EAS program seeks to preserve commercial air service to small communities by subsidizing service that would otherwise be unprofitable. The cost of the program in real terms has doubled since FY2008, in part because route reductions by airlines resulted in new communities being added to the program (see Table 8 ). Congress made changes to the program in 2012, including allowing no new entrants, capping the per-passenger subsidy for a community at $1,000, limiting communities that are less than 210 miles from a hub airport to a maximum average subsidy per passenger of $200, and allowing smaller planes to be used for communities with few daily passengers. Supporters of the EAS program contend that preserving airline service to small communities was a commitment Congress made when it deregulated airline service in 1978, anticipating that airlines would reduce or eliminate service to many communities that were too small to make such service economically viable. Supporters also contend that subsidizing air service to smaller communities promotes economic development in rural areas. Critics of the program note that the subsidy cost per passenger is relatively high, that many of the airports in the program have very few passengers, and that some of the airports receiving EAS subsidies are little more than an hour's drive from major airports. <3.1.5. Positive Train Control> In 2008, Congress directed railroads to install positive train control (PTC) on certain segments of the national rail network by the end of 2015. PTC is a communications and signaling system that is capable of preventing incidents caused by train operator or dispatcher error. Freight railroads have reportedly spent billions of dollars thus far to meet this requirement, but most of the track required to have PTC installed was not in compliance at the end of 2015; in October 2015 Congress extended the deadline to the end of 2018 with an option for individual railroads to extend to 2020 with Federal Railroad Administration (FRA) approval. Congress provided $50 million in FY2010 and again in FY2016 for grants to railroads to help cover the expenses of installing PTC, and $199 million in FY2017 to help commuter railroads implement PTC. The Trump Administration's FY2018 budget request did not include any funding for the cost of PTC implementation, nor did the House or Senate Appropriations Committees recommend any funding for this purpose. The enacted FY2018 bill provided $250 million for PTC implementation under the Consolidated Rail Infrastructure and Safety Improvements grant program, and made up to $50 million of Amtrak's National Network grant available for PTC projects on state-supported routes where PTC is not required by law. <3.1.6. Railroad Rehabilitation and Infrastructure Financing (RRIF) Loan Program> The RRIF loan program provides direct loans and loan guarantees to state and local governments, government-sponsored entities, and railroads for rehabilitation or development of rail facilities and equipment. The program's resources are relatively lightly used; it is authorized to make up to $35 billion in loans, but has less than $5 billion outstanding, and has made only four loans since 2012. One of the factors that has been cited as reducing the attractiveness of the program is the requirement that loan recipients pay a credit risk premium to offset the risk of their defaulting on their loan. For the first time, the FY2018 appropriation act provided funding ($25 million) to subsidize the cost of the credit risk premium. Another point of contention with the RRIF program has been DOT's failure to repay the credit risk premium to borrowers who have paid off their loans. The program's statute calls for a borrower's credit risk premium to be repaid when all the loans in that cohort of loans have been paid off, but DOT has never defined what a cohort of loans is. Congress has directed DOT to define a cohort as all loans executed in a particular year; it reiterated that directive in the FY2018 appropriations act, and told DOT to repay the credit risk premiums when all loans in a cohort have been repaid. <3.1.7. Amtrak and Intercity Passenger Rail Development> The Passenger Rail Reform and Investment Act of 2015 (Title XI of P.L. 114-94 ) reauthorized Amtrak while changing the structure of its federal grants: instead of getting separate grants for operating and capital expenses, it now receives separate grants for the Northeast Corridor and the rest of its national network. This act also authorized three new programs to make grants to states, public agencies, and rail carriers for intercity passenger rail development: Consolidated Rail Infrastructure and Safety Improvement Grants Federal-State Partnership for State of Good Repair Grants Restoration and Enhancement Grants The Administration's FY2018 budget requested a total of $811 million for intercity passenger rail funding: $760 million for grants to Amtrak and $51 million for two of the new grant programs. The House Appropriations Committee recommended $1.4 billion for Amtrak and a total of $525 million for two of the new grant programs. The Senate committee recommended $1.6 billion for Amtrak and a total of $124 million for the three new grant programs (see Table 9 ). It specified that $41 million of the $124 million recommended for the grant programs could be used to initiate or restore intercity passenger rail services, and advised Amtrak and other stakeholders to seek that funding for restoration of Amtrak's Gulf Coast service, which was interrupted in 2007 and never fully restored. It also noted that funding under the Federal-State Partnership for State of Good Repair program could be used for Amtrak's Hudson Tunnel replacement project (without naming that project). The final FY2018 act provided $1.9 billion for Amtrak, an increase of 30% ($447 million) over FY2017, and a total of $863 million for the new grant programs. The $98 million provided for the three new intercity passenger rail grants in FY2017 was the first funding provided for intercity passenger rail (other than annual grants to Amtrak and the occasional grants for PTC implementation) since the 111 th Congress (2009-2010), which provided $10.5 billion for DOT's high-speed and intercity passenger rail grant program. From FY2011 to FY2016, Congress provided no funding for intercity passenger rail development, and in FY2011 it rescinded $400 million that had been appropriated for that purpose but not yet obligated. <3.1.8. Federal Transit Administration Capital Investment Grants> The majority of the Federal Transit Administration's (FTA's) roughly $12 billion in funding is funneled to state and local transit agencies through several programs that distribute the funding by formula. Of the few transit grant programs that are discretionary (i.e., awarding funding to applicants selectively, usually on a competitive basis), the largest is the Capital Investment Grants program (often referred to as the New Starts program, as that is the largest and best known of its component grant programs). It funds new fixed-guideway transit lines and extensions to existing lines. The program has three components: New Starts funds capital projects with total costs over $300 million that are seeking more than $100 million in federal funding; Small Starts funds capital projects with total costs under $300 million that are seeking less than $100 million in federal funding; and Core Capacity grants are for projects that will increase the capacity of existing systems. There is also an Expedited Project Delivery Pilot, intended to provide funding for eight projects eligible for any of the three programs that require no more than a 25% federal share and are supported, in part, by a public-private partnership. Grant funds for large projects are typically disbursed over a period of years. Much of the funding for this program each year is committed to projects already under construction with multiyear grant agreements signed in previous years. For FY2018, the Trump Administration requested $1.2 billion for Capital Investment Grants, 50% ($1.323 billion) less than the $2.4 billion provided in FY2017. The Administration stated an intention to approve no new projects, only to provide funding to projects that had previously been approved for funding. The Administration request noted that there were "66 projects in the program seeking funding, more than at any time in the program's 30-year history a clear indication of the intense demand from communities around the United States for new and expanded transit services." The House Committee on Appropriations recommended $1.8 billion, which is 42% ($521 million) more than requested but 27% ($660 million) below the FY2017 level. The House committee did not recommend funding for any new projects during FY2018, save for funding that appears to be provided for Amtrak's Hudson Tunnel project. The Senate Committee on Appropriations recommended $2.1 billion, 73% ($901 million) more than requested but 12% ($280 million) below the FY2017 level. The final FY2018 act provided $2.6 billion, 9.6% ($232 million) more than the FY2017 level, and over twice the amount requested by the Administration. The division of funding among the components of the Capital Investment Grants program is shown in Table 10 . Perhaps due to concerns about whether the Administration would make use of the grant funding provided in excess of the requested amount, both the House and Senate committee bills included language directing DOT to carry out the Capital Investment Program as described in statute; the enacted bill included that language, and added a directive to DOT to obligate $2.253 billion by December 31, 2019 (the amounts appropriated for Capital Investment Grants are available for obligation for four years). A New Starts grant, by statute, can be up to 80% of the net capital project cost. Since FY2002, DOT appropriations acts have included a provision directing FTA not to sign any full funding grant agreements for New Starts projects that would provide a federal share of more than 60%. The House-reported bill included a provision prohibiting grant agreements with a federal share greater than 50%. That provision was not included in the Senate-reported bill. The enacted bill followed the House lead in reducing the federal share, with a provision prohibiting New Starts grant agreements with a federal share greater than 51%. Critics of lowering the federal share provided for New Starts projects note that the federal share for highway projects is typically 80%, and in some cases is higher. They contend that the higher federal share makes highway projects relatively more attractive than public transportation projects for communities considering how to address transportation problems. Advocates of this provision note that the demand for New Starts funding greatly exceeds the amount available, so requiring a higher local match allows FTA to support more projects with the available funding. They also assert that requiring a higher local match likely encourages communities to estimate the costs and benefits of proposed transit projects more carefully, reducing the risk of subsequent cost overruns and of project ridership falling short of expectations. <3.1.9. The Hudson Tunnels and Amtrak's Gateway Program> Among the challenges to funding transportation infrastructure is that most federal transportation funding is distributed by mode, and most of the funding is distributed to states by formula. There are grant programs reserved for highways, for public transportation, for rail, and for airport development, but sponsors of projects involving multiple modes may have difficulty amassing significant amounts of federal funding. And while Congress provides some $55 billion annually for surface transportation programs, the vast majority of that funding is automatically divided among the states, making it difficult for a state to accumulate the funding needed for a major project in addition to meeting its other needs. One project that is highlighting this situation is Amtrak's Gateway Program, and specifically the Hudson Tunnel replacement project. Amtrak's Gateway Program is a set of projects intended to increase capacity and reliability of rail service between northern New Jersey and Manhattan, the most heavily used section of intercity and commuter rail track in the nation. The program would replace bridges, expand track capacity from two to four parallel tracks, and, most critically, add a new rail tunnel under the Hudson River. The existing tunnel, the only link connecting the Northeast Corridor from New Jersey to New York, is over a century old, was flooded with seawater during Hurricane Sandy, and is deteriorating. The estimated cost of the Gateway Program is at least $24 billion, and likely will increase as project planning advances; the estimated cost of just the new Hudson Tunnel is $11.1 billion. Since the new tunnel would carry both intercity and commuter rail traffic, it is eligible for DOT funding from both the intercity rail program and the public transportation Capital Investment Grants program. But other than the annual grants to keep Amtrak going, relatively little funding has been available in recent for intercity rail projects: the largest rail grant program in FY2017 was funded at $68 million. The Capital Investment Grants program has significantly more funding to award $2.4 billion in FY2017 but competition for that funding is intense, and the largest grant awarded to a project in the past 10 years was $2.6 billion. In 2016, under the Obama Administration, media reports indicated an agreement had been reached between DOT, Amtrak, and the states of New Jersey and New York to share the costs of building the new Hudson Tunnel, with one-third to be covered each by DOT/Amtrak, New Jersey/New Jersey Transit, and New York State. The Trump Administration's position on sharing the cost of the new tunnel is unknown. In any case, it would be up to Congress to provide the money. The House Appropriations Committee did not mention the Gateway Program or Hudson Tunnel project in its FY2018 THUD committee report, nor did it provide a significant amount of additional funding to any grant program. The committee recommended zeroing out the TIGER Grant Program, which could be one source of money for the Hudson Tunnel project, and cutting funding to the Capital Investment Grants program, another potential source, by $660 million from its FY2017 level. But the committee report noted that its Capital Investment Grants program funding recommendation included $400 million for new projects that meet the criteria of 49 U.S.C. 5309(q): "joint public transportation and intercity passenger rail projects." The Senate Appropriations Committee did not recommend any specific funding for the Hudson Tunnel replacement. It noted that FRA's Federal-State State of Good Repair grant program could be a source of funding for projects similar to those in the Gateway Program, and encouraged Amtrak to use the $358 million recommended for its Northeast Corridor account to continue its Gateway Project. The enacted bill did not mention the Gateway Program or Hudson Tunnel project. But it provided Amtrak almost $300 million more than Amtrak requested for its Northeast Corridor, and increased funding for FRA's State of Good Repair program from $25 million in FY2017 to $250 million for FY2018, as well as increased funding for the TIGER grant prog ram and FTA's Capital Investment Grants program. <3.1.10. Grant to the Washington Metropolitan Area Transit Authority> The Passenger Rail Investment and Improvement Act of 2008 authorized $1.5 billion over 10 years in grants to the Washington Metropolitan Area Transit Authority (WMATA) for preventive maintenance and capital grants, to be matched by funding from the District of Columbia and the states of Maryland and Virginia. Under this agreement, Congress has provided $150 million to WMATA in each of the past nine years. WMATA faces a number of difficulties. It is dealing with a backlog of maintenance needs due to inadequate maintenance investment over many years, and it has experienced several fatal incidents, most recently in January 2015. A number of other incidents have raised questions about the safety culture of the agency. An investigation that found numerous instances of mismanagement of federal funding led FTA to restrict WMATA's use of federal funds. An FTA audit of WMATA's safety practices in 2015 produced many recommendations for change, and in October 2015 FTA assumed oversight of WMATA's safety compliance practices from the Tri-State Oversight Committee, the agency created by the governments of the District of Columbia, Maryland, and Virginia to oversee WMATA safety performance. FTA continues to exercise safety oversight of WMATA, conducting inspections, leading accident investigations, and directing that federal funds received by WMATA are used to improve safety. In February 2017, FTA notified leaders of the three jurisdictions that it would withhold 5% of their FY2017 transit Urbanized Area formula funds until they meet the requirements to create a new State Safety Oversight Program to replace the Tri-State Oversight Committee. The jurisdictions passed legislation establishing a new safety oversight agency soon after, but the agency must be in operation before FTA will release the funding. The National Transportation Safety Board has recommended that oversight of WMATA's rail operations be assigned to FRA, which has a long history of safety enforcement, rather than FTA, which is primarily a grant management agency. However, Congress would have to act to give FRA authority to oversee WMATA, while FTA already has such authority. For FY2018, the final year of the grant authorization, both the House and Senate Appropriations Committees recommended the full $150 million annual grant for WMATA. The Senate committee report expresses frustration at the slow progress WMATA has made in providing wireless service throughout its system, which Congress mandated in 2008. The Senate committee report also notes that the FY2018 grant is the final installment of the $1.5 billion funding commitment Congress made in 2008, but that WMATA's budget assumes that the annual funding will continue to be provided. The enacted bill provided the $150 million, and made grants to WMATA contingent on improvements to its safety management system.

Congress appropriated $86.2 billion for the Department of Transportation (DOT) for FY2018. This represented a $9.1 billion (11.8%) increase over the amount provided in FY2017. The principal reason for the higher spending level was increases in funding from the general fund for highways, public transportation capital investments, and passenger rail projects. The appropriation was included in an omnibus spending bill, P.L. 115-141, Title I of Division L, the DOT Appropriations Act. The DOT appropriations bill funds federal programs covering aviation, highways and highway safety, public transit, intercity rail, maritime safety, pipelines, and related activities. Federal highway, transit, and rail programs were reauthorized in fall 2015, and their future funding authorizations were somewhat increased. The Trump Administration proposed a $75 billion budget for DOT for FY2018, including $16.4 billion in discretionary funding and $58.7 billion in mandatory funding. That was approximately $2 billion less than was provided for FY2017. The budget request reflected the Administration's call for significant cuts in funding for transit and rail programs. The annual appropriations for DOT are combined with those for the Department of Housing and Urban Development (HUD) in the Transportation, Housing and Urban Development, and Related Agencies (THUD) appropriations bill. The House Appropriations Committee reported H.R. 3353, the THUD FY2018 appropriations bill, in which Division A provided FY2018 appropriations for DOT. The committee recommended $77.5 billion in new budget authority for DOT, 0.5% ($400 million) more than ultimately approved for FY2017 and roughly 3% ($2.4 billion) more than the Administration requested. The Senate Appropriations Committee reported out an FY2018 THUD bill, S. 1655, which was not taken up by the full Senate. The Senate committee recommended $78.6 billion in new budget authority, 2% ($1.6 billion) more than the comparable FY2017 amount and 4.7% ($3.5 billion) more than the Administration requested. Conflicts over funding levels and limits delayed action on final FY2018 appropriations until March 2018. Until that time, a series of continuing resolutions provided temporary funding for federal agencies. There is general agreement that more funding is needed for transportation infrastructure, and the Trump Administration has proposed an increase in spending on infrastructure, but Congress has not been able to agree on a source that could provide the additional funding. The federal excise tax on motor fuel, which is the primary funding source for federal highway and transit programs, has not been increased in over 20 years, and does not raise enough revenue to support even the current level of spending. To address this shortfall, Congress has transferred money from the general fund to the Highway Trust Fund on several occasions since 2008 to provide sufficient funding for the programs. Revenue estimates by the Congressional Budget Office (CBO) suggest that general fund transfers will continue to be required in future years to support the currently authorized level of highway and public transportation spending.

<1. Introduction> In vitro diagnostic (IVD) devices, including genetic tests, provide information that is used to inform health care decision making. IVDs are devices that are used in laboratory analysis of human samples an d include commercial test products and instruments used in testing, among other things. IVDs may be used in a variety of settings, including a clinical laboratory, a physician's office, or in the home. IVDs have a number of uses, such as diagnosis, screening, staging, and disease management, including, for example, the selection and dosing of therapeutics. One estimate found that the results of clinical laboratory tests influence approximately 70% of health care decisions. Despite this broad effect on the delivery of health care, spending on IVDs represents a small portion of overall health care costs. The Centers for Disease Control and Prevention (CDC) estimated that, based on 2007 data, approximately 6.8 billion clinical laboratory tests are performed in the United States annually, but noted that "publicly available information about the economic status and quality of the laboratory medicine sector remains limited." IVDs may be used in the care of a patient in numerous ways (see text box) and at various points in the delivery of care. IVDs differ from other medical devices in that they do not act directly on a patient to produce a result as does, for example, an implantable stent that keeps an artery open to allow blood flow. Instead, the potential for risk of harm to the patient would be from the generation of inaccurate test results that could lead to the mismanagement of a patient's disease or condition (i.e., false negative test result) or to treatment for a disease or condition that is in fact absent (false positive test result). Given this potential risk, as well as the impact on the overall delivery of health care, the federal government has taken a role in the oversight of IVDs. Federal oversight of IVDs spans several federal agencies, including the Food and Drug Administration (FDA) and the Centers for Medicare & Medicaid Services (CMS). Oversight efforts focus on ensuring the safety and effectiveness of IVDs; the accuracy and reliability of IVDs; the quality of clinical laboratories that carry out IVD testing; the utility of the information in clinician and patient decision making; and the truthfulness of claims made about IVDs that are marketed directly to consumers. IVDs include genetic tests, a type of diagnostic test that analyzes various aspects of an individual's genetic material (DNA, RNA, chromosomes, and genes). Through basic research, scientists have "discovered hundreds of genes that harbor variations contributing to human illness." They have also found "genetic variability in patients' responses to dozens of treatments" and are using IVDs "to better predict patients' responses to targeted therapy." The use of an IVD companion diagnostic device to select the best therapy, at the right dose, at the correct time for a particular patient is often referred to as personalized medicine. Another term, pharmacogenomics, is sometimes used interchangeably with personalized medicine. Pharmacogenomics is the study of how individual genetic variation affects a person's response to drugs. Currently, more than 100 FDA-approved drugs contain pharmacogenomic information in their labeling. The regulation of genetic testing has raised several issues. Traditionally, most genetic tests have not been subject to premarket review by the FDA. It has been noted that, in the past, genetic tests were developed mostly by academic or research laboratories primarily for in-house use tests referred to as laboratory-developed tests (LDTs) to diagnose rare diseases and were highly dependent on expert interpretation. In recent years, LDTs have been developed to assess relatively common diseases and conditions, such as various cancers. The extent to which all LDTs should be regulated by the FDA has been a subject of debate. On July 31, 2014, the FDA officially notified the Senate Committee on Health, Education, Labor and Pensions and the House Committee on Energy and Commerce that it would be issuing draft guidance on LDT regulation; on October 3, 2014, the agency published a notice in the Federal Register announcing the availability of the guidance documents and requesting comments within 120 days to ensure their consideration in the development of final guidance. The agency announced in November 2016 that it would be delaying finalization of the draft guidance. In January 2017, FDA released a discussion paper on LDTs that included a possible approach to LDT oversight (for more detail, see " FDA's January 2017 Discussion Paper: A Possible Approach to LDT Oversight "). The appropriate degree and extent of federal regulation of direct-to-consumer (DTC) genetic testing has also been a subject of debate amongst relevant federal agencies as well as the affected entities (mostly for-profit companies, for example, 23andMe, Pathway Genomics, or Life Technologies). Genetic testing has become increasingly available for direct purchase by consumers, generally over the Internet. In this type of testing direct-to-consumer genetic testing the consumer sends in a tissue sample, often cells from the inside of the cheek, and the results are conveyed directly to the consumer by the company that developed the test. Almost a decade ago, in 2010, the Government Accountability Office (GAO) testified that in its investigation of DTC genetic tests priced from $299 to $999 from four companies, it found the DTC genetic test results to be "misleading and of little or no practical use to consumers." However, in a reflection of evolution in both DTC genetic tests themselves and FDA oversight of these tests, in April 2017, FDA approved the first DTC genetic test that provides information about the risk of developing disease (predisposition). This test, 23andMe's Personal Genome Service Genetic Health Risk, provides consumers with information about their likelihood of manifesting 10 diseases or conditions (e.g., celiac disease, Parkinson's disease). Congress and the regulatory agencies have historically been interested in balancing the goals of allowing consumers to have access, as quickly as possible, to new and improved medical devices with preventing devices that are not safe and effective from entering or remaining on the market. In the case of IVDs, and specifically, LDTs, Congress has introduced bills that attempt to address both of these goals, that is, to support innovation and to increase or expand regulatory oversight. Approaches have included, among others, streamlining regulation by concentrating it in a single federal agency or requiring the FDA to assert its enforcement authority over LDTs. In addition to its role as regulator, the federal government has a role as a payor for IVDs, primarily through the Medicare program. Medicare covers outpatient clinical laboratory testing and generally reimburses for these tests based on the Clinical Laboratory Fee Schedule (CLFS). Medicare also covers clinical laboratory testing conducted during inpatient care either in a hospital or a skilled nursing facility (SNF). Although an in-depth discussion of this issue is outside the scope of this report, the federal role as payer intersects with its role as regulator. This is due to the fact that, as a payor, Medicare generally will only cover IVDs that have passed FDA premarket review either approval or clearance where such FDA review is required by applicable statute and regulation. However, in these cases, FDA approval or clearance is not sufficient in and of itself to result in a favorable coverage decision by CMS for any given IVD. This report provides an overview of federal regulation of IVDs by FDA, through the Federal Food, Drug, and Cosmetics Act (FFDCA) and the Public Health Service Act (PHSA), and by CMS, through the Clinical Laboratory Improvement Amendments (CLIA) of 1988. It then provides a discussion of the oversight of LDTs including the history of the debate over regulating LDTs and a description of FDA's recently announced Framework for Regulatory Oversight of Laboratory Developed Tests (LDTs) as well as an overview of the regulation of DTC genetic tests. Terms used throughout this report are defined in the text box. <2. FDA Regulation of IVD Devices28> As with other medical devices, the application of FDA regulatory requirements to IVDs depends on the IVD's risk classification according to its intended use. Risk classification "is based on the risk the device poses to the patient or the user and the information available to address that risk. " The risk classification process is described in more detail in the "IVD Regulatory Requirements" section of this report. IVDs are defined in regulation as a specific subset of medical devices that include "reagents, instruments, and systems intended for use in the diagnosis of disease or other conditions ... in order to cure, mitigate, treat, or prevent disease ... [s]uch products are intended for use in the collection, preparation, and examination of specimens taken from the human body." As indicated by this definition, an IVD may be either a complete test or a component of a test. In either case, the IVD comes under FDA's regulatory purview. Test components include both non-diagnostic ingredients, called general purpose reagents (GPRs), and the active ingredient in a diagnostic test, referred to as the analyte specific reagent (ASR). There are two routes to market for an IVD used in the clinical management of patients. In one route, the product is developed, produced, and sold by a manufacturer for distribution to multiple laboratories referred to as a "commercial test kit." In the second route, the product is developed by and used in a single laboratory referred to as a "laboratory developed test," or LDT. LDTs may use ASRs or GPRs that are either manufactured in-house by the laboratory or that are commercially developed and distributed. The FDA has been generally exercising enforcement discretion for LDTs in that the agency has generally not enforced applicable regulatory requirements. <2.1. FDA's Authority to Regulate In Vitro Diagnostic (IVD) Devices> IVDs that are used in the clinical management of patients generally fall under the definition of medical device and therefore are subject to regulation by the FDA. The FDA derives its authority to regulate the sale and distribution of medical devices from the Medical Device Amendments of 1976 (MDA, P.L. 94-295 ), which amended the FFDCA. Congress via the MDA amended the definition of "device" and outlined a basic process for premarket approval and clearance of such devices, among other things. The term "device" is statutorily defined as "an instrument, apparatus, implement, machine, contrivance, implant, in vitro reagent , or other similar or related article, including any component, part, or accessory" (emphasis added) that is "intended for use in the diagnosis of disease or other conditions, or in the cure, mitigation, treatment, or prevention of disease, in man or other animals, or is intended to affect the structure or any function of the body of man or other animals." Some tests may be used for non-health related purposes; for example, certain genetic testing may be used to determine ancestry. It has been noted that this type of test would not come under the FDA's regulatory purview. In some limited cases, IVDs may fall under the statutory definition of a biological product, and are therefore subject to the requirements of the PHSA for the licensure of biological products. Such IVDs include, for example, blood donor screening tests for infectious agents (HIV, hepatitis B and C), blood grouping, and cross-matching prior to transfusion. Given that IVDs may fall under either the definition of medical device or biological product, they are regulated by FDA primarily through the Center for Devices and Radiological Health (CDRH) and additionally by the Center for Biologics Evaluation and Research (CBER). <2.2. IVD Regulatory Requirements> FDA uses a risk-based regulatory scheme for medical devices, including IVDs. IVDs receive their risk classification based on their intended use and the risk relative to that use. The intended use "is established according to the claims the manufacturer or sponsor intends to make for the device, and includes the target population and the clinical setting for the use of an IVD." In addition, classification is based on the risk the device poses to the patient; for IVDs this is the risk to the patient of an incorrect test result. Congress provided definitions in the MDA for the three device classes class I, class II, class III based on the level of risk; low-, moderate-, and high-risk, respectively. About 50% of IVDs are class I, 42% are class II and 8% are class III. Device classification determines the type of premarket regulatory requirements that a manufacturer must follow. Many low-risk devices (class I) are exempt from premarket review through the respective classification regulations and manufacturers need not submit an application to FDA prior to marketing. Premarket review is required for moderate- and high-risk devices (class II and class III). In general, there are two main pathways that manufacturers can use to bring such devices to market. One pathway consists of conducting clinical studies and submitting a premarket approval (PMA) application, which requires evidence providing reasonable assurance that the device is safe and effective. The PMA process is generally used for novel and high-risk devices 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, if successful, results in FDA clearance . Substantial equivalence is determined by comparing the performance characteristics of a new device with those of a predicate device; clinical data demonstrating safety and effectiveness are usually not required. The FDA has 180 days to review a PMA application and 90 days to review a 510(k) notification. Once a PMA application is approved or a 510(k) notification is cleared for marketing, manufacturers must comply with regulations on manufacturing, labeling, surveillance, device tracking, and adverse event reporting. In addition, any future modification of the device must be cleared or approved by the FDA. Class I devices are those under current law for which general controls "are sufficient to provide reasonable assurance of the safety and effectiveness of the device." This is the lowest risk category; most class I devices are exempt from premarket review though they still have to comply with the other general controls (see text box). "Class I IVDs include certain reagents and instruments, as well as a number of highly adjunctive IVD tests, where one test is dependent on the results of another; consequently an incorrect result would generally be detected easily.... An example of a class I test is a luteinizing hormone test that, if it gives a false result, may lead to delayed conception but is unlikely to directly harm the patient." Class II devices are those under current law "which cannot be classified as class I because the general controls by themselves are insufficient to provide reasonable assurance of safety and effectiveness of the device." Class II includes devices that pose a moderate risk to patients and are typically subject to general controls and special controls. It includes "many standard laboratory tests, such as chemistry and immunology tests. Most class II tests are subject to FDA review through premarket notification under section 510(k) of the Act. For example, a false sodium result (a class II test) may be life-threatening if the error is unrecognized and treatment decisions to correct the sodium level are made based on the false result." Special controls may include special labeling requirements, mandatory performance standards, and postmarket surveillance. Class III is the highest risk category. Under current law, general and special controls are not sufficient to ensure safe and effective use of a class III device which therefore is subject to premarket approval PMA requirements. Class III "includes devices and tests that present a potentially unreasonable risk of illness or injury. For example, a false negative result for a hepatitis C virus test (a class III test) may result in failure to provide appropriate treatment, leading to risk of liver failure due to delayed treatment. In addition, without the knowledge that he or she is infected, the patient may put others at risk by spreading the disease." The PMA application must provide "valid scientific evidence" which usually requires clinical studies. In most cases, a clinical evaluation of an investigational device must have an investigational device exemption (IDE) before a clinical study is initiated. An IDE allows an unapproved or uncleared device to be used in a clinical study to collect the data required to support a premarket submission. The IDE permits a device to be shipped lawfully for investigation of the device without requiring that the manufacturer comply with other requirements of the FFDCA, such as registration and listing. Many IVD devices would be exempt from IDE requirements if, for example, testing is noninvasive, does not require invasive sampling, does not introduce energy into a subject, and does not stand alone (i.e., is not used for diagnosis without confirmation by other methods or medically established procedures). However, even if a particular IVD study is exempt from most IDE requirements, it still would be subject to other requirements, such as informed consent of study subjects. <2.2.1. Commercial Test Kits vs. Laboratory Developed Tests (LDTs)> FDA has historically focused its oversight of IVDs on diagnostic test kits that have been broadly marketed to laboratories or the public. Examples include tests for infectious disease, blood glucose tests, and pregnancy tests. In contrast, laboratory developed tests (LDTs) a subset of IVDs may be defined as "a class of in vitro diagnostics that are manufactured, including being developed and validated, and offered, within a single laboratory." LDTs are often used to test for conditions or diseases that are either rapidly changing (e.g., new infectious diseases or new strains of known infectious diseases) or for those that are the subject of quickly advancing scientific research (e.g., genomic testing for cancer). LDTs have not traditionally been regulated by FDA; this issue is discussed later in the report (see " History of the Regulation of LDTs "). <2.2.2. Analyte Specific Reagents (ASRs)> FDA is generally enforcing applicable regulatory requirements for components of IVDs even if the agency is exercising enforcement discretion for the complete test. Analyte specific reagents (ASRs), a component of tests, have a particular diagnostic use and therefore are regulated as class I, II, or III depending on their application's level of risk. An ASR is defined as "antibodies, ... specific receptor proteins, ligands, nucleic acid sequences, and similar reagents which, through specific binding or chemical reaction with substances in a specimen, are intended for use in a diagnostic application for identification and quantification of an individual chemical substance or ligand in biological specimens." For example, ASRs used for diagnosis of human immunodeficiency virus (HIV) or other contagious and fatal diseases must meet class III requirements because of the high risk posed by a test malfunction. <2.2.3. General Purpose Reagents (GPRs)> A general purpose reagent (GPR) is defined as "a chemical reagent that has general laboratory application, that is used to collect, prepare, and examine specimens from the human body for diagnostic purposes, and that is not labeled or otherwise intended for a specific diagnostic application." Examples of GPRs include buffer solutions and some enzymes. General purpose reagents are usually regulated as class I devices and are exempt from the premarket 510(k) notification procedures. <2.2.4. IVD Products for Research Use Only (RUO) or Investigational Use Only (IUO)> In November 2013, FDA issued guidance on the use of IVD products labeled for "Research Use Only" (RUO) or for "Investigational Use Only" (IUO). Such IVD products include reagents, instruments, and systems that have not been approved, cleared, or licensed by FDA. "The term RUO refers to devices that are in the laboratory phase of development. The term IUO refers to devices that are in the product testing phase of development." IUO products may be used in research testing on human samples and the research may eventually lead to the clearance, approval, or licensure of a new IVD for clinical diagnostic use. The manufacturer of such an RUO or IUO IVD product may legally sell it without FDA premarket review as long as the product is only for research or investigational use and not for clinical diagnostic use. FDA has expressed its concern that the "distribution of unapproved and uncleared IVD products labeled RUO or IUO, but intended for purposes other than research or investigation (for example, for clinical diagnostic use), has led, in some cases, to the clinical diagnostic use of products with unproven performance characteristics, and with manufacturing controls that are inadequate to ensure consistent manufacturing of the finished product. Use of such tests for clinical diagnostic purposes may mislead health care providers and cause serious adverse health consequences to patients, who are not aware that they are being diagnosed with research or investigational products." The purpose of the FDA 2013 guidance is to "clarify the requirements applicable to RUO and IUO IVD products, including that RUO and IUO labeling must be consistent with the manufacturer's intended use of the device." <2.2.5. IVD Companion Diagnostic Devices (CoDx)> FDA defines an IVD companion diagnostic (CoDx) device as "an in vitro diagnostic device that provides information that is essential for the safe and effective use of a corresponding therapeutic product." According to FDA, this definition excludes tests that are not a determining factor in the safe and effective use of the therapeutic product. CoDx tests "identify patients who are most likely to benefit from a particular therapeutic product" or are "likely to be at increased risk for serious adverse reactions as a result of treatment with a particular therapeutic product." The instructions for use labeling of the therapeutic product would stipulate the use of the IVD companion diagnostic device. One of the earliest examples of the co-development of a drug and diagnostic was the FDA approval in 1998 of a CoDx along with Herceptin as a treatment for breast cancer. "[C]linicians now commonly use diagnostics to determine which breast tumors overexpress the human epidermal growth factor receptor type 2 (HER2), which is associated with a worse prognosis but also predicts a better response to the medication trastuzumab [Herceptin]. A test for HER2 was approved along with the drug (as a "companion diagnostic") so that clinicians can better target patients' treatment." Another reason for the combined approval is that use of the CoDx can avoid the toxic side effects to the heart caused by Herceptin in those who would not benefit from the drug. Other examples of FDA-approved drugs and companion diagnostics include Erbitux used to treat metastatic colorectal cancer; Gleevec for gastrointestinal stromal tumors; Zelboraf for late-stage melanoma; Xalkori for late-stage lung cancer; Tarceva for non-small cell lung cancers; and Tafinlar and Mekinist for advanced melanoma. FDA expects that many companion diagnostic devices will be class III "owing to the likelihood of harm to the patient if the diagnostic result is incorrect." <3. Clinical Laboratory Improvement Amendments of 1988 (CLIA)> The Clinical Laboratory Improvement Amendments (CLIA) of 1988 provides CMS with authority to regulate clinical laboratories. CLIA establishes quality standards for clinical laboratory testing and a certification program for clinical laboratories that perform testing using IVD devices. All laboratories that perform diagnostic testing for health-related reasons (i.e., with results returned to the patient or a health care practitioner) are regulated by CMS under the authority of CLIA. For CLIA to apply, testing must be carried out on a human specimen. The FDA pursuant to the FFDCA, and CMS through CLIA, have different regulatory goals. FDA regulation "addresses the safety and effectiveness of the diagnostic tests themselves and the quality of the design and manufacture of the diagnostic tests." CLIA regulates the quality of the clinical testing process itself, mostly by assessing the quality of the clinical laboratory. However, this oversight also includes requirements that assess the performance of the tests themselves and, therefore, there is some overlap in the two agencies' approaches. Specifically, CLIA requirements evaluate a test's analytical validity , whereas the FDA's premarket review requirements assess a test's analytical validity and clinical validity . Analytical validity is defined as the ability of a test to detect or measure the analyte it is intended to detect or measure; the clinical validity of a test is defined as its ability to accurately diagnose or predict the risk of a particular clinical outcome. To summarize, FDA oversight of IVDs and not CLIA oversight includes the following components: (1) the regulation of the safety and effectiveness of the test; (2) pre-market review of the test; (3) demonstration of clinical validity; (4) systematic adverse event reporting; and (5) a process for corrections or recalls. In 1988, Congress passed CLIA in response to concern about the quality of clinical laboratory testing, and specifically, concerns about Pap smears. This law expanded the Department of Health and Human Services' (HHS's) existing authority to regulate clinical laboratories (and therefore clinical laboratory testing) to include any clinical laboratory that examines "materials derived from the human body for the purpose of providing information for the diagnosis, prevention, or treatment of any disease or impairment of, or the assessment of the health of, human beings." All such facilities are required to receive certification demonstrating that they meet certain requirements, as well as specific quality standards "to assure consistent performance by laboratories issued a certificate of valid and reliable laboratory examinations and other procedures." CLIA does not apply to laboratories conducting only tests for research purposes, or to laboratories in those states where state law establishes requirements of equal or greater stringency (currently, these states are New York and Washington). CLIA certification is based on the level of complexity of testing that the laboratory performs, specifically (1) low (therefore, waived) complexity; (2) moderate complexity; and (3) high complexity. The FDA has responsibility for categorizing tests according to their level of complexity. This FDA role is distinct from the device risk classification discussed in the " IVD Regulatory Requirements " section of this report. Laboratories that perform moderate and high complexity testing must meet specific standards and requirements as a condition of certification, including proficiency testing (PT), patient test management, quality control, personnel qualifications, and quality assurance. An inspection is part of the initial certification process, and CMS (or another survey and certification entity) may perform subsequent inspections on a biennial basis to ensure continued compliance with the requirements of CLIA. Laboratories that only perform waived tests receive a certificate of waiver (COW) from CMS; under current law, waived tests are those "that have been approved by the FDA for home use or that, as determined by the Secretary, are simple laboratory examinations and procedures that have an insignificant risk of an erroneous result." In order to monitor the quality, accuracy, and reliability of testing carried out by CLIA-certified laboratories (those conducting moderate and high complexity testing, as noted above), CMS requires the laboratory to carry out proficiency testing. Proficiency testing is defined as, "the testing of unknown samples sent to a laboratory by a CMS-approved proficiency testing program" and is required and defined in regulation for certain specialties and subspecialties (e.g., virology, chemistry, endocrinology). Laboratories carrying out moderate or high complexity testing must be certified in each specialty or subspecialty in which they carry out such testing. Proficiency test samples must be tested in the same way that the laboratory tests its patient samples, and sent back to the approved proficiency testing program for analysis. In this way, the quality of the laboratory's services may be evaluated. Given the role of proficiency testing in the certification process, CLIA prohibits laboratories from sending the samples they receive for proficiency testing out to another laboratory for processing. Additionally, as a condition of certification, a laboratory must agree "to treat proficiency testing samples in the same manner as it treats materials derived from the human body referred to it for laboratory examinations or other procedures in the ordinary course of business." All LDTs, including genetic tests offered as LDTs, are considered high complexity tests under CLIA and therefore labs conducting these tests would otherwise have to carry out proficiency testing. However, in practice, there are no specified proficiency testing requirements for genetic testing laboratories, because genetics is not a designated specialty area and none of the specified regulated analytes include nucleic acids (RNA, DNA). Some labs that conduct genetic testing are also conducting moderate or high complexity testing in other specialty or subspecialty areas that do have specified proficiency testing requirements. The Centers for Disease Control and Prevention's (CDC) Clinical Laboratory Improvement Advisory Committee (CLIAC) recommended adding a genetic specialty under CLIA, and CMS considered but eventually decided against such an action. This decision was made partially based on a potential lack of sufficient proficiency testing samples for many genetic tests and the absence of a mechanism for assessing clinical validity due to lack of adequate data. <4. Oversight of Laboratory Developed Tests (LDTs)> FDA has, to date, focused its enforcement efforts on commercial IVDs, which are broadly marketed to labs or to the public, and has not generally enforced the pre-market clearance or approval requirements for LDTs. In recent years, however, FDA has indicated its intent to broadly regulate LDTs using a risk-based approach. <4.1. Agency Activity> On July 31, 2014, the agency officially notified Congress of its intent to begin regulating LDTs in fulfillment of a statutory requirement in the Food and Drug Administration Safety and Innovation Act of 2012 (FDASIA, P.L. 112-144 ). On September 30, 2014, the agency posted draft guidance on its website, and on October 3, 2014, the agency published a notice in the Federal Register announcing the availability of the guidance documents and the start of a 120-day comment period. In response to the FDA draft guidance, the American Clinical Laboratory Association (ACLA) announced that it has retained counsel with expertise in constitutional law and administrative procedure to represent the association in matters relating to the guidance. In a press release, ACLA states its position that LDTs "are not commercially distributed products they are an integral part of the physician's practice of medicine. Thus, [the Association] continues to believe that LDTs are not medical devices and that the FDA does not have the statutory authority to regulate them as devices." The agency collected comments on the draft guidance documents, held a public workshop in January 2015 to discuss the regulatory framework described in the draft guidance, and provided an opportunity for additional public comment. However, in November 2016 the agency announced that it would be delaying finalization of the draft guidance documents, stating that "we realize just how important it is that we continue to work with stakeholders, our new Administration, and Congress to get our approach right." FDA summarized the comments it had received in its January 2017 "Discussion Paper on Laboratory Developed Tests (LDTs)" and included a possible approach to LDT oversight. In the lead paragraph of the discussion paper, the agency states that it would not be issuing "a final guidance on the oversight of laboratory developed tests (LDTs) at the request of various stakeholders to allow for further public discussion on an appropriate oversight approach, and to give our congressional authorizing committees the opportunity to develop a legislative solution." <4.2. Congressional Interest> The agency's steps to regulate LDTs have drawn support from those concerned about device safety, and criticism from some who are concerned about the scope of FDA's statutory authority over LDTs as well as the potential impact of regulation on innovation. It has also attracted the attention of Congress; for example, on September 9, 2014, the House Committee on Energy and Commerce, Subcommittee on Health, held a hearing on the topic of FDA's notice that it will enforce regulatory requirements for LDTs. The House Committee on Energy and Commerce also released a white paper on December 9, 2014, soliciting comments on a series of specific questions relating to the regulation of LDTs and IVD commercial test kits. On November 17, 2015, the House Committee on Energy and Commerce, Subcommittee on Health, held a second hearing on this issue entitled "Examining the Regulation of Diagnostic Tests and Laboratory Operations." Most model legislative approaches to regulating LDTs have taken one of three approaches for agency oversight: (1) an approach focused on FDA, (2) an approach focused on the CLIA program at CMS, or (3) an approach that is focused on a combination of FDA and CMS engaged "in complementary, non-duplicative oversight." During the hearing, the CMS Chief Medical Officer and Deputy Administrator for Innovation and Quality, Dr. Patrick Conway, reiterated that CMS does not have the experience or the scientific expertise to assess clinical validity in premarket review. Dr. Conway stated, "CLIA is focused on assessment of the protocols, the standards, the equipment, the training, and the personnel. Even in analytic validity, we are simply looking at does the lab test detect the analyte described. That is very different than clinical validity, which is assessing whether the test reliably and accurately detects the presence or absence of disease." Dr. Conway also stated that CMS staff "are not trained to assess premarket scientific literature and determine clinical validity." That expertise currently resides with FDA staff. Immediately before this hearing, the FDA released a report outlining 20 case studies of events involving LDTs that demonstrate "that these products may have caused or have caused actual harm to patients." The Association for Molecular Pathology (AMP), a group that supports CLIA-centric regulation of LDTs, published a critique of the FDA report on the 20 case studies of events involving LDTs that demonstrated harm; this critique concluded "that only a few of the 20 tests identified by the FDA could cause patient harms that FDA oversight might have prevented." <4.3. History of the Regulation of LDTs> Generally, the FDA has maintained that it has clear regulatory authority over LDTs, as it does with all IVDs that meet the definition of medical device in the FFDCA. However, despite this, the FDA traditionally exercised enforcement discretion over LDTs, choosing not to enforce applicable regulations with respect to such tests. Beginning in 1997, several governmental entities "questioned the appropriateness of the FDA's policy of enforcement discretion toward LDTs, including the National Institutes of Health (NIH) and Department of Energy's Joint Task Force on Genetic Testing, the Secretary's Advisory Committee on Genetic Testing (SACGT), and the Secretary's Advisory Committee on Genetics, Health, and Society (SACGHS)." , More recently, "other groups have pointed out the lack of effective oversight and made specific recommendations regarding the regulation of LDTs." Examples include the pharmaceutical manufacturer Genentech, the Advanced Medical Technology Association (AdvaMed), and the College of American Pathologists (CAP). On the other hand, some representatives of clinical laboratories and manufacturers of LDTs, such as the American Clinical Laboratory Association (ACLA), have asserted that LDTs should be outside of the FDA's regulatory purview. To clarify the distinction between an LDT and an in vitro commercial test kit, the Association for Molecular Pathology (AMP) has proposed a new name for LDTs: laboratory-developed procedures (LDPs), defined as "a professional service that encompasses and integrates the design, validation, verification, and quality systems used in laboratory testing and interpretative reporting in the context of clinical care." In 2006, FDA published draft guidance on a specific subset of LDTs called In Vitro Diagnostic Multivariate Index Assays (IVDMIAs). IVDMIAs are defined by the FDA as tests that, among other things, provide results that are not transparent and that the end user (usually a physician) could not independently derive. The draft guidance announced that "the enforcement discretion for tests meeting the definition of an IVDMIA would be terminated"; it attracted "both intense criticism and strong support." In a second draft guidance, published in 2007, the FDA states: IVDMIAs raise significant issues of safety and effectiveness. These types of tests are developed based on observed correlations between multivariate data and clinical outcome, such that the clinical validity of the claims is not transparent to patients, laboratorians, and clinicians who order these tests. Additionally, IVDMIAs frequently have a high risk intended use. FDA is concerned that patients are relying upon IVDMIAs with high risk intended uses to make critical healthcare decisions when FDA has not ensured that the IVDMIA has been clinically validated and the healthcare practitioners are unable to clinically validate the test themselves. Therefore, there is a need for FDA to regulate these devices to ensure that the IVDMIA is safe and effective for its intended use. The FDA never finalized its guidance concerning IVDMIAs, and instead announced its intent to regulate all LDTs. In June 2010, FDA announced it would hold a public meeting the following month to allow stakeholders the opportunity to discuss the agency's decision to exercise its regulatory authority over all LDTs. FDA presentations during that July 2010 public meeting provided a number of reasons for its decision to assert its enforcement authority over all LDTs, including the following: The volume and types of LDTs have grown considerably, with a high proportion of these tests developed in commercial laboratories or biotechnology companies. LDTs have evolved to be more like commercial in vitro devices. LDTs are no longer tests developed in a laboratory for patients in a regional medical setting with consultation occurring between the pathologist and the ordering physician. The LDT route to market is viewed as a favorable business model and driving venture capital funding for clinical diagnostics. Companies see the laboratory developed testing pathway as an easier route to market to avoid FDA regulation of their tests. In addition, manufacturers who develop commercial test kits, which are required to go through FDA premarket review, may be at a competitive disadvantage with LDT manufacturers. Some LDTs are aggressively marketed directly to clinicians via Internet sales. The public needs assurances that LDTs are sound and reliable. FDA asserted that at the present time, "diagnostics critical for patient care may not be developed in a manner that provides a reasonable assurance of safety and effectiveness." Some clinical laboratories and manufacturers of LDTs have asserted that LDTs should be outside of the FDA's regulatory purview. On June 4, 2013, the American Clinical Laboratory Association (ACLA) filed a citizen petition under the FFDCA requesting that the agency "refrain from issuing draft or final guidance or a proposed or final rule purporting to regulate LDTs as devices." ACLA states that FDA lacks statutory authority to regulate LDTs because ACLA claims that LDTs are not devices as defined under the FFDCA. ACLA maintains that LDTs are "proprietary procedures" and therefore not subject to regulation under the FFDCA. In addition, ACLA asserts that LDTs do not meet the FDA definition of "commercial distribution" which requires "that a product be delivered, distributed, or placed on the market." In a June 2013 speech, FDA Commissioner Margaret A. Hamburg stated that the agency had under development a "risk-based framework" for the regulation of LDTs. Section 1143 of FDASIA stipulates that the agency "may not issue any draft or final guidance on the regulation" of LDTs without, "at least 60 days prior to such issuance," first notifying Congress "of the anticipated details of such action." On July 31, 2014, in fulfillment of this statutory requirement, the FDA officially notified Congress that it would be issuing draft guidance, and on October 3, 2014, the agency published a notice in the Federal Register announcing the availability of the guidance documents and requesting comments within 120 days to ensure their consideration in the development of final guidance. <4.4. FDA's Draft Guidance: "Framework for Regulatory Oversight of Laboratory Developed Tests (LDTs)"> In its draft guidance, "Framework for Regulatory Oversight of Laboratory Developed Tests (LDTs)," the FDA presented the details of a risk-based framework for regulating LDTs. The framework generally identifies classes of LDTs that will be (1) exempt from regulation entirely; (2) only required to meet registration and listing (or notification) and adverse event reporting requirements; and (3) required to meet registration and listing (or notification), adverse event reporting, applicable premarket review (PMA or 510(k) notification), and quality system regulation requirements. The determination to continue enforcement discretion or to enforce certain or all applicable regulatory requirements for an LDT will be based on risk evaluation. This framework relies on the following definition of LDT: "[An LDT is] an IVD that is intended for clinical use and [is] designed, manufactured and used within a single laboratory." FDA notes that there are numerous examples of tests that do not meet this strict definition of an LDT that are nevertheless being marketed as LDTs; in these cases, the LDT regulation will apply to these tests in an effort to maintain continuity in the market. Examples of tests that are being marketed as LDTs, but that do not meet the FDA's narrow definition of LDT, include (1) tests that include a key component manufactured by a third party under contract to the clinical laboratory that makes the tests; and (2) tests that were transferred to multiple clinical laboratories that are under ownership of a single entity that developed the tests. Two subsets of LDTs will not fall under the purview of the LDT regulatory framework. FDA will exercise full enforcement discretion over: LDTs used solely for forensic purposes, and LDTs used for organ, stem cell and tissue transplantation. For all remaining LDTs, FDA will use the information obtained through the registration and listing (or notification) requirement to classify (class I, class II, class III) LDTs, based on risk, using a public process involving advisory panels and public comment. Once classification has taken place, the FDA will enforce premarket review requirements, prioritizing the highest risk class III tests. According to the framework guidance document, "[d]evices would remain on the market during review and FDA's consideration of applications." For three subsets of LDTs, however, FDA will exercise enforcement discretion for premarket review (and quality system requirements), but will enforce other regulatory requirements, including general controls, registration and listing (or notification), and adverse event reporting. The three LDT subsets are (1) low-risk LDTs (class I); (2) LDTs used for rare diseases and traditional LDTs; and, (3) LDTs for unmet needs. Registration and listing (or notification) and adverse event reporting will begin 6 months after the framework guidance is final. For moderate-risk (class II) and high-risk (class III) LDTs, all applicable regulatory requirements will be enforced by FDA, including general controls, registration and listing (or notification), adverse event reporting, premarket review, and quality system regulation requirements. FDA intends to first focus on three types of class III LDTs with the highest risk: (1) LDTs that have the same intended use as a cleared or approved companion diagnostic; (2) LDTs with the same intended use as an already FDA-approved class III device; and (3) specific LDTs used to evaluate characteristics of blood or blood products. Registration and listing (or notification) and adverse event reporting will begin six months after the guidance is final. Premarket review will begin 12 months after guidance is final for class III LDTs with the highest risk; the remaining class III LDTs will phase-in over four years. For moderate risk class II LDTs, premarket review requirements will begin after completion of the class III LDTs. An FDA-accredited third party review program will use the 510(k) process for the premarket review of most class II LDTs. The agency anticipates the entire process of bringing all LDTs into compliance will take nine years to complete. Estimates of the number of laboratories developing and conducting LDTs vary, although the American Clinical Laboratory Association (ACLA) estimates the number of laboratories may be as high as 11,000. The number of LDTs that would need to be brought into compliance is difficult to evaluate, given there are no regulatory requirements currently in effect for notification or registration and listing for these tests; however, a recent analysis of the voluntary Genetic Test Registry identified 8,245 clinical genetic tests, of which 15 had gone through FDA premarket review. This is likely an underestimate of the number of LDTs, given that it is only genetic tests and the registry is voluntary. <4.5. FDA's January 2017 Discussion Paper: A Possible Approach to LDT Oversight> According to FDA, since the 2014 release of the draft guidance on LDT regulation, "the positions of many groups, including FDA, have evolved" and there is "growing consensus that additional oversight of LDTs is necessary." The agency states that the various proposals share a number of features, including a risk-based approach to oversight; independent premarket review for certain tests and for some modified tests; a focus on analytical and clinical validity as the basis for test approval; risk classification activities; adverse event reporting; exemption of certain categories of tests from premarket review; a robust laboratory quality system; "grandfathering" for tests available prior to a specific date; and public availability of test performance information. The proposals took one of three approaches for agency oversight, focused on FDA, the CLIA program at CMS, or a blend of FDA and CMS engaged "in complementary, non-duplicative oversight." According to FDA, "the complementary approach in some form is supported by the broadest array of stakeholders, including some members of the laboratory community. This approach may best streamline effective oversight by taking advantage of each federal agency's existing structure and strengths, including FDA's experience in premarket review of diagnostics and its deep knowledge of clinical research methodology pertinent to clinical validity." The proposed oversight framework in the January 2017 discussion paper would focus on "new and significantly modified high and moderate risk LDTs." Previously marketed LDTs would be grandfathered and "would not be expected to comply with most or all FDA regulatory requirements" such as premarket review, registration and listing, unless necessary to protect the public health. In addition, new and significantly modified LDTs in the following categories would not be expected to comply with FDA regulatory requirements unless necessary to protect the public health: Low-risk LDTs LDTs for rare diseases. Traditional LDTs (i.e., tests that use components that are legally marketed for clinical use and whose output is the result of manual interpretation by a qualified laboratory professional, without the use of automated instrumentation or software for intermediate or final interpretation). LDTs intended solely for public health surveillance (i.e., intended solely for use on systematically collected samples for analysis and interpretation of health data that are essential to the planning, implementation, and evaluation of public health practice, which is closely integrated with the dissemination of these data to public health officials and linked to disease prevention and control). LDTs used in CLIA-certified, high-complexity histocompatibility labs to perform allele typing, antibody screening and monitoring, or crossmatching in connection with organ, stem cell, and tissue transplantation. LDTs intended solely for forensic use. FDA would retain its ability to enforce premarket review "and other applicable requirements for any LDT, including those listed above, if the agency identified one or more of the following" listed below: The LDT is not analytically and clinically valid or there is an absence of sufficient data to support its analytical and clinical validity. The manufacturer of an LDT has engaged in deceptive promotion. There is a reasonable probability that the LDT will cause death or serious adverse health consequences. FDA estimates that the "premarket review of new and significantly modified LDTs could be phased in over four years, rather than the nine years proposed in FDA's 2014 draft guidance," because grandfathering LDTs currently on the market would reduce the overall workload on FDA laboratories offering LDTs. The agency provides the following timeline for phasing in the above oversight approach: Year One: Serious adverse event and malfunction reporting for all LDTs except traditional LDTs, LDTs intended solely for public health surveillance, certain stem cell/tissue/organ transplantation LDTs, and LDTs intended solely for forensic use. Year Two: Premarket review for new/modified LDTs with the same intended use as an IVD approved under a PMA (i.e., tests that have already been identified as high risk by FDA). Year Three: Premarket review for new/modified LDTs with the same intended use as a Class II device type subject to 510(k) clearance (i.e., tests that have already been identified as moderate risk by FDA). Year Four: Premarket review for new/modified LDTs that do not fall into the above categories. Other features of the proposal include an expansion of the FDA third-party premarket review program to include eligible LDTs and an emphasis on transparency regarding test performance, which is important to understanding how to use LDT results. For tests reviewed by FDA, "the agency would publish its review memorandum" containing test performance information; for tests not reviewed by FDA, "laboratories should consider making such information public." To ensure that marketed LDTs continue to perform as intended, the agency would use various postmarket surveillance activities. "This type of oversight is critical in particular because laboratories and other test developers may make modifications to their tests and processes that are not reviewed by FDA or an accredited third party and that can impact the performance of their tests." Serious adverse events would be reported to FDA for all tests except traditional LDTs, LDTs intended solely for public health surveillance, certain stem cell/tissue/organ transplantation LDTs, and LDTs intended solely for forensic use. The requirement for such reports may decrease or be discontinued as performance monitoring of medical tests and other technologies shifts to the collection of real-world data, such as what would be possible after establishment of the National Evaluation System for health Technology (NEST). <5. Oversight of Direct-to-Consumer (DTC) Genetic Testing> Genetic testing may be offered directly to consumers, with companies entering the market and offering health-related testing (e.g., 23andMe). Proponents of DTC genetic testing maintain that such testing provides consumers with information necessary to make better health care decisions and also that it generally empowers consumers, enhancing their autonomy. However, as the field has expanded and issues related to the accuracy and utility of the tests have grown, questions have arisen generally about whether and how to regulate this type of test, and specifically about the applicability of FDA and CLIA regulatory requirements to DTC genetic testing. As FDA historically exercised enforcement discretion over LDTs, and because the majority of DTC genetic tests are LDTs, manufacturers of DTC genetic tests that are also LDTs have generally operated under the assumption that regulatory requirements pertaining to these tests are not actively being enforced by the FDA. (FDA-regulated ASRs contained in such tests are clearly regulated; however, not all LDTs contain regulated ASRs.) To date, the agency has not provided guidance on this issue; however, the FDA has "stated publicly that DTC genetic testing should be regulated by the agency. Several companies have decided to come to the FDA with premarket submissions, and these are in the process of working with the FDA to come into compliance." Notably, the FDA states in its recently released Framework for Oversight of Laboratory Developed Tests (LDTs) that "FDA generally does not exercise enforcement discretion for direct-to-consumer (DTC) tests regardless of whether they meet the definition of an LDT provided in this guidance. Therefore the enforcement policies in this guidance do not apply to DTC tests, and FDA's usual enforcement policies apply to DTC tests [emphasis added]." Despite stating that it generally does not exercise enforcement discretion over direct-to-consumer tests, nevertheless, the agency has generally not actively enforced regulatory requirements for DTC genetic tests. For example, in 2010 testimony, Jeffrey Shuren, Director of FDA's Center for Devices and Radiological Health, noted that "although FDA has cleared a number of genetic tests since 2003, none of the genetic tests now offered directly to consumers have undergone premarket review by the FDA.... " However, more recently, the FDA has taken steps to enforce the regulation of certain DTC genetic tests. Specifically, in November of 2013, the agency sent a warning letter to 23andMe instructing the company to discontinue marketing of its Personal Genome Service (PGS) test until it receives FDA clearance for this test. In April 2017, FDA approved 23andMe's Personal Genome Service Genetic Health Risk, making it the first FDA -pproved DTC genetic test that provides information about the risk of developing disease (predisposition). This test provides consumers with information about their likelihood of manifesting 10 diseases or conditions (e.g., celiac disease, Parkinson's disease). In late 2015, FDA sent several letters to companies marketing DTC genetic tests that are LDTs; this came at around the same time that the agency announced in the Federal Register its "intent to exempt from the premarket notification requirements autosomal recessive carrier screening gene mutation detection systems, subject to certain limitations." FDA also published a second announcement simultaneously in the Federal Register stating that the agency was classifying these tests as Class II devices. Both of these decisions apply to such tests that are marketed over-the-counter directly to consumers, with certain special controls in place. Part of the agency's rationale for proposing to exempt these tests from premarket notification requirements is that carriers of autosomal recessive mutations do not manifest the disease or disorder being screened for (the disease or disorder being screened for would only manifest in this case if an individual had two copies of the variant gene), so the potential harm from a false negative in particular would not be high. Clinical laboratories performing health-related genetic testing on human specimens are subject to CLIA requirements, whether or not the tests are provided directly to consumers; however, regulators have had some difficulty determining whether companies offering DTC genetic testing are utilizing CLIA-certified laboratories or not. In addition, certain manufacturer claims about their products are regulated by the Federal Trade Commission (FTC), although a full discussion of this regulation is outside the scope of this report. "Section 5 of the Federal Trade Commission Act [(FTCA, 15 U.S.C. 45)] prohibits unfair or deceptive acts or practices in or affecting commerce. Section 12 of the FTCA [(15 U.S.C. 52)] specifically prohibits the dissemination of false advertisements for foods, drugs, devices, services, or cosmetics. The FTC analyzes the role of advertising in bringing health-related information to consumers and can bring law enforcement actions against false or deceptive advertising." The truthfulness of such claims in DTC genetic testing is an issue, compounded by the fact that consumers are often ordering the test in the absence of consultation with a health care provider. Additionally, companies may modify the content of their webpages in real time, creating difficulty in enforcing regulatory requirements. <5.1. Appendix. GAO Investigations into Direct-to-Consumer Genetic Testing> GAO has carried out a number of investigations and other oversight activities related to DTC genetic testing. A 2006 GAO investigation of four companies selling DTC genetic tests found that these companies "misled consumers by providing test results that were both medically unproven and so ambiguous as to be meaningless." GAO conducted a second investigation, from June 2009 to June 2010, of four different genetic testing companies, this time selecting companies that were "frequently cited as being credible by the media and in scientific publications." In July 2010, GAO provided testimony on this second investigation before the Subcommittee on Oversight and Investigations of the Committee on Energy and Commerce. GAO stated that the DTC genetic test results were "misleading and of little or no practical use to consumers." Specifically, GAO found that identical DNA samples yielded contradictory predictions depending solely on the company the DNA was sent to for analysis. The tests in the second GAO investigation cost from $299 to $999 and provided risk predictions for diseases such as diabetes, hypertension, multiple sclerosis, leukemia, breast cancer and prostate cancer. GAO consulted with several external experts in the field of genetics about the results of this second investigation. One expert stated that "the science of risk prediction based on genetic markers is not fully worked out, and that the limitations inherent in this sort of risk prediction have not been adequately disclosed." An expert further noted "the fact that different companies, using the same samples, predict different directions of risk is telling and is important. It shows that we are nowhere near really being able to interpret [such tests]." When asked if any of the test results or disease predictions were more accurate than the others, the genetics experts stated that "there are too many uncertainties and ambiguities in this type of testing to rely on any of the results." For certain situations, the external experts agreed the limitations of the tests should be "clearly disclosed upfront" and suggested that GAO attempt to obtain a refund; two companies complied, but a third refused and the fourth did not respond to the refund request. SACGHS also addressed the issue of the regulation of DTC testing in its 2008 report on the oversight of genetic testing. In response to recommendations by both SACGT and SACGHS, NIH has created a voluntary genetic testing registry for all genetic tests in order to provide a central location for information on "the test's purpose, methodology, validity, evidence of the test's usefulness, and laboratory contacts and credentials." This voluntary registry may include information about genetic tests that are directly marketed to consumers. Such information, including whether or not the test was cleared or approved by FDA, could allow physicians and patients to make better informed decisions about using these tests.

In vitro diagnostic (IVD) devices are used in the analysis of human samples, such as blood or tissue, to provide information in making health care decisions. Examples of IVDs include (1) pregnancy test kits or blood glucose tests for home use; (2) laboratory tests for infectious disease, such as HIV or hepatitis, and routine blood tests, such as cholesterol and anemia; and (3) tests for various genetic diseases or conditions. More recently, a specific type of diagnostic test—called a companion diagnostic—has been developed that may be used to select the best therapy, at the right dose, at the correct time for a particular patient; this is often referred to as personalized or precision medicine. Federal agencies involved in the regulation of IVDs include the Food and Drug Administration (FDA) and the Centers for Medicare & Medicaid Services (CMS). FDA derives its authority to regulate the sale and distribution of medical devices, such as IVDs, from the Federal Food, Drug, and Cosmetics Act and the Public Health Service Act. CMS's authority to regulate IVDs is through the Clinical Laboratory Improvement Amendments of 1988. FDA regulates the safety and effectiveness of the diagnostic test, as well as the quality of the design and manufacture of the diagnostic test. CMS regulates the quality of clinical laboratories and the clinical testing process. Traditionally, most genetic tests have not been subject to premarket review by the FDA. This is because in the past, genetic tests were developed by laboratories primarily for their in-house use—referred to as laboratory-developed tests (LDTs)—to diagnose mostly rare diseases and were highly dependent on expert interpretation. However, more recently, LDTs have been developed to assess relatively common diseases and conditions, thus affecting more people, and direct-to-consumer (DTC) genetic testing has become more available over the Internet. The extent to which LDTs should be regulated by the FDA, in conjunction with CMS, has traditionally been a subject of debate. Some clinical laboratories and manufacturers of LDTs have maintained that LDTs should be outside of the FDA's regulatory purview. Legislation was introduced in the 110th and 112th Congresses with the aim of clarifying regulatory oversight and supporting innovation. In June 2010, FDA announced its decision to exercise its authority over all LDTs. A provision in the Food and Drug Administration Safety and Innovation Act of 2012 stipulates that the agency "may not issue any draft or final guidance on the regulation" of LDTs without, "at least 60 days prior to such issuance," first notifying Congress "of the anticipated details of such action." On July 31, 2014, in fulfillment of this statutory requirement, the FDA officially notified the Senate Committee on Health, Education, Labor and Pensions and the House Committee on Energy and Commerce that it would issue draft guidance on the regulation of LDTs, and included the anticipated details of that regulatory framework. On October 3, 2014, the FDA formally issued these documents as draft guidance in the Federal Register, giving 120 days for comment. The draft guidance identifies groups of LDTs that would be (1) exempt from regulation entirely; (2) only required to meet notification and adverse event reporting requirements; and (3) required to meet notification, adverse event reporting, applicable premarket review, and other regulatory requirements. FDA would classify LDTs, based on risk, using information obtained through the notification process. Next FDA would enforce premarket review requirements, prioritizing the highest-risk tests. Bringing all LDTs into compliance was estimated to take nine years. However, in November 2016 the agency announced it will be delaying finalization of the guidance indefinitely "to allow for further public discussion on an appropriate oversight approach and to give our congressional authorizing committees the opportunity to develop a legislative solution." In January 2017, FDA released a discussion paper on LDTs that included a possible approach to LDT oversight.

<1. Background> Pacific Chinook, coho, chum, sockeye, and pink salmon as well as steelhead trout are anadromous (i.e., they live as juveniles in fresh water, migrate to the ocean to develop, and, when sexually mature, return to freshwater to spawn). While steelhead trout and Atlantic salmon can return to the sea after spawning (and may spawn again in subsequent years), Pacific salmon die after spawning once. Juvenile salmon typically reside in fresh water from a few days (pink salmon) to three years (some sockeye salmon) before migrating to the ocean, where they typically spend one to six years before migrating to their natal stream, as much as 900 miles or more inland. Natural phenomena predators, droughts, floods, and fluctuating oceanic conditions stress salmonids and contribute to the variable abundance of their populations. El Ni o , Pacific decadal oscillation, and global climate change have been of particular concern as factors altering salmon habitat and affecting salmon distribution and abundance. Precipitous salmon declines in the 1990s hurt the economies of fishing-dependent communities throughout the Northwest and northern California. By the late 1990s, west coast salmon abundance had declined to only a small fraction of what it had been in the mid-1800s, with much of the current population supported by artificial hatchery production. As recently as 1988, sport and commercial salmon fishing in that region generated more than $1.25 billion for the regional economy. Since then, salmon fishing closures have contributed to the loss of nearly 80% of this region's job base, with a total salmon industry loss over 30 years of approximately 72,000 family wage jobs. Currently, 28 distinct population segments of five salmonid species have been listed as either endangered or threatened under the Endangered Species Act (ESA, see Table 1 ), with three additional populations identified as "species of concern." While no species of anadromous trout or salmon is in danger of near-term extinction, individual distinct population segments (designated as "evolutionarily significant units" or ESUs) within these species have declined substantially or have even been extirpated. The American Fisheries Society considers at least 214 Pacific Coast anadromous fish populations to be "at risk," while at least 106 other historically abundant populations have already become extinct. More recently, another study estimated that 29% of nearly 1,400 historical populations of Pacific salmon have been lost from the Pacific Northwest and California since Euro-American contact. <2. Human Activities Stressing Fish> Anadromous salmonids inhabit clean, silt-free streams of low water temperature (below 68 F) and quality estuarine nursery habitat. Human activities logging, grazing, mining, agriculture, urban development, and consumptive water use can degrade aquatic habitat. Silt can cover streambed gravel, smothering eggs. Poorly constructed roads often increase siltation in streams where adult salmon spawn and young salmon rear. Removal of streamside trees and shade frequently leads to higher water temperatures. Grazing cattle remove streamside vegetation and exacerbate streambank erosion. Urbanization typically brings stream channelization and filled wetlands, altering food supplies and nursery habitat. Habitat alterations can lead to increased salmonid predation by marine mammals, birds, and other fish. Water diversions for agriculture exacerbate these problems. According to state water resource agencies, almost every water basin in Oregon, eastern Washington, and northern California is now over-appropriated (i.e., there are more legal permits for diversion than available water) during the hottest and driest months of the year. Dams for hydropower, flood control, and irrigation substantially alter aquatic habitat and can have significant impacts on anadromous fish. The 31 dams (i.e., hydroelectric projects) in the Federal Columbia River Power System (FCRPS) produce about 40% of the power in the Pacific Northwest, and the reservoirs behind these dams create a major navigable waterway as far inland as Lewiston, Idaho. While the design of some dams is described as "fish-friendly" (e.g., Wells Dam on the Columbia River in Washington), poorly designed dams can physically bar or impede anadromous fish migrations to and from the sea, kill juveniles as they pass through a dam's turbines, and expose fish to potentially harmful gas supersaturation. If delayed by dams during migration, both juvenile and adult salmon can be exposed to increased predation, to an increased risk of bacterial infections, and to higher temperatures which cause stress and sometimes death. Decreased river flow can also harm juveniles by delaying their downstream migration. Changing FCRPS operations to benefit salmon is controversial, in part because costs of dam and power generation changes are passed along to power customers through increased rates. The goal of fish hatcheries, operated along the Pacific Coast since 1877, has been the augmentation of natural salmonid populations and the production of fish to replace those lost where dams completely blocked fish passage and destroyed native salmonid populations. Today, at least 80% of the salmon caught commercially in the Pacific Northwest and northern California each year come from hatcheries. In the 1970s, however, scientists discovered that some hatchery practices reduced genetic diversity in fish populations. The mixing of populations by hatcheries and transplantation has generally resulted in decreased genetic fitness of wild populations and the loss of some stream-specific adaptations. Also, hatchery fish generally have lower survival rates than wild fish, and are less able to adjust to changing ocean conditions or to escape predators. The harvest of intermingled salmonid populations from different watersheds presents several problems, including how to protect ESA-listed populations while promoting the harvest of abundant native and hatchery fish. Since hatcheries are often more productive than natural fish populations, managing fisheries to avoid surplus returns to hatcheries can result in overharvested natural populations. Controversy arises when managers must consider how much the harvest of abundant populations must be curtailed to protect less abundant ESA-listed populations. Such policies can frustrate both commercial fishermen and sport anglers. ESA-listed or seriously depressed populations thus can become a limiting factor on fish harvest, resulting in tens of millions of dollars in foregone fishing opportunities to avoid further depressing the weakest populations. <3. Protection and Restoration Efforts> The National Marine Fisheries Service (NMFS, also popularly referred to as "NOAA Fisheries") in the National Oceanic and Atmospheric Administration, Department of Commerce, implements the ESA for anadromous salmonids. NMFS receives a petition from an individual, group, or state agency, or initiates internally the process to determine whether a species or population merits listing as "endangered" or "threatened." Based on facts presented, the Secretary of Commerce decides whether the petition provides substantial information indicating that listing may be warranted. If the Secretary decides affirmatively, a 90-day notice announcing the initiation of a status review is published in the Federal Register. Once the status review is completed, NMFS publishes a notice of proposed rulemaking in the Federal Register and seeks public comment for those species or populations NMFS believes should be listed. A final listing decision must occur within 12 months after notice publication. Once listed, NMFS is required to designate critical habitat as well as develop and publish a recovery plan for the listed entity. The goal of ESA listing is species recovery, defined as removal from the ESA list. When a federal activity may harm an ESA-listed salmonid, the ESA requires the federal agency to consult with NMFS to determine whether the activity is likely to jeopardize the survival and recovery of the species or adversely modify its critical habitat. In response to a federal agency's biological assessment, NMFS issues a "biological opinion" (BiOp) with an incidental "take" statement which can authorize a limited take (i.e., harm) of the species and specify reasonable and prudent measures that might minimize harm. If NMFS issues a jeopardy opinion, it includes reasonable and prudent alternative (RPA) actions which could be taken to avoid jeopardizing the species. NMFS may issue numerous BiOps related to salmon each year. For example, a 1995 BiOp for the U.S. Army Corps of Engineers and the Bonneville Power Administration sought to develop a biologically sound strategy to deal with salmon passage in the Columbia and Snake Rivers. The major impact of this BiOp and its 1998 supplement has been the move away from transporting the majority of juvenile salmonids downstream by truck or barge. Instead, the adopted "spread the risk" policy supplements barge transport and reduces fish mortality by increasing the spill of water and fish over dams to circumvent turbines. In 2000, the Corps completed a System Operations Review of the Columbia and Snake River hydropower system, with breaching the four lower Snake River dams considered as one among several options. As a result, in December 2000, NMFS issued a revised BiOp that reviewed the strategies outlined in the 1995 and 1998 BiOps and recommended changes. This BiOp did not recommend breaching Snake River dams, but did include steps to consider breaching these dams should the RPA fail. A revised 2004 "no jeopardy" BiOp did not include breaching and was remanded to NOAA by the Federal District Court of Oregon (although not due to dam breaching issues). NOAA released a revised BiOp on May 5, 2008. The final revised BiOp was reviewed by the court as to its adequacy. On September 15, 2009, the Obama Administration, after evaluating the BiOp, filed an Adaptive Management Implementation Plan (AMIP) in an effort to forestall court rejection of the BiOp. The AMIP included: immediate acceleration and enhancement of mitigation actions called for under the 2008 BiOp; expanded research, monitoring and evaluation to quickly detect unexpected changes in fish populations; specific biological "triggers" that, if exceeded, will activate a range of near and long-term responses to address significant fish declines; and, preparation by the U.S. Army Corps of Engineers, starting immediately, of a study plan to develop scope, budget, and schedule of studies needed regarding potential breaching of the lower Snake River dams. In late November 2009, District Court Judge James Redden acknowledged the AMIP as a positive step forward but requested additional information on how the AMIP might be added to the BiOp. NMFS released a modified BiOp, incorporating the AMIP, on May 20, 2010. In August 2011, this 2010 supplemental BiOp was found insufficient by a federal court, and temporary measures put in place in 2005 continue to dictate the Federal Columbia River Power System operation. Prior to the listing of salmonid ESUs under ESA, the majority of conservation and habitat management efforts were conducted by individual states, tribes, and private industries. In the Columbia River Basin, the Northwest Power and Conservation Council took the lead under the 1980 Pacific Northwest Electric Power Planning and Conservation Act ( P.L. 96-501 ), by attempting to protect salmon and their habitat while also providing inexpensive electric power to the region. Although federal agencies and public utilities have spent hundreds of millions of dollars on technical improvements for dams, habitat enhancement, and water purchases to improve salmon survival, some populations have continued to decline. Recent years have seen an increased interest by state governments and tribal councils in developing comprehensive salmon management efforts. States generally seek to forestall ESA listings, or, if listings do occur, to reduce federal involvement affecting state-managed lands. With limited staff and funding to implement a wide range of programs, NMFS has encouraged integrated management efforts (i.e., habitat conservation plans) among federal, state, and tribal agencies as a tool to save listed species and avoid future listing of additional ESUs through comprehensive recovery efforts. NMFS viewed the Oregon Coastal Salmon Restoration Initiative (OCSRI), to promote comprehensive and proactive state-based recovery efforts and avoid listing coho salmon in Oregon, as precedent for federal/state/local partnerships. However, a federal court decision clarified that, to avoid an eventual listing, plans cannot be based primarily on speculative or proposed future measures, but must instead be based on recovery measures that are enforceable or reasonably likely to occur; for instance, measures embodied in laws, regulations, or long-range and stable funding mechanisms. With the listing of many salmonid ESUs in the Columbia River basin, new options for governance are being explored by federal, state, and tribal parties. Restoration efforts for some California salmon, including water reforms, were embodied in the Central Valley Project Improvement Act (CVPIA, Title XXXIV of P.L. 102-575 ) and the San Joaquin River Restoration Program (authorized by Title X, Subtitle A, of P.L. 111-11 ). Under the CVPIA authority, the U.S. Fish and Wildlife Service (FWS) has coordinated plans for fish screens, fish ladders, and water pollution reduction to recover native fish populations in the Central Valley Project area. On June 4, 2009, a NMFS BiOp concluded that current water pumping operations in the Central Valley Project and the State Water Project jeopardize the survival of winter and spring-run Chinook salmon, Central Valley steelhead, the southern population of North American green sturgeon, and Southern Resident killer whales, which rely on Chinook salmon runs for food. The BiOp provides RPAs, suggesting actions that can be taken to alleviate this jeopardy situation. On May 18, 2010, U.S. District Court Judge Oliver Wanger ruled that federal regulators illegally restricted water pumping from California's San Francisco Bay Delta to protect endangered salmon, striking down salmon protection rules in the BiOp. Along the border between California and Oregon, a Klamath Basin Restoration Agreement was negotiated by 29 Klamath River stakeholders and signed on February 18, 2010, to address conflicting water management objectives. A second, related Klamath Hydropower Settlement Agreement may result in the removal of four dams on the Klamath River that block salmon and steelhead from historic spawning areas. NMFS is also reviewing the effects of common pesticides on salmon. In response to a citizen suit filed under the Endangered Species Act against the Environmental Protection Agency (EPA) by a group of environmental organizations ( Washington Toxics Coalition et al. v. EPA ), the U.S. District Court for the Western District of Washington issued an order that establishes pesticide buffer zones. Buffer zones are areas adjacent to certain streams, rivers, lakes, estuaries, and other water bodies, where the court ordered that certain pesticides not be used. Generally, these buffers are 20 yards wide for ground application and 100 yards for aerial application, adjacent to certain "salmon-supporting waters" in Washington, Oregon, and California. NMFS is in the process of reviewing different pesticides and issuing BiOps on their use and application. However, restrictions on pesticide application are controversial as some agricultural interests believe this action poses an economic threat to their operations. In 1993, NMFS issued an interim policy on artificial propagation of Pacific salmon under the ESA to guide how hatcheries should be used to help recover salmonids. In response to litigation over the role of hatcheries in salmon recovery, a policy statement defined how hatchery fish are to be treated when deciding whether ESUs should be listed under the ESA. In general, the policy is to recover wild populations in their natural habitat wherever possible, without resorting to artificial propagation. Washington, Oregon, and British Columbia mass-mark hatchery coho salmon by fin clipping so that marked fish can be readily identified by fishermen as hatchery fish and selectively harvested, while unmarked, native fish can be released to spawn. Similar programs are underway for other species, such as Chinook salmon and steelhead trout. An FWS review of Columbia River hatcheries for their contribution to salmon recovery, begun in May 2005, was completed in June 2010. An independent scientific panel's collaborative review of 178 hatchery programs in the Columbia River Basin, begun in 2006 to identify (1) hatchery programs that are not contributing to salmon recovery and (2) ways to reduce the harvest of ESA-listed fish, was completed in February 2009 with the publication of both a comprehensive system-wide report and a shorter report for Congress. Summary conclusions focus on: managing hatchery broodstocks to achieve proper genetic integration with, or segregation from, natural populations; promoting local adaptation of natural and hatchery populations; minimizing adverse ecological interactions between hatchery- and natural-origin fish; minimizing effects of hatchery facilities on the ecosystem; and maximizing survival of hatchery fish. In January 2009, the nonprofit Resource Renewal Institute funded a report by a "Council of Elders" experienced older professionals to offer recommendations on Columbia River salmon recovery for the Obama Administration. This group provided eight priority recommendations: Establish White House leadership and coordination of all salmon recovery actions by federal agencies. Consolidate of ESA responsibilities for all salmon species within FWS. Transfer implementation of salmon recovery and mitigation programs from the Bonneville Power Administration (BPA) to FWS, with continued funding by BPA. Initiate audit and oversight of the Northwest Power and Conservation Council and Bonneville Power Administration to ensure compliance. Direct federal agencies to include impacts of climate change and population growth in biological opinions and salmon recovery plans. Issue an Executive Order directing all federal agencies to foster and protect independent science and scientists implementing federal programs. Support a congressional request for a comprehensive study of the benefits and costs of removing the four Lower Snake River Dams. Direct the White House Council on Environmental Quality to develop and implement a federal water management-salmon recovery plan for the Columbia River Basin. Legislative activities in the 112 th Congress to address these and other concerns related to Pacific salmonids can be found in CRS Report R41613, Fishery, Aquaculture, and Marine Mammal Issues in the 112 th Congress , by [author name scrubbed] and [author name scrubbed].

Along the Pacific Coast, 28 distinct population segments of Pacific salmon and steelhead trout are listed as either endangered or threatened under the Endangered Species Act (ESA), with three additional populations identified as "species of concern." While no species of anadromous trout or salmon is in danger of near-term extinction, individual population segments within these species have declined substantially or have even been extirpated. The American Fisheries Society considers at least 214 Pacific Coast anadromous fish populations to be "at risk," while at least 106 other historically abundant populations have already become extinct. Human activities—logging, grazing, mining, agriculture, urban development, and consumptive water use—can degrade aquatic habitat. Silt can cover streambed gravel, smothering fish eggs. Poorly constructed roads often increase siltation in streams where adult salmon spawn and young salmon rear. Removal of streamside trees and shade frequently leads to higher water temperatures. Grazing cattle remove streamside vegetation and exacerbate streambank erosion. Urbanization typically brings stream channelization and filled wetlands, altering food supplies and nursery habitat. Habitat alterations can lead to increased salmonid predation by marine mammals, birds, and other fish. Dams for hydropower, flood control, and irrigation substantially alter aquatic habitat and can have significant impacts on anadromous fish. In addition, natural phenomena stress fish populations and contribute to their variable abundance. Current management efforts aim to restore the abundance of ESA-listed native northeast Pacific salmonids to historic, sustainable population levels. The National Marine Fisheries Service (NMFS, also popularly referred to as "NOAA Fisheries") in the Department of Commerce implements the ESA for anadromous salmonids. When a federal activity may harm an ESA-listed salmonid, the ESA requires the federal agency to consult with NMFS to determine whether the activity is likely to jeopardize the survival and recovery of the species or adversely modify its critical habitat. Prior to the listing of salmonid "evolutionarily significant units" (ESUs) under the ESA, the Northwest Power and Conservation Council took the lead in the Columbia River Basin under the 1980 Pacific Northwest Electric Power Planning and Conservation Act, by attempting to protect salmon and their habitat while also providing inexpensive electric power to the region. Under this effort, federal agencies and public utilities have spent hundreds of millions of dollars on technical improvements for dams, habitat enhancement, and water purchases to improve salmon survival. Recent years have seen an increased interest by state governments and tribal councils in developing comprehensive salmon management efforts. This report summarizes the reasons for ESA listings and outlines efforts to protect ESA-listed species.

<1. Introduction> On January 30, 2009, a Monaco Declaration was signed by more than 150 marine scientists from 26 countries, calling for immediate action by policymakers to reduce carbon dioxide emissions so as to avoid widespread and severe damage to marine ecosystems from ocean acidification. The Monaco Declaration is based on the Research Priorities Report developed by participants in an October 2008 international symposium on "The Ocean in a High-CO 2 World," organized by UNESCO's Intergovernmental Oceanographic Commission, the Scientific Committee on Oceanic Research, the International Atomic Energy Agency, and the International Geosphere Biosphere Programme. In December 2010, the United Nations Environment Programme highlighted the emerging concerns over the relationship between ocean acidification and food security. While not yet fully understood, the ecological and economic consequences of ocean acidification could be substantial. Legislative attention by Congress on ocean acidification currently is focused on authorizing, funding, and coordinating research to increase knowledge about ocean acidification and its potential effects on marine ecosystems. <2. What Is Ocean Acidification?> The complex interplay between rising carbon dioxide (CO 2 ) levels in the atmosphere and the ocean's chemistry is a process that scientists have recognized for more than a century. As increasing CO 2 from the atmosphere dissolves in seawater, seawater chemistry is altered. The prevailing pH (a measure of hydrogen ion concentration) of water near the ocean surface is around 8.1, or slightly alkaline. Ocean acidification is the name given to the ongoing process whereby pH decreases as seawater becomes less alkaline when increasing amounts of anthropogenic CO 2 from the atmosphere dissolve in seawater. When atmospheric CO 2 dissolves into the ocean, it forms carbonic acid (H 2 CO 3 ). Some of the carbonic acid dissociates in ocean waters, producing hydrogen ions (H + ). As the number of hydrogen ions increases, the pH of the ocean decreases, and the water becomes less alkaline. Scientists are concerned that this change in seawater pH could alter biogeochemical cycles, disrupt physiological processes of marine organisms, and damage marine ecosystems. This report does not discuss the effects of increasing thermal stress to marine organisms and ecosystems (e.g., coral bleaching) related to climate change. However, marine ecosystems are likely to be affected by the synergistic effects of factors involved in both thermal and chemical processes. <3. At What Rate Is Ocean Acidification Occurring, and What Factors Affect This Rate?> Over the past several decades, the oceans annually have absorbed about 2 billion metric tons of the approximately 7 billion metric tons of carbon that all the countries in the world release as CO 2 into the atmosphere each year. It has been estimated that a total of more than 530 billion tons of CO 2 have been absorbed by the ocean between 1800 and 1994, with the average pH of water near the ocean surface decreasing by almost 0.1 pH unit. That decrease sounds small, but it represents a 26% increase in the concentration of hydrogen ions, because the pH scale is logarithmic (i.e., water with a pH of 6 is 10 times less acidic than water with a pH of 5, and 100 times less acidic than water with a pH of 4). Open ocean observational records of declining pH are available from the Hawaiian Ocean Time-Series Station in the Pacific and the Bermuda Atlantic Time-Series Station in the Atlantic. Up to a point, as atmospheric CO 2 continues to increase, ocean pH will continue to decrease; one estimate suggests that the rate of CO 2 uptake by the oceans could stabilize at around 5 billion metric tons per year by 2100. One prediction suggests that continued burning of fossil fuels and future uptake of CO 2 by the ocean could reduce ocean pH by 0.3-0.5 units. All gases, such as CO 2 , are less soluble in water as temperature increases. Thus, marine waters near the poles have a much greater capacity for dissolving CO 2 than do ocean waters in the tropics. In addition, dissolved CO 2 is transported into ocean depths at these high latitudes (i.e., deep water formation mechanism) since the lower-temperature waters are of higher density, causing greater convection to occur than happens in the more stratified tropical oceans. If temperature were the only factor affecting the rate of ocean acidification and its impacts on physical and biological features, these impacts might be more likely to occur in marine waters nearer the poles. However, in addition to temperature, other factors modulate the impact of CO 2 on marine waters. Cellular respiration and organic decomposition add CO 2 to seawater, and photosynthesis removes it. Deep oceanic water is enriched in CO 2 due to respiration in the absence of photosynthesis and, when brought to the surface by equatorial currents (i.e., upwelling), can place CO 2 -enriched seawater in contact with the atmosphere where it can absorb even more CO 2 . Hence, the tropics, and most notably tropical coral reefs, are also vulnerable to near-term effects. An additional factor is the potential increase in storm activity at higher latitudes, as some climate models suggest. CO 2 and other acidic gasses such as nitrogen dioxide are also dissolved in rainwater. An increase in North Atlantic or western North Pacific storms could significantly accelerate the pH decrease of surface ocean waters in these regions. Key scientific questions concern which factors may affect the future rate at which seawater pH might decrease, especially whether the rate of decrease will remain constant in direct relationship to the amount of CO 2 in the atmosphere or whether other factors, such as rising ocean temperatures diminishing CO 2 absorption, will decelerate the rate that pH changes. There is also the question of equilibrium that is, how long might it take the process whereby the pH of warming ocean waters is decreasing to come into equilibrium with the concentration of atmospheric CO 2, should the currently increasing atmospheric emission rate of CO 2 eventually stabilize or diminish? An adjunct to this question is how long might it take the rate of ocean acidification to slow (or even reverse) in response to increasing water temperatures and any measures that might be taken to slow, halt, or even reverse the increasing concentration of CO 2 in the atmosphere? Additional questions relate to how ocean circulation, which partially controls the CO 2 uptake rate, might change in response to changes in the overlying climate as a result of greenhouse gas emissions. <4. What Are Some of the Potential Effects of Ocean Acidification?> Since the marine environment is complex and some of the likely changes may be years in the future, the potential effects identified in this section, although many are supported by laboratory experimentation, are primarily conjecture and/or forecasts. However, field studies are beginning to provide a more direct view of potential ocean acidification problems. <4.1. Effects of Changing Ocean Chemistry> A lower pH affects marine life in the oceans and is related to other changes in ocean chemistry. In addition to the lower pH, another consequence of the increased amount of dissolved CO 2 in the ocean is the production of more bicarbonate ions (HCO 3 1- ). As more CO 2 dissolves into the ocean, bicarbonate ions form at the expense of carbonate ions (CO 3 2- ), which scientists often describe by the following reaction: CO 2 + CO 3 2- + H 2 O = 2HCO 3 1- The abundance and availability of carbonate ions are critical to many shell-forming marine organisms. At current average ocean pH levels (about 8 or above), ocean waters near the surface have ample carbonate ions to support shell formation and coral growth. However, as increased amounts of carbonic acid form in the ocean as a result of higher atmospheric CO 2 levels, pH decreases and the amount of carbonate ions in the oceans declines, resulting in fewer carbonate ions available for making shells. Organisms make biogenic calcium carbonate for their shells and skeletons by combining calcium ions (Ca 2+ ) which are abundant in the oceans with carbonate ions to form solid calcium carbonate (CaCO 3 ). Certain marine organisms (e.g., corals and pteropods) precipitate one mineral type of calcium carbonate called aragonite, and other marine organisms (e.g., foraminifera and coccolithophorids) use another type called calcite. A third type of calcium carbonate high magnesium calcite is precipitated by echinoderms (sea urchins and starfish) and some coralline algae (an encrusting form of red algae that forms calcareous crusts like coral). Under present conditions of ocean chemistry, these forms of calcium carbonate are relatively stable in waters near the ocean surface, except for certain areas of high upwelling activity. Water near the ocean surface currently is supersaturated (i.e., more concentrated than normally possible and therefore not in equilibrium) with calcite, high magnesium calcite, and aragonite, meaning that organisms easily can form shells from all of these mineral types. However, as more carbonic acid is formed in water near the ocean surface from higher levels of CO 2 in the atmosphere, the level of saturation decreases. If the ocean waters become undersaturated, then shells made from all of these minerals would tend to dissolve. Shells made from high magnesium calcite would tend to dissolve first, at lower concentrations of carbonic acid (and thus at higher pH values) than would shells made from aragonite. Shells made from calcite would dissolve at higher concentrations of carbonic acid than those made from aragonite. Thus, organisms that incorporate high magnesium calcite (i.e., echinoderms and some coralline algae) are likely to be the "first responders" to ocean acidification. Ocean waters at depths of thousands of feet are undersaturated with respect to all forms of biogenic calcite, which is why most of the shells from dead organisms that "rain" down from the ocean surface dissolve before reaching the ocean floor. Because of the combined effects of increased CO 2 and calcium carbonate solubility in cold water, some suggest that marine surface waters closer to the poles may become undersaturated within the next 50 years. Researchers at the Antarctic Climate and Ecosystems Cooperative Research Centre have demonstrated significant reductions in shell mass and thickness of several Southern Ocean marine algae and animals that appear consistent with the projected effects of recent decreases in seawater pH. <4.2. Response of Marine Life to Changing Ocean Chemistry> Although there has been a great deal of work growing organisms under different pHs, most species have biochemical mechanisms to regulate internal pH and are able, within limits, to grow skeletons even when the external medium is less alkaline. A lower pH environment may cause these organisms to expend more energy, but overall they may be able to adapt in complex and species-specific ways. Understanding how marine life might respond to less alkaline conditions is more complicated than the simple claims that all will dissolve, which may ignore the actual physiology of these organisms. <4.2.1. Corals> Some have raised questions downplaying the potential harm to coral reefs from ocean acidification. Differences of opinion exist on the relative effects of climate change as expressed in increased CO 2 when compared to increased ocean temperature. Opinion has been expressed that, in marine systems, increased temperature may have detrimental effects comparable to or larger than those seen from increased CO 2 concentration, for corals and for phytoplankton. Although calcification rates in massive Porites coral were reported to have declined over a 16-year study period by approximately 21% in two regions on Australia's Great Barrier Reef, these findings were consistent with other studies of the synergistic effect of elevated seawater temperatures and CO 2 concentrations on coral calcification. Concerns have also been expressed for coral reefs in the eastern tropical Pacific. While ocean acidification may not appear currently to be killing corals, decreasing seawater pH is slowing development of coral larvae into juvenile colonies. Some project that, in coral reef ecosystems, coral calcification will be reduced by 30% on average by the end of the century. Calcareous algae, another contributor to building the reef frame, will recruit, grow, and calcify under lower pH. However, the dissolution of reef carbonate by boring microflora could increase by 50% under less alkaline conditions by the end of the century. The decrease in coral and crustose coralline algae combined with the increase of carbonate dissolution under less alkaline conditions has the potential to jeopardize the maintenance and resilience of coral reefs and their services to human populations (in terms of food and economic resources). Emerging evidence for the variability in coral response to acidification as well as response to past climate change suggest greater heterogeneity in the pace and degree of reef degradation. In addition, shallow-water coral reefs with long water residence times may be able to mask the effects of ocean acidification in some downstream habitats. In support of the ability of certain corals to survive decreasing pH, stony and soft corals have been grown successfully in open systems with water from a saltwater well at a pH between 7.5 and 7.8 since the 1970s. However, given the high level of adaptation in corals to facilitate calcification via complex processes, at least some corals may be sensitive to changes in pH because of adaptation to invariant pH, with evidence coming primarily from the discovery that periods of high CO 2 in the geological past were often also periods of low aragonite-coral abundances and diversity. Others have found that certain species of coral survive in the laboratory at a pH of 7.3 to 7.6 after their calcified structure dissolves by functioning similar to sea anemones, and retaining the ability to recalcify when pH is increased. However, in the natural marine environment, predation could be a significant factor in limiting the viability of such "naked" corals, and it is unlikely that such organisms could form reefs and attract the diverse community that constitutes a coral reef. <4.2.2. Other Invertebrates> Increasing acidification may alter marine microbial activity, resulting in fundamental changes to how nitrogen is cycled in the ocean. Ocean acidification appears to decrease nitrification, which could reduce emissions of the greenhouse gas nitrous oxide to the atmosphere. In addition, an unknown but potentially significant proportion of the ocean's primary productivity could shift from nitrate- to ammonium-supported, possibly resulting in cascading effects in marine food webs. In the open ocean, some species of phytoplankton (i.e., microscopic floating plant life) may respond positively (increasing their primary production rate) to rising CO 2 concentrations in the ocean, while others, such as the calcifying coccolithophores, could be negatively affected (decreasing their calcification rate) by lower pH. Regarding the latter, however, some have suggested that several larger coccolithophore species may be able to increase their calcification in response to anthropogenic CO 2 release. Investigating 40,000 years of deposition in sediment core samples, others find a marked pattern of decreasing calcification of coccolithophores with increasing CO 2 and decreasing bicarbonate. There is also the concern that decreasing seawater pH may dissolve marine calcium carbonate sediments with potential harm to species and communities residing in and on these sediments. Since many of these organisms provide food or modify habitat for other organisms, the well-being of these carbonate-dependent species will affect other species. Because of these interrelationships, the potential indirect effects of decreased seawater pH on other marine organisms is not well understood. While some have raised concerns that ocean acidification, by harming calcifying plankton species, could shift ecological balances so as to increase populations of some noncalcifying species, there appears to be no significant relationship between jellyfish abundance and lower pH conditions, and any role of pH in structuring zooplankton communities is believed to be tenuous. There are also concerns that decreasing seawater pH could alter the ability of some invertebrate organisms to conduct essential biochemical and physiological processes. For example, scientists have found that, when exposed to water of pH 7.7, roughly equivalent to pH levels predicted for the year 2100, sea urchin sperm swam much more slowly. Overall, fertilization fell by 25%, and in almost 26% of cases where the eggs were fertilized, they did not survive long enough to develop into larvae. While marine invertebrates in general, and their early developmental stages in particular, are believed to be more sensitive to environmental disturbance, available data to assess their vulnerability to ocean acidification is contradictory. In a controlled study at pH values anticipated in 2100, calcification was reduced 28% in the pteropod Limacina helicina . These animals continued to grow and produce their shells even under high CO 2, but at a slower rate. Many species, including Pacific salmon, mackerel, herring, cod, and baleen whales, feed upon pteropods. Effects, if any, on the food web are unknown, since pteropod growth is strongly influenced by food availability and temperature, among other things. It is possible that higher temperatures could compensate for growth depression by CO 2 . Coastal areas with upwelling of deeper waters may be at risk from detrimental effects of ocean acidification much more quickly. Concerns have been expressed for benthic calcareous organisms living in the nearshore shelf along the North American west coast. More specifically, scientists in one of the Intergovernmental Panel on Climate Change (IPCC) scenarios have projected that mussel and oyster calcification, and thus shell strength, could decrease significantly by the end of the 21 st century. Recently, oyster growers in the Pacific Northwest have experienced severe larval mortalities resulting in multi-year reproductive failures which may be related to changing ocean chemistry. In addition, laboratory experiments indicate that mussels may exhibit significant signs of deterioration under acidified conditions predicted by the IPCC. Others have attempted to project the timing and severity of the effects of ocean acidification on commercial mollusc harvests. <4.2.3. Vertebrates> Answering the question of how acidification may affect fisheries will likely require the integration of knowledge across multiple disciplines. Although evidence suggests that larval and juvenile fish are more susceptible to changes in ocean water pH than adults, larval and juvenile fish exposed to exceedingly high CO 2 concentrations (more than 100 times current levels) suffered little apparent harm. Fish appear to be among the more tolerant marine animals. These scientists believe that "the relative tolerance of fish may relate to high capacity for internal ion and acid-base regulation via direct proton excretion, and an intracellular respiratory protein that results in a high oxygen-carrying capacity and substantial venous oxygen reserve." Other studies indicate that ocean acidification can impair olfactory discrimination and homing ability of a marine fish such as the clown fish in coral reefs. <4.3. Physical Effects of Changing Ocean Chemistry> Concern has also arisen that lower ocean water pH will diminish low-frequency (below 10 KHz) sound absorption in the ocean, increasing noise levels within the auditory range critical for environmental, military, and economic interests. Frequency-dependent decreases to sound absorption related to the current decrease in pH of about 0.1 pH unit may exceed 12%, and an anticipated pH decrease of 0.3 pH units by mid-century may result in an almost 40% decrease in sound absorption. It is unknown how marine mammals might be affected by and adapt to an ocean increasingly transparent to sound at low frequencies. <4.4. Worst-Case Scenarios> Worst-case scenarios can be particularly hard to characterize, due to unforeseen consequences and possible tipping points, where environmental response may suddenly no longer be directly or linearly related to the causative factors. Although the likelihood of a "worst-case scenario" coming to pass is uncertain and probably low, these circumstances require attention because ignoring them could be potentially disastrous. Mass extinction events of marine organisms have occurred in geologic history, and some of these events may have had some relationship to significant changes in ocean pH. The fossil record indicates that marine organisms may be quite sensitive to ocean acidification about 55 million years ago, a large injection of CO 2 into the deep ocean, presumably resulting from a massive methane release, was followed by the extinction of some species of benthic foraminifera. In addition, the extensive loss of marine biodiversity in the Late Triassic, about 200 million years ago, appears to coincide with increased atmospheric CO 2 concentration. Mass extinctions in the geological record correspond to gaps of millions of years in coral reef building, and were likely caused by problems in the carbon cycle, among which acidification is a strong possibility. Some, however, caution that paleo-events may be imperfect analogs to current conditions. The Intergovernmental Panel on Climate Change has predicted that, under their worst-case scenario of no reduction or control of CO 2 emissions, ocean pH could decrease to 7.7 by 2100. Worst-case scenarios for ocean acidification focus on the potential for disruption of marine ecosystems to the extent that food production from the ocean finfish, shellfish, and other invertebrates could be compromised. Physiological changes caused by ocean acidification and affecting ocean primary productivity phytoplankton have the potential to alter marine ecosystems significantly, because primary production is at the base of almost all marine food chains. According to the most recent report on the status of the world's fisheries by the United Nations Food and Agriculture Organization, fisheries supply at least 15% of the animal protein consumed by humans, provide direct and indirect employment for nearly 200 million people worldwide and generate $85 billion annually. Any significant disruption of this industry could have broad dietary as well as economic consequences. Other consequences of a worst-case scenario include the loss of coral reefs, which, in addition to being unique ecosystems supporting extensive biodiversity, provide coastal protection to mediate storm and wave action as well as the basic structure for many island nations. Reef fish provide subsistence for hundreds of millions of coastal residents, particularly in Southeast Asia. In addition, reef tourism contributes significantly to the economy in the tropics accounting for about $2 billion dollars of income to Queensland, Australia, about $6 billion dollars of income in the Caribbean (where developing countries can ill afford the loss of it), and a significant portion of the $6 billion that all tourism contributes in the Florida Keys. <5. What Are the Natural and Human Responses That Might Limit or Reduce Ocean Acidification?> Several natural feedback mechanisms can act to moderate the process of seawater pH change. The less alkaline the ocean becomes, the less CO 2 will be dissolved. In addition, the warmer the seawater becomes, the less CO 2 will dissolve. Speculative questions exist about what might occur should the oceans reach a ceiling (i.e., equilibrium) in their ability to take up CO 2 , and atmospheric CO 2 levels continue to increase. Even with increasing concentrations of atmospheric CO 2 , scientists predict that the oceans are not likely to reach pH values of less than 7 (neutral). Our ability to reduce ocean acidification through artificial means is unproven. Proposals have suggested the addition of chemicals to the ocean, such as (1) using iron compounds to stimulate planktonic algae growth, whereby the increased photosynthesis might capture/remove dissolved CO 2 ; (2) using limestone to neutralize (i.e., buffer) the lower-pH streams and rivers near where they enter oceans and close to sources of limestone, or adding limestone powder directly to the ocean where deeper, lower-pH water upwells; or (3) pumping the calcium bicarbonate byproduct from limestone scrubbers at natural gas power plants into the ocean. Other measures might include habitat restoration/creation, such as planting seagrass. Unless a massive global effort is mounted, these techniques will at best be effective only on a very local scale. In addition, manipulation of ocean chemistry has the potential to damage or otherwise alter the marine environment and ecosystems in unforeseen ways. Reducing CO 2 emissions to the atmosphere and/or removing CO 2 from the atmosphere (i.e., carbon sequestration) currently appear to be the only practical ways to minimize the risk of large-scale and long-term changes to the pH of marine waters. Because of the continuing increase in CO 2 levels in the atmosphere, and its resident time there, decreasing pH of ocean waters will likely continue for decades. Even if atmospheric CO 2 were to return to pre-industrial levels, it could possibly take tens of thousands of years for ocean chemistry to return to a condition similar to that occurring at pre-industrial times more than 200 years ago. <6. What Is the Federal Government Doing About Ocean Acidification?> Much of the current federal attention to ocean acidification focuses on research to better understand the chemical processes involved and to become better able to predict how ocean ecosystems might respond to decreasing pH. The National Science Foundation (NSF) was the first federal agency to become involved in research related to ocean acidification. The modern surveys of CO 2 in the oceans can be traced to the NSF-sponsored Joint Global Ocean Flux Study (JGOFS), which originated in recommendations from a National Academies of Science workshop in 1984. The more modern concerns over ocean acidification arose from a May 2004 Paris workshop chaired by the now-president of the National Academy of Sciences, Ralph Cicerone. In April 2005, NSF, the National Oceanic and Atmospheric Administration (NOAA), and the U.S. Geological Survey sponsored a workshop on the impacts of ocean acidification on coral reefs and other marine calcifiers. In Section 701 of P.L. 109-479 , Congress called for an 18-month comprehensive national study by the National Research Council of the National Academies of Science on how CO 2 emissions absorbed into the oceans may be altering fisheries, marine mammals, coral reefs, and other natural resources. This study was commissioned by NOAA and NSF in October 2008, and a summary of Ocean Acidification: A National Strategy to Meet the Challenges of a Changing Ocean was released in late April 2010; the full report was published in September 2010. The Federal Ocean Acidification Research and Monitoring Act of 2009 (FOARAM; P.L. 111-11 ) established the interagency working group on ocean acidification (IWGOA). The IWGOA is chaired by a representative from the National Oceanic and Atmospheric Administration and includes representatives from the National Science Foundation, Bureau of Ocean Energy Management, U.S. Department of State, Environmental Protection Agency, National Aeronautics and Space Administration, U.S. Geological Survey, U.S. Fish and Wildlife Service, and U.S. Navy. The IWGOA was charged with developing a strategic research and monitoring plan to guide federal research on ocean acidification. In 2012, a draft of the Strategic Plan for Federal Research and Monitoring of Ocean Acidification was released and sent to the National Research Council for review. The strategic research plan attempts to provide a common vision and specific goals to coordinate activities of federal agencies. The plan is organized into the following seven themes, 1. monitoring of ocean chemistry and biological impacts, 2. research to understand responses to ocean acidification, 3. modeling to predict changes in the ocean carbon cycle, 4. technology development and standardization of measurements, 5. assessment of socioeconomic impacts and development, 6. education, outreach, and engagement strategy, and 7. data management and integration. FOARAM also directed the IWGOA to submit a report to Congress every two years that summarizes federally funded ocean acidification activities. The most recent report for FY2010 and FY2011 identifies funding levels by agency and by the strategic themes used in the strategic research plan. In FY2011, total funding for ocean acidification activities was approximately $29 million. Funding for activities with a primary focus on ocean acidification was approximately $21 million and funding for activities related to ocean acidification was approximately $8 million. <7. What Is the Congressional Interest in Ocean Acidification?> In comparison to previous sessions of Congress, legislative interest in ocean acidification expanded significantly in the 110 th Congress. Congressional attention focused primarily on addressing the cause of ocean acidification increasing atmospheric CO 2 . To date, legislative attention to ocean acidification has focused on authorizing, funding, and coordinating research to increase knowledge about ocean acidification and its potential effects on marine ecosystems. In the 111 th Congress, FOARAM directed the Secretary of Commerce to establish an ocean acidification program within NOAA, established an interagency committee to develop an ocean acidification research and monitoring plan, and authorized appropriations through FY2012 for NOAA and the National Science Foundation. On April 22, 2010, the Senate Commerce, Science, and Transportation Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard held a hearing on the environmental and economic impacts of ocean acidification. Several additional measures were introduced in the 111 th Congress to address this issue. The only bill related to ocean acidification that has been introduced during the 113 th Congress is the Coral Reef Conservation Act Amendments of 2013 ( S. 839 ). S. 839 would include ocean acidification in the criteria used to evaluate project proposals for studying threats to coral reefs and developing responses to coral reef losses. On July 30, 2013, the Senate Committee on Commerce, Science and Transportation ordered S. 839 to be reported. <8. Additional Selected References> R.P. Kelly, et al., "Mitigating Local Causes of Ocean Acidification with Existing Laws," Science , v. 332 (May 27, 2011): 1036-1037. Quirin Schiermeier, "Earth's Acid Test," Nature , v. 471 (March 10, 2011): 154-156.

With increasing concentrations of carbon dioxide (CO2) in the atmosphere, the extent of effects on the ocean and marine resources is an increasing concern. One aspect of this issue is the ongoing process (known as ocean acidification) whereby seawater becomes less alkaline as more CO2 dissolves in it, causing hydrogen ion concentration in seawater to increase. Scientists are concerned that increasing hydrogen ion concentration could reduce growth or even cause death of shell-forming animals (e.g., corals, mollusks, and certain planktonic organisms) as well as disrupt marine food webs and the reproductive physiology of certain species. While not yet fully understood, the ecological and economic consequences of ocean acidification could be substantial. Scientists are concerned that increasing hydrogen ion concentration in seawater could alter biogeochemical cycles, disrupt physiological processes of marine organisms, and damage marine ecosystems. This report does not discuss the effects of increasing thermal stress to marine organisms and ecosystems (e.g., coral bleaching) related to climate change. However, marine ecosystems are likely to be affected by the synergistic effects of factors involved in both thermal and chemical processes. Congress is beginning to focus attention on better understanding ocean acidification and determining how this concern might be addressed. In the 111th Congress, the Federal Ocean Acidification Research and Monitoring Act of 2009 (Title XII, Subtitle D, of P.L. 111-11) directed the Secretary of Commerce to establish an ocean acidification program within NOAA, established an interagency committee to develop an ocean acidification research and monitoring plan, and authorized appropriations through FY2012 for NOAA and the National Science Foundation. The only bill related to ocean acidification that has been introduced during the 113th Congress is the Coral Reef Conservation Act Amendments of 2013 (S. 839). S. 839 would include ocean acidification in the criteria used to evaluate project proposals for studying threats to coral reefs and developing responses to coral reef losses. On July 30, 2013, the Senate Committee on Commerce, Science and Transportation ordered S. 839 to be reported.

RS20995 -- India and Pakistan: U.S. Economic Sanctions Updated February 3, 2003 <1. Recap of Nuclear Tests Sanctions (1)> In May 1998, India and Pakistan each conducted tests of nuclear explosive devices, triggering sweeping U.S. economic sanctions as required by the ArmsExport Control Act (AECA) and the Export-Import Bank Act. (2) Prior to the tests, for international treaty purposes, the two countries were classified asnon-nuclear-weapon states; the tests put each country in jeopardy of world condemnation and sanctions. In theUnited States, the law required the President toimpose the following restrictions or prohibitions on U.S. relations with both India and Pakistan: termination of U.S.foreign assistance other than humanitarianor food assistance; termination of U.S. government sales of defense articles and services, design and constructionservices, licenses for exporting U.S.Munitions List (USML) items; termination of foreign military financing; denial of most U.S. government-backedcredit or financial assistance; U.S. oppositionto loans or assistance from any international financial institution; prohibition of most U.S. bank-backed loans orcredits; prohibition on licensing exports of"specific goods and technology"; and denial of credit or other Export-Import Bank support for exports to eithercountry. Since 1990, Pakistan had been under a sanctions regime that was mandated by another provision of U.S. law pertaining to U.S. foreign assistance. The Pressleramendment, added in 1985 to the Foreign Assistance Act of 1961, requires the President to determine that Pakistandoes not possess a nuclear explosive deviceand that any proposed U.S. assistance would reduce the risk of obtaining such a device. (3) President Reagan and President Bush issued determinations each yearuntil 1990, when then-President Bush did not make the finding required to make assistance available. In 1995, thisrequirement was changed to apply only tomilitary assistance to Pakistan, making the country eligible for other foreign assistance. <2. Sanctions are Eased> During the Clinton Administration. Almost immediately after the 1998 imposition of sanctions on India andPakistan required in the Arms Export Control Act, Congress intervened on behalf of U.S. wheat growers by passingthe Agriculture Export Relief Act, signedinto law on July 14, 1998. (4) The Act amended theAECA to exempt various Department of Agriculture-backed funding from sanctions applied pursuant tosection 102 of that Act. This freed up U.S. wheat farmers to participate in auctions in which Pakistan was asubstantial buyer. Congress later passed theIndia-Pakistan Relief Act of 1998, signed into law by the President on October 21, 1998. (5) This Act authorized the President to waive, for a period of one year,the application of sanctions relating to U.S. foreign assistance, U.S. government nonmilitary transactions, the U.S.position on loans or assistance byinternational financial institutions, and U.S. commercial bank transactions. President Clinton quickly made use ofhis new authority, announcing on November7, 1998, that certain transactions and support would be restored. The authority granted to the President in each of these 1998 laws, however, was limited to a one-year period. Additional legislation was required to make theauthority permanent. Congress provided permanent waiver authority in the Department of Defense AppropriationsAct, FY2000, signed into law on October25, 1999. (6) This Act gave the President the authorityto waive all the economic sanctions imposed against India and Pakistan in response to the nuclear tests,including for the first time those sanctions related to military assistance, USML licenses, and exports to hightechnology entities. To waive those sanctionspertaining to the sales of defense articles, defense services, design or construction services, foreign militaryfinancing, or export licenses for specific goods andtechnology (the sanctions related to, or with possible, military applications), current law requires the President todetermine and certify to Congress "that theapplication of the restriction would not be in the national security interests of the United States." President Clintonexercised this authority on October 27,1999, when he waived the applicability of nonmilitary restrictions for India, on Export-Import Bank loans andcredits, Overseas Private Investment Corporation(OPIC) funding, Trade and Development Agency (TDA) export support, International Military Education andTraining (IMET) programs, U.S. commercialbanks transactions and loans, Department of Agriculture (USDA) export credits, and specific conservation-orientedassistance. For Pakistan, he waived therestrictions on USDA credits and U.S. commercial bank loans and transactions. During the Bush Administration. Throughout the first eight months of 2001, the Bush administration hadhinted that the United States would like to remove the sanctions imposed against India and, to a lesser extent,Pakistan. (7) India's foreign and defense ministervisited Washington in April; Chairman of the Joint Chiefs of State, General Shelton visited India in May to discussmilitary-to-military relations. In May, 2001,and again in August, Deputy Secretary of State Richard Armitage visited India and publically stated the UnitedStates' interests in fully normalizing relationswith the country. In August 2001, U.S. Trade Representative Robert Zoellick visited India to promote global tradetalks. Regarding Pakistan, Secretary of State Powell met with its foreign minister in Washington in June. They reportedly discussed Afghanistan and the Taliban,terrorism, democracy, nuclear proliferation, and sanctions. (8) After the terrorist attack on the United States on September 11, 2001, because of Pakistan's unique position - both geographic and political - vis-a-visAfghanistan, policymakers recognized the urgency by which U.S.-Pakistan relations had to be mended. At the sametime, parity had to be maintained in termsof India. As a result, the President exercised the authority granted him in the Defense Appropriations Act, FY2000,on September 22, 2001, when he lifted allnuclear test-related economic sanctions against the two countries after finding that denying export licenses andassistance was not in the national securityinterests of the United States. (9) Today, the solevestige of the nuclear sanctions is the listing of four Indian and 20 Pakistani entities (and their subsidiaries) onthe Commerce Department's list of entities for which export licenses are required. By comparison, restricted entitiesnumbered in the hundreds in the wake ofthe 1998 nuclear tests. (10) Pakistan continued to be ineligible for most forms of U.S. foreign assistance under a provision of the annual foreign assistance appropriations act that bansforeign assistance "to any country whose duly elected head of government is deposed by military coup or decree." Pakistan's current leader, General PervezMusharraf seized power and overthrew a democratically elected government in October 1999. He declared himselfPresident on June 20, 2001. Pakistan wasalso denied most U.S. foreign assistance for falling into arrears in servicing its debt to the United States. (11) Pakistan was found to be in arrears under termsofthe Foreign Assistance Act in September 2000, and under terms of the Foreign Operations Appropriations Act inMarch 2001. (12) At the end of 1999, Pakistan'sinternational debt was $30.7 billion, of which $2.38 billion was owed to the United States ($1.14 billion in AIDloans, $981 million in food aid, $139 million inExport Import Bank loans, and $119 million in military loans). Two steps were taken to relieve the prohibition on U.S. foreign aid. First, on September 24, 2001, the U.S. Ambassador to Pakistan signed an agreement inPakistan to reschedule $379 million of its debt to the United States, enough to cancel the arrearage. (13) Then Congress passed a bill to exempt Pakistanfrom thesections of law that prohibit making foreign assistance available to any country governed by a military thatoverthrew a democratically elected regime. ThePresident signed S. 1465 into law on October 27, 2001; its authority to waive the sanctions related to bothdemocracy and debt arrearage remainsavailable through FY2003, provided the President determines that making foreign assistance available "facilitatesthe transition to democratic rule in Pakistan"and "is important to United States efforts to respond to, deter, or prevent acts of international terrorism." (14) Prior to the passage of S. 1465 , President Bush invoked the authority granted him in sec. 614 of the Foreign Assistance Act of 1961 (22 U.S.C.2364) to provide $50 million in Economic Support Funds to Pakistan on September 28, 2001, without regard torestrictions in that Act or the ForeignOperations Act that are applicable to Pakistan. The President made another $50 million available under the sameauthority on October 16, 2001. These twodisbursements were part of the Administration's proposed $600 million package of assistance to Pakistan. ThePresident also released $25 million inEmergency Migration and Refugee Funds to Pakistan around the same time. (15) Funding derived from the 2001 Emergency Supplemental AppropriationsActincludes the balance of the President's package to Pakistan ($500 million), and another $73 million for bordersecurity between Pakistan and Afghanistan. (16) On October 5, the President made another $100 million available for management of the emerging Afghan refugeecrisis - $50 million in food assistance toAfghanistan and neighboring countries, and $50 million in Migration and Refugee Assistance to be administeredthrough the United Nations and associatednongovernmental organizations tending to the Pakistan-Afghanistan border. None of these recent fund releases wassubject to sanctions. And on September 26,2001, the International Monetary Fund determined that Pakistan had met the requirements to become eligible for$135 million, to complete disbursement of a$600 million loan. (17) <3. The Fiscal Year 2003 Budget Proposal> Any lingering doubts about the repair of U.S. relations with India and Pakistan were dispelled in the President's FY2003 budget proposal, shown below. (18) INDIA PAKISTAN

In 1998, India and Pakistan each conducted tests of nuclear explosive devices, drawingworld condemnation. TheUnited States and a number of India's and Pakistan's major trading partners imposed economic sanctions in response. Most U.S. economic sanctions werelifted or eased within a few months of their imposition, however, and Congress gave the President the authority toremove all remaining restrictions in 1999. The sanctions were lifted incrementally. President Bush issued a final determination on September 22, 2001,to remove the remaining restrictions, finding that denying export licenses and assistance was not in the national security interests of the United States. Today, four Indian and 20 Pakistani entities (and their subsidiaries) remain on the Commerce Department's listof entities for which export licenses arerequired. By comparison, restricted entities numbered in the hundreds in the wake of the 1998 nuclear tests. Anexport license is still required to ship missiletechnology-controlled or nuclear proliferation-controlled items to users in either country, but the Department ofCommerce no longer views such licenseapplications with a presumption of denying their issuance. Apart from the sanctions imposed following the nuclear tests, the United States prohibited foreign aid toPakistan when that country fell into arrears in servicingits debt to the United States in late 1998, a prohibition reenforced when Pakistan's military forces overthrew thedemocratic government in late 1999. Post-September 11 cooperation between the United States and Pakistan included a rescheduling of the debt and newlegislation to waive the so-calleddemocracy sanctions. Pakistan thus became eligible to receive U.S. foreign assistance through FY2003 when, unlessit holds free and fair elections, restrictionson foreign aid could be reimposed.

<1. Overview> The term "conflict minerals" is used to describe metal ores that, when mined, sold, or traded, are widely reported to play key roles in fueling armed conflict and human rights abuses in several far eastern provinces of the Democratic Republic of the Congo (DRC, formerly Zaire). The main minerals at issue are columbite-tantalite (coltan, a source of tantalum and niobium), cassiterite (tin ore), wolframite (tungsten ore), and gold and their derivatives. The first three minerals are dubbed the 3Ts. When gold is also considered, they are known as the 3TGs. Links between conflict, human rights abuses, and the mining of and trade in these minerals have been the subject of numerous investigations, research studies, and policy papers, as well as policy advocacy campaigns focused on a need to respond to the persistence of conflict and its large toll in lives and human rights abuses. Such efforts have prompted policy makers, industry groups, and others, both in the United States and abroad, to craft measures aimed at cutting links between the minerals trade and those involved in or abetting armed conflict in eastern DRC. Continuing political instability in Congo has been the focus of congressional attention since the overthrow in 1997 of the regime of Mobutu Sese Seko, who had led DRC (known during his rule as Zaire) since 1965. Multiple congressional hearings have investigated various aspects of the DRC's conflicts, and multiple resolutions and bills have been introduced to help end them or mitigate their effects. Several have become law. The most extensive U.S. law aimed at halting the trade in conflict minerals, specifically the 3TGs, is Section 1502 of Title XV of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ). It is the subject of an ongoing Securities and Exchange Commission (SEC) rule-making process that is expected to lead to adoption of "final" Section 1502 implementing rules. This process, which has faced delays, is discussed further below. These congressional efforts have dovetailed with executive branch activities aimed at curtailing conflict in DRC, especially in the east. For nearly two decades, State Department and U.S. Agency for International Development (USAID) officials have monitored the dynamics of instability in eastern DRC and the surrounding sub-region, including linkages between conflict, human rights abuses, and minerals. They have also implemented multiple humanitarian and technical aid, policy-focused, and public-private partnership programs to break such links, in some cases as mandated by Congress. Multiple international public and private initiatives have sought to accomplish similar goals. The United Nations (U.N.) Security Council (UNSC) has, for instance, imposed DRC-focused sanctions aimed, in part, at curtailing the conflict minerals trade. It has also mandated that the U.N. peacekeeping mission in the DRC help the national government to achieve that end. Donor governments have also supported initiatives by states and intergovernmental entities in central Africa to design and implement transparent, accountable, and conflict-free national and regional mineral purchasing and trade certification regimes. Other donor-backed mining sector reform efforts also seek to reduce links between mining and conflict and boost legitimate trade. Industry groups are also piloting several similar certification schemes in central Africa that seek to verifiably track supply chains of minerals sourced in the region to ensure that buying and trade activities do not fund armed actors or otherwise abet conflict. These schemes are designed to complement government certification efforts in the region (see Appendix B ) and in some cases are an inherent part of these efforts. A key component of most of these public and private sector efforts is a process of due diligence that was developed by the Organization for Economic Co-operation and Development (OECD) with input from a broad array of stakeholders. <2. Background: Conflict and the Role of Minerals> The areas in eastern DRC that have been negatively affected most persistently by conflict lie in the border regions adjacent to Uganda, Rwanda, and Burundi, and include the provinces of North and South Kivu (known jointly as the Kivus). Armed groups and illegal mineral sector actors also operate in the district of Ituri, just north of the Kivus, the locale of an ethnically and resource-focused conflict in the mid-2000s. It has been relatively quiescent in recent years. More than a decade and a half of conflict has also resulted in a breakdown of law and order and caused socioeconomic devastation for many in eastern DRC, an area which had already suffered decades of state neglect and depredation under Mobutu's rule. Conflicts in eastern DRC have spawned a large number of armed militias, motivated by a mix of political aims and communal or ethnic self-defense, criminal, and other goals. Multiple, often inter-related factors have underpinned these conflicts, which have consistently been characterized by numerous, extreme human rights abuses. Such factors have included inter-ethnic political and economic competition, in some instances associated with the 1994 Rwandan genocide or Congolese state and societal discrimination against ethnic minorities. Diverse political grievances against and competition for control over the state have also played a role. Integration of various non-state armed groups into the national military and other military reform processes; lack of military training and discipline; and contested command and control and corruption within the military are also contributing factors. Widespread poverty and unequal patterns of resource distribution have also helped spur and prolong conflict, as have criminal opportunism, pillage, and predation of civilian populations, often by elements of state security forces. Such catalysts of conflict have not only motivated Congolese armed actors' actions; they also spurred several foreign state military interventions in Congo in the early 2000s. For more on the dynamics of conflict in eastern DR and actors involved, see Appendix A . These drivers of conflict have been aggravated by competition and conflict over various resources, including land rights; tropical timber and agricultural commodities, such as coffee, palm oil, and charcoal; illicit drug cultivation and trade; and fishing rights but more notably over mineral reserves, mining, and trade. Ores that have been the focus of such dynamics have earned the moniker "conflict minerals" because they are found in all of the provinces of eastern DRC that have experienced lengthy periods of war and insecurity, and have often provided an incentive for acts of coercion and armed clashes; are mined under very poor, often dangerous labor conditions due to the use of manual modes of production and human rights abuses by armed groups, including state security force elements, who often directly or indirectly coercively control mining operations; provide armed groups profit derived from direct participation in, control of, or extortion from mineral mining and commerce; and underpin an extensive black-market cross-border trade that is proscribed under UNSC sanctions pertaining to the DRC and which benefits armed groups, among other actors, many illicit, such as black market traders and smugglers. <2.1. Minerals> The main conflict minerals at issue are the 3TGs and their derivatives, which Section 1502 explicitly and formally defines as "conflict minerals." The reason that these minerals have both played such a prominent role in conflict in the sub-region and drawn extensive international attention is that they help supply a high-value, global commodities trade that provides crucial inputs to a wide variety of industries and manufacturers. They include: Columbite-tantalite , a composite mineral ore known in Central Africa as coltan. Columbite is the ore of columbium, also known as niobium. Tantalite is the source of the metal tantalum. Tantalum is a highly malleable and corrosion-resistant metal conductor of heat and electricity. It is a key component in electronics goods, especially capacitors (devices that store and regulate, or buffer, electrical charges) used in cell phones and auto electronics, computers, digital cameras, and other electronics. It is also used to create carbide alloys in hard metals for use in cutting tools, jet parts, and other applications. In the early 2000s, after a spike in tantalum prices, production and sales of coltan in the eastern DRC rose sharply prompting increased concern over conflict minerals, as armed groups became involved in the trade but later dropped as global prices decreased. Niobium is also highly malleable and heat resistant, and is used in alloys for jet and rocket engines, medical and optical technology, electronics, jewelry, and other applications. The DRC is a marginal source of niobium, supplying well under an estimated 1% of world supplies between 2006 and 2010, but it is a significant, though highly variable global source of tantalite. During the same period, its estimated share of world tantalite supplies rose from 1.6% to 20.5%, and it supplied an annual average of 11.4% of the global supply. Cassiterite (tin oxide) is the main ore source of tin, a highly corrosion-resistant metal often used in solders, tin plating, chemicals, and alloys, notably bronze. Often found co-located with coltan in the DRC, tin is increasingly being used in electric circuits. Laws requiring a phase-out of lead in such applications in Europe and Japan reportedly contributed to a spike in tin prices in 2007 and 2008. Asian industrial growth has also contributed to a gradual increase in demand for tin. Cassiterite is widely seen as the most important ore from eastern DRC, which has contributed between 2% and 5% of global supplies in recent years. Wolframite is the ore of tungsten. The latter is used as a source for cemented carbide, especially in the manufacture of mining, metal, construction, oil sector, and cutting tools and other machine parts; as an alloy for hard, high-density, high-melting point metal products; and in varied electrical applications, including semi-conductors and cell phone vibrators. The DRC is a marginal source of wolframite, supplying between .5% and nearly 1% of world supplies between 2006 and 2010. Gold , a precious metal, has many ornamental, coinage, electronics, and industrial applications. DRC is a relatively minor global gold supplier, contributing a reported average, based on official or documented trade flows, of 0.2% of annual world gold supplies from 2006 to 2010. Its actual contribution to world supplies may be far higher, however as much as 2% annually during those years; as much as 90% or more of much artisanal production from the key gold production zones in Ituri, north of the Kivus, and in South Kivu may reportedly be smuggled out of the DRC. <2.2. Conflict Minerals: Key Approaches to the Problem> There have been numerous U.N., governmental, academic, and non-governmental investigations and studies of the role of the minerals sector within the war economy of eastern DRC. These have examined the full range of factors associated with conflict mineral dynamics: the production, commercial, and profit structure of the trade; patterns of untaxed, fraudulent, and otherwise illicit cross-border mineral shipments; trade routes within and out of the region; ties between regional and international mineral markets; the sources, types, and levels of various armed groups' estimated earnings; and human and labor abuses associated with mineral mining and commerce in the region. Such reports have generally provided policy recommendations aimed at halting the trade in conflict minerals. Some have focused on possible military and/or politically negotiated ends to the conflicts that would lead to a normalization of economic processes generally, including in the mining sector. Others lay out various technical or regulatory reforms aimed at severing linkages between conflict and the mineral trade and/or expanding legal mineral trading. Some proposals seek to compel actors involved in the trade to act peacefully and legally, through the use of armed force or such tools as targeted financial, travel, or trade sanctions, or the threat of international criminal prosecution. Other policy proposals seek to streamline the DRC's mineral export sector by reducing red tape and increasing regulatory effectiveness of state agencies (e.g., customs, mine regulators, business licensing, safety inspections, etc) through institutional capacity-building and reform. The creation of varying types of certified production and trading partnerships has also been proposed as a means of supporting legitimate mineral commerce. Under some such proposals, an independent monitoring system would be put in place at mines that are determined to be in compliance with national laws and labor standards, free of armed groups, providing minimum wages to miners, or meeting various related criteria. Ore certified as originating at these sites could then be issued a certificate of legitimacy and legal origin. This model is aimed at creating positive incentives for good behavior and bolstering closed supply pipelines that can be monitored. A second model involves the creation of general, mandatory regulatory schemes, in which all actors must comply with certain specified criteria or standards (e.g., conflict-free mineral purchasing), for which a certificate is issued, with punitive sanctions imposed on those actors who do not obtain certificates or comply with regulatory mandates. Certificate systems typically incorporate company due diligence efforts, and may also employ forensic technologies that support scientific vetting of source supply origins, purity, or the like. It is difficult to assess the relative viability of these proposals, as most are theoretical; have been attempted only episodically, on a small scale, or unsuccessfully; or are at early stages of development or implementation. While some approaches may well have the potential to succeed, most face a range of challenges related to cost, technical complexity, interest group opposition or dissensus, lack of national or international political will, and similar factors. The most immediate and profound challenge to all of these proposals, however, is the depth, complexity, and extensiveness of eastern DRC's conflicts, which to date have prevented any military, political, or policy-based interventions from durably or comprehensively succeeding. <3. Mineral Sourcing: Chain of Custody Controls and Due Diligence> Among the approaches to breaking mineral-conflict linkages that have attracted the broadest support from policy-makers, business interests, and non-governmental advocates are so-called mineral supply chain of custody controls and other proactive monitoring efforts, collectively dubbed "due diligence." <3.1. OECD Due Diligence System> Most of a handful of initiatives that are being established or piloted (see Appendix B ) use as an operational standard a detailed set of conflict-free mineral sourcing due diligence guidelines crafted by the Organization for Economic Co-operation and Development (OECD). This guidance (the OECD Guidance hereainfter) is also the primary due diligence standard that a wide array of interests groups has proposed the SEC incorporate into its Section 1502 rules. The OECD Guidance , adopted by the OECD Council in May 2011, was developed with input from various stakeholders and interests, and garnered broad international support, including from the State Department. The Guidance , which is not legally binding, is part of a larger set of OECD efforts to promote legal and ethical business conduct in areas where the rule of law is weak. The OECD Guidance is the main standard for several regional, state-sponsored, and private-sector national chain of custody tracking and certified trading chain systems, which many expect will provide the framework for a Section 1502-compliant due diligence system. These systems are discussed in Appendix B of this report. <4. Section 1502: Overview> Section 1502 of P.L. 111-203 , passed as H.R. 4173 , is the culmination of several prior congressional efforts to help break links between mineral trade and conflict in eastern DRC. At its core is a requirement that SEC-regulated firms that use the 3TGs in their products publicly report whether or not they obtain their supplies of these minerals from the DRC, and if so, what due diligence they exercise to ensure that these purchases do not benefit armed groups. For supporters of the measure, part of the rationale for including the provision in a financial reform law was the assertion that if a firm were to be tied to conflict minerals and associated human rights abuses, such linkages would constitute an investment risk. Proponents successfully argued for inclusion of the measure, which, from their point of view, provides a way for firms to offer investors material assurances that they are not subject to reputational or other risks potentially including legal liabilities arising from their sourcing or use of conflict minerals. Some critics of Section 1502, on the other hand, view it as a non-germane use of SEC regulatory authority. They argue that it falls outside the intended scope of the Dodd-Frank Wall Street Reform and Consumer Protection Act, that is, to reform the U.S. financial system in order to address the causes of the post-2007 U.S. financial crisis. Many assert it imposed inordinate, potentially large financial and regulatory burdens on a large, broad class of U.S. and international firms in order to attempt to address a discrete problem in a single region of a foreign country. Some Members also question the legislative process that led to the enactment of Section 1502. Section 1502 states that the exploitation and trade of conflict minerals from the DRC help to finance violent armed conflict in eastern DRC, particularly sexual- and gender-based violence, thereby contributing to an emergency humanitarian situation. As previously stated, it defines conflict minerals as "columbite-tantalite (coltan), cassiterite, gold, wolframite, or their derivatives; or [...] any other mineral or its derivatives determined by the Secretary of State to be financing conflict" in the DRC or an adjoining country. Other minerals are found in eastern DRC (e.g., bauxite, uranium, rhenium, cobalt, manganese, tourmaline, and pyrochlor), and some of these have periodically been implicated in conflict-related trade. They could, therefore, potentially be designated as conflict minerals, including under Section 1502. To date, however, they have garnered little attention from policy-makers or global markets. Section 1502 amends the Securities Exchange Act of 1934 by requiring the SEC to issue rules requiring selected SEC-regulated "persons" (essentially business entities) to publicly report certain information about their activities to the SEC. Affected businesses are those that engage in commercial activities involving products for which "conflict minerals are necessary to the functionality or production of a product." Such disclosures must include information on whether designated minerals used by the firm originated in the DRC or an adjoining country. When this occurs, affected firms must submit to the SEC and publicly release a report containing a description of the measures that the person (i.e., business) has taken "to exercise due diligence on the source and chain of custody" of any conflict minerals used, to be accompanied by a certified, independent, SEC-compliant audit of the information being reported; and descriptions of the products manufactured or contracted to be manufactured that are not DRC "conflict free." Section 1502 does not explicitly ban use of minerals linked to conflict, but firms must be transparent about their use of such minerals, in order to enable investors, businesses, and consumers to make informed choices about dealing with firms that do not meet "conflict-free" criteria. The report must also describe the entity that audited the due diligence efforts of an affected firm; the country of origin of the minerals used; the facilities used to process the minerals; and "efforts to determine the mine or location of origin with the greatest possible specificity." Penalties for non-compliance with Section 1502 are standard penalties, such as fines and other SEC enforcement actions, to which firms that violate SEC regulations may be subject. <4.1. Section 1502: Responses and Status of Rule-Making> Public comments on Section 1502 rule-making have been submitted to the SEC by diverse politically or economically influential actors notably firms and industry associations, human rights and good governance advocacy groups, and Members of Congress with both overlapping and divergent equities in the outcome. International responses to Section 1502 by concerned foreign governments, non-governmental advocacy groups, and some industry groups and firms have been positive, although some have voiced concern over whether Section 1502 will comport with existing voluntary international due diligence systems (see Appendix B ). Reaction to Section 1502 among many affected U.S.-listed firms and industry groups has been mixed. Most U.S. business interests that have publicly commented on Section 1502 express support for its basic goal of reducing conflict and human rights abuses in eastern DRC. Many firms and trade groups, some Members of Congress, and others, however, question whether the potentially large costs associated with implementing Section 1502 are justifiable. Concern has been expressed over whether the potentially complicated logistical and procedural challenges of compliance can practicably be surmounted as rapidly or comprehensively as advocated by the congressional sponsors and other supporters of the law if at all. Many see the SEC's draft rules as containing multiple onerous, costly provisions that cannot be realistically met, and some have argued for what they would see as more pragmatic rules. Business interests, as well as some academic and non-governmental analysts, have set out suggestions for doing so. Common among these are recommendations that provisions of final rules be phased in. Supporters of a phase-in cite the need for existing mineral certification pilot projects to mature and a need to build understanding of and compliance with traceability schemes among local actors in eastern DRC. Some also contend that existing supply contracts, commodity processing and stock clearance timeframes, and the complexity of product supply chains, especially for large-scale multi-nationals, are incompatible with a single, set deadline. Other key recommendations focus on how compliance standards and reporting burdens will be defined, or request that the rules limit the numbers, types, and sizes of businesses that would be affected. In contrast to the bulk of business interests, many of the strongest U.S. advocates of Section 1502 such as congressional sponsors of the law and non-governmental advocacy groups support rapid adoption of final rules, although some have suggested amendments to the SEC's proposed rules. Most of the advocacy groups see the costs of implementing Section 1502 as fully justified, cost-effective, and not as prohibitive as business groups have tended to claim, but they differ regarding such issues as proposed phased-in approaches and certain reporting standards. Those arguing for quick rule implementation generally contend that continuing delay undermines various efforts to break the persistent link between conflict and mineral trading; abets continuing human rights abuses associated with the trade; and constitutes a continuing risk to investors. Many also emphasize that the congressional deadline for issuance of the rules has not been met, and the SEC has had more than adequate time to prepare final rules. <4.1.1. Eastern DRC Mineral Boycott> Another issue spurring some Section 1502 advocates to urge that final rules be adopted rapidly and some critics to argue that its effects, even prior to implementation, have been destructive and that it should be abandoned is a de facto buyers' boycott of minerals from eastern DRC. Firms appear to fear that they might procure minerals in a manner that might not comply with "DRC conflict free" Section 1502 provisions or might otherwise be accused of exercising inadequate due diligence in procuring minerals from the region. Rule issuance delays have therefore spurred them to sharply decrease or stop purchases from eastern DRC. The effects and motivations for this de facto boycott were amplified by a DRC government ban on most mineral mining and trade in eastern DRC between September 2010 and March 2011 imposed, in part, to reassert legal compliance and regulatory oversight over the sector and allow the deployment of newly trained mining police. The ban reportedly had a limited deterrent effect in curbing illegal mining, as had a similar, more limited ban in 2008 in North Kivu's Walikale district; the certification system implementation reportedly remains, at best, embryonic, and police deployments have faced diverse challenges. The de facto boycott was reportedly deepened by a Conflict-Free Smelter (CFS) program announcement requiring smelters to provide documentation "from a credible in-region [DRC and regional] sourcing program verifying their conflict-free sources" as of April 1, 2011. Since separate but related chain of custody certification programs upon which the CFS program relies were not yet operational in eastern DRC (and as of late June 2012 were still not), the notice effectively prevented CFS participants from sourcing from the region. The CFS is a voluntary, industry association-run "conflict free" smelter program designed to ensure that smelter raw material inputs and production outputs are from conflict-free sources; see Appendix B . The April 1 deadline was set in order to "enable the electronics supply chain to be conflict-free by January 1, 2012" and permit implementation of mineral tracking programs. There was a rush to sell stocks of minerals between the lifting of the ban in March and the CFS deadline in early April, but eastern DRC exporters have since been unable to sell to major traditional buyers (i.e., refineries and smelters seeking CFS compliance status or middlemen supplying them). There is debate over the impact of the boycott. According to a late 2011 U.N. Group of Experts report, the boycott has "increased economic hardship, and more smuggling and general criminalisation of the minerals trade. It has also had a severely negative impact on provincial government revenues, weakening governance capacity." Other observers portray the local effects of the embargo in stronger terms, calling them catastrophic and disastrous. They contend that the removal of thousands of miners' incomes is causing local economic collapse and negative multiplier effects, as local businesses' customer base dries up, social service providers are left without paying clientele, and unemployed miners and their dependents are left without the means to supply their basic needs. The Group of Experts also reported that the boycott has caused mineral traders to sell "to smelters, refiners and trading companies in China that do not require tags or evidence of due diligence," often at heavily discounted prices and, in some cases, in a manner that may benefit armed groups, including DRC military criminal networks. In general, the boycott has undermined short-term incentives of local, mostly small-scale actors in eastern DRC's mining sector to begin instituting due diligence efforts, as they have had few buyers at all, and even fewer concerned about due diligence. While the boycott represents a widely recognized negative unforeseen consequence of Section 1502, the law is also viewed by some as already even prior to final rules adoption having had salutary effects. Anticipation of the rules' issuance, for instance, has spurred changes in the way firms source their mineral supplies, along with growing efforts to operationalize or expand various due diligence systems described in Appendix B . These emergent schemes are beginning to show some positive results including lessons on which approaches tend to work and which are less promising. They are thus functioning as applied models illustrating how potential Section 1502-compliant, OECD Guidance- based due diligence processes can work in practice albeit, to date, only in locales where there is not conflict, such as in Rwanda and Katanga, in southern DRC. In October 2011, the U.N. Group of Experts reported that such efforts are "reducing conflict financing, promoting good governance in the DRC mining sector, and preserving access to international markets for impoverished artisanal miners, [... who are] are among the prime sources of recruitment for armed groups in the DRC." The group also reported that "since the signing into law of the Dodd Frank Act, a higher proportion than before of tin, tungsten and tantalum mined in the DRC is not funding conflict." It attributed these outcomes to an emergent shift in the mining of these minerals to less conflict-prone provinces near the Kivus (the two main conflict-affected provinces in eastern DRC); the loss of control over mines by certain armed groups; and a decline in purchaser demand for 3T production from the most conflict-prone areas. It concluded that Section 1502 has had a massive and welcome impact so far, requiring chain participants all over the world to take due diligence and conflict financing seriously. This should not and must not be thrown away or weakened. [ ] Retreat now will confuse all players in the market, unfairly and unwisely diminishing the efforts of those who are implementing due diligence, and playing into the hands of the cynical and those with other agendas who have thus far refused to implement due diligence in the hope that it will simply go away. Despite such assertions, it is crucial to note that private or public sector certification systems are not currently operational in the Kivus which are the crux of the conflict minerals problem and the primary initial motive for establishing these systems. <4.2. Delays in Rule-Making> The large volume of comments submitted to the SEC on Section 1502 and the complex prospective rule implementation issues that these comments have raised pose substantial challenges for the SEC, as do possible court suits. These factors appear to be the main determinants of the SEC's repeated extensions of the commentary period on the rules, thereby delaying final adoption. While these delays have been criticized by Section 1502 supporters on a number of grounds, including with respect to spurring the de facto mineral buyers' boycott discussed above, the extended commentary period has spurred constructive debate on rule-making. It has provided parties with potentially opposed interests in the law opportunities to respond to one another, to craft solutions to problems raised by their peers, and to build consensus around some issues (e.g., rules phase-in). While there is some contention over phase-in, it is likely that a phased-in approach will ultimately be incorporated into the SEC rules as SEC Chairman Mary Schapiro stated during a March 2012 congressional hearing albeit potentially with a firmly scheduled set of benchmarks compliant with congressional intent. Another key proposal around which consensus has grown is a need for Section 1502 rule complementarity with the OECD Guidance . <4.3. Section 1502: Key Issues Under Debate> A large range of legal, technical, logistical, and other types of issues is in play under the Section 1502 rule-making process, as are diverse human rights, transparency, political, corporate financial, and reputational (e.g., public relations and consumer perceptions) interests. Apart from debate over rule phase-in and due diligence standards, key legal and technical questions focus on such issues as how final Section 1502 rules will define, operationalize, or treat Product "functionality" (a concept at the core of Section 1502), given that a product may include a conflict mineral but arguably be able to function without it (e.g., a use might be ornamental, say, or occur in a car radio that is not essential to functionality as a transport vehicle). A related subject of debate is the extent to which tools used in manufacturing that may contain a conflict mineral or tools used to produce other specialized tools necessary to the manufacture of a product are covered under the law. The SEC has proposed that such tools would likely not be affected, but has solicited feedback on this issue. A similar set of issues focuses on components necessary for the functionality or manufacture of other production components. Product "manufacture," given that while the Section 1502 "functionality requirement" only applies to those who use conflict minerals in their products, the reporting requirement that applies to such persons refers to "a description of the products contracted to be manufactured" [emphasis added]. This disparity may raise questions over who is required to report under the law, as may varied interpretation of the term "manufacture." The SEC had proposed not to offer a definition. Various commentators, however, have suggested that one should be included, but have proposed disparate definitions, some broadly inclusive and others quite narrow. There has also been debate over whether mining operators are to be defined as "manufacturers" bound by the law. Reporting thresholds, if any, in cases where a firm does not control all facets of production of its products (e.g., parts are manufactured by chains of discrete subcontractors who are contractually unrelated to the final buyer) or has a role limited to product branding and sale (e.g., of generics that may be sourced from multiple vendors). Various derivatives of the minerals and their recombination with other elements to create new substances. Ornamental and other "de minimis" uses of the minerals, or instances in which a product unintentionally includes naturally occurring trace occurrences of a conflict mineral. Recycled supplies with essentially untraceable origins. "Reasonable" credibility standards for mineral country-of-origin inquiries. "Armed groups." It is unclear, for instance, how firms would differentiate between state military or police forces at large and those elements of these forces which based on allegations of human rights abuses or other criminal acts, including illicit involvement in the conflict minerals trade would be considered armed groups under the law. Indirect "finance or benefit" to armed groups arising from association with a conflict mineral. The threshold or definition for "indirectly finance or benefit" is not defined in Section 1502. The burden of proving an absence of indirect financing or benefit could potentially be large. Firms bound by long-term contracts that precede or may conflict with or otherwise not reflect the requirements of Section 1502 (such as rules that might require immediate implementation and compliance). The status of stocks of materials that are already in processing and supply pipelines prior to the adoption of the rules. Firms covered, as some interpretations of the definition of ''person described" in the law, as written, could arguably be applied to "persons" who are not SEC issuers. The standards and responsibilities that accountants and auditors will need to comply with to provide required due diligence auditing to firms subject to Section 1502. The technical modalities of reporting language and standards, types of documentation and forms to be employed, and other technical and legal process questions. The basis for determining whether compliance costs may be too great for small manufacturers to bear and, in general, for determining what the costs will be for the full range of affected firms, persons, and industries. <5. U.S. Policies and Programs to Counter Trade in Conflict Minerals> <5.1. U.S. Strategy> As required under Section 1502, the Department of State transmitted a conflict minerals strategy to Congress in mid-2011. It identifies multiple "strategic objectives and current, planned, or possible U.S. actions" to achieve the aims of the strategy, which is entitled a "U.S. Strategy to Address the Linkages between Human Rights Abuses, Armed Groups, Mining of conflict minerals, and Commercial Products." These actions center on security force reforms; support for DRC government mineral trade regulatory systems; small-scale miner and local community protection and related capacity building; support for international and regional efforts to curtail illicit minerals trading; and promotion of due diligence and responsible trade through public outreach. The strategy also provides State Department views on "punitive measures against commercial activities that support armed groups and human rights violations." The State Department also published an initial Section 1502-mandated conflict minerals map, although it is heavily caveated. It states that the map "does not provide sufficient information to serve as a substitute for information gathered by companies in order to exercise effective due diligence on their supply chains." An updated map was published in late May 2012. <5.2. U.S. Programs> <5.2.1. Responsible Minerals Trade> Several programs designed to implement the U.S. conflict minerals strategy and the objectives of Section 1502 are under way. USAID's efforts are being undertaken primarily under the Responsible Minerals Trade (RMT) program, an inter-agency effort. It is primarily funded with $10 million from FY2010 Section 1207 appropriations and $4.78 million from FY2011 Complex Crises Fund (CCF) appropriations. The USAID DRC country mission directly implements a three-part RMT component program with $8 million of this funding, which also funds an initiative called the Public-Private Alliance for Responsible Minerals Trade. The first component supports various field-level infrastructure and training efforts to help the DRC government to implement its pilot national conflict-free mineral supply certification system. Key activities include the rehabilitation or completion of two trading centers (Centres de N goce, or CdN), an administrative building in South Kivu, and transport infrastructure linking the centers to export points. It also supports piloting of DRC's certified mineral chain tracking and export systems through CdNs in the Kivus in 2012. A second component focuses on reducing child labor in mining through various educational activities, skills training for children leaving mining, and support for DRC government efforts to integrate a child labor-free criterion into its national certification process. A third component provides technical support to the DRC Mines Ministry and other national and local mining authorities to help them implement conflict-free minerals supply chain initiatives and provide capacity-building to help the artisanal mining sector to move toward a legally based, semi-industrialized, formal production model. <5.2.2. Additional Responsible Minerals Trade Programs> In late January 2012, USAID also announced an obligation of $4.78 million in FY2011 CCF appropriations to support an initiative to "mitigate the unanticipated consequences of the de facto embargo by end-user companies on the mineral trade, support the mining sector reform agenda, and reduce existing tensions." The funding will, in part, support operationalization of the International Conference on the Great Lakes Region (ICGLR) independent Minerals Chain Auditor a key component of the ICGLR's regional certification mechanism (see Appendix B ). Programs will seek to rapidly scale up implementation of validation and traceability systems in conflict zones and areas affected by social and economic vulnerability in order to induce economic recovery and job creation. USAID's Office of Conflict Management and Mitigation "is providing an additional $1.2 million for community mediation, alternative livelihoods and civil society engagement in the areas around the pilot conflict-free supply chains" implemented by a project implementing partner, a non-profit organization called Pact. <5.2.3. State Department Efforts> USAID's programs are closely coordinated with programs sponsored by the State Department and the Department of Defense (DOD). One is a set of Democracy, Human Rights and Labor Bureau (DRL) two-year, $1.4 million program supported by Democracy Fund/Human Rights Democracy Fund FY2010 appropriations implemented by the non-profit Pact. It seeks to break links between illegal mineral exploitation, conflict, and serious human rights abuses by supporting DRC certification implementation and "a realistic oversight mechanism for the ... vast network of remote militarized mines" in eastern DRC through local capacity building. It also has three components, which complement and overlap with some RMT activities: The first focuses on building local security, human rights abuse, corruption, and mineral traceability public education, monitoring, and reporting capacities, in order to protect mining communities and help implement traceability and certification systems at the local level. The second supports efforts to operationalize the CdN mineral trading posts and related efforts to improve traceability and certified trade in minerals; introduce mineral certification systems; bolster security and human rights abuse and corruption prevention; and create local grievance and conflict resolution mechanisms. The third centers on public education in eastern DRC and Rwanda regarding minerals sector governance and reforms, links between the minerals trade, conflict, and human rights abuses, and the implementation of mineral traceability and certification systems. USAID and DRL programs are coordinated with a $2 million State Department International Narcotics and Law Enforcement Bureau effort, drawn from the $10 million allocation of Section 1207 funds that also support USAID's RMT program, to train and equip DRC mining police. These efforts are complemented by other State Department, USAID, and DOD programs in eastern DRC focused on various rule of law, workers' rights, human rights, and/or justice goals. <6. Outlook> How effective international and regional conflict mineral trade abatement efforts may be at curtailing or ending conflict and human rights abuses in eastern DRC even in the minerals sector alone is open to debate on multiple grounds. In the long run, efforts focused on ending the conflict mineral trade have the potential to play a crucial role in helping to reduce human rights violations and other crimes by reducing armed groups' access to mineral revenues. They are unlikely to succeed on their own, however. Instead, their success will almost certainly depend on diverse other efforts to achieve security and demobilization of armed groups; accountability for and prevention of human rights abuses; politically and administratively feasible resolutions to diverse local grievances; and enhanced mineral sector production and regulatory capacity-building. For instance, it is not clear that credible, consistent, and effective due diligence efforts to prevent the conflict minerals trade can be undertaken while widespread insecurity and periodic military clashes in eastern DRC persist. It is also not certain how durable or substantial an effect on conflict reduction the removal of armed actors' access to mineral revenues through conflict-free trading schemes might have, given the availability of alternate sources of conflict financing and the multiplicity of factors that stoke conflict. Another major challenge is the technical complexity associated with due diligence and mineral certification initiatives. Without substantial, continuing external assistance to help small-scale mining sector actors in eastern DRC with these efforts, and much greater local buy-in and participation, there is no guarantee that such efforts will be credible and sustainable. The potential for such schemes may also be poor if the state military elements that have so often abetted the eastern DRC trade in conflict minerals are not substantially reformed or cut off from interaction within the mineral sector. Prospects for such an outcome are decidedly mixed. Elements of the national military and other state security forces sometimes in league with armed non-state groups have for years been involved in various exploitative, often coercive, illicit profit-making mining and mineral trade activities. Some have also actively hampered state attempts to better regulate the trade and impose sanctions on their criminal acts, or have stymied security sector reforms (SSR) that threaten their ability to operate autonomously and to engage in income-earning activities, despite limited progress in addressing these problems. Thus far, emergent mineral certification and due diligence schemes have demonstrated how such systems can operate in practice in central Africa, but critically, have not yet advanced beyond nascent, in some cases abortive pilot programs in conflict-affected eastern DRC the ultimate target of these efforts. Ultimately, however, their potential for sustained success is likely to depend on efforts to ensure overall security and stability, to end impunity for human rights abuses and illicit activities, and to undertake reforms and related actions, such as Military and police training and broader security sector reform; Use of armed force by the state to seize and maintain control of mining sites and wider areas controlled by armed groups and, ultimately, neutralize these groups, including rogue elements of the national military; Political agreements and compromise over control of mining sites, and assured scope for civil society actors in the mineral sector to freely advocate reform policies and undertake investigations; National and international criminal prosecution for human rights violators and imposition of targeted international sanctions, in addition to U.N. sanctions already in place, possibly specifically directed at those who engage in conflict-related mineral transactions; Institutional capacity building for trade regulation, mining, and border control and related agencies in the DRC and neighboring countries; Targeted sustainable employment and working condition-focused assistance for artisanal miners and mining communities affected by externally driven due diligence initiatives and outcomes such as the de facto boycott; Reform of DRC mineral tax rates and revenue sharing formulas; Increased state and third party mineral sector and trade data reporting, as well as public and private sector adherence to international extractive sector transparency initiatives, such as the Extractive Industries Transparency Initiative (EITI); and Reform of mining contracts and laws, taking into consideration multiple interest groups, including the state, large-scale mining concerns, and artisanal miners. There is widespread recognition by regional and donor governments and various international organizations that such multi-faceted approaches are essential, and diverse efforts to pursue them are underway, in addition to efforts spurred by Section 1502 and the OECD Guidance . <6.1. Potential Prospective Congressional Role> In the short to medium term, interested Members of Congress are likely to closely monitor Section 1502 rule-making and the effectiveness of any eventual rule and other conflict mineral-focused programs as they are implemented. Both SEC rule-making and prospective rule implementation are likely to continue to pose complex challenges, and may spur Congress, ultimately, to revisit the approach taken in the Section 1502 rule. If the SEC issues Section 1502 rules at a scheduled August 22, 2012, meeting which is not a given, as the SEC has stated that this meeting will be held on " whether to adopt rules regarding Section 1502 [emphasis added]," rather than that it, in fact, intends to adopt final rules reactions are likely to be complex. Given substantial opposition to the anticipated rule by some industry actors and Members of Congress as described previously in this report political and possibly legal action to amend or overturn the rules may ensue. On the other hand, given that a substantial number of Members of Congress and non-governmental organizations support the law, opposition to such efforts might be expected to be stiff, and if rules implementation is not timely and effective may generate a separate set of political or legal actions to make it so. Quite apart from debate within the United States over Section 1502 and the procedural, technical, and legal aspects its implementation, application of the law's provisions and other U.S. and international conflict mineral abatement efforts in the region are also likely to be complex, and to draw congressional attention. While substantial financial and applied efforts are being invested in such activities, conflict in eastern DRC has long posed a complex set of intractable security, governance, and human rights challenges, which trade-focused efforts alone are unlikely to overcome. To the extent that this proves the case and conflict persists, notwithstanding enactment of Section 1502, some Members of Congress may see a need to pursue a more comprehensive approach to ending conflict and building peace in the DRC and the surrounding sub-region. Appendix A. Background on Conflict and Armed Actors in Eastern DRC Armed conflict has plagued eastern DRC since the mid-1990s, notably in the border region adjacent to Uganda, Rwanda, and Burundi primarily the provinces of North Kivu, South Kivu, and eastern Orientale. This conflict has spawned a large number of armed militias, some politically oriented and some primarily criminal. Conflict in the area has varied roots and causes, but is, in large part, an artifact of two wars that began in the east. The first followed the mid-1994 takeover of state power in Rwanda by the ethnic Tutsi-led Rwandan Patriotic Front (RPF), which ended the Rwandan genocide. In the wake of the genocide, Rwandan ethnic Hutu militia forces and elements of the rump ousted Hutu-led government fled Rwanda into eastern Zaire, along with large numbers of Hutu refugees, and settled in border camps. This influx fueled pre-existing local ethnic tensions, sometimes violent, and competition over land and resources, trends which were aggravated by persistent predation by various Zairian state security forces. The exiled Hutu militia forces controlled and used the refugee camps as a rear base for cross-border attacks into Rwanda. These forces, sometimes together with other local ethnic militias and the Zairian Armed Forces (FAZ), also launched attacks on Zairian Tutsis, the Banyamulenge. In response, in 1996, an RPF-backed, largely Banyamulenge force broke up the camps and forced a mass repatriation of the bulk of refugees to Rwanda. Recalcitrant militant Hutu elements and large numbers of accompanying refugees fled deeper into Zaire, pursued by the RPF-backed force, which also skirmished with FAZ elements. Simultaneously, leaders of the RPF-allied force joined with several obscure or defunct Zairian rebel groups and other restive elements to form the Alliance of Democratic Forces for the Liberation of Congo-Zaire (AFDL) in October 1996. Led by Laurent-D sir Kabila and backed by several neighboring governments, the AFDL marched across Zaire and ousted the regime of Mobutu Sese Seko, Zaire's leader since 1965. After seizing the capital, Kinshasa, in May 1997, they assumed state power. A second civil war began in August 1998. It was sparked by a military rebellion in the east that was ostensibly motivated by concerns over corruption and poor governance under Kabila, but was underpinned by ethnic divisions within the AFDL. In subsequent months, the war burgeoned, spawning the creation of numerous new Congolese armed factions and prompting extensive intervention by the militaries of neighboring states opposed to or supportive of the Kabila government. Kabila was assassinated in early 2001 and succeeded by his son, Joseph Kabila, DRC's recently re-elected president. Beginning in 1999, a series of peace accords was signed. They eventually led to the deployment of a U.N. peacekeeping mission and the creation of an interim Congolese government, based on a 2002 peace accord. It provided for a transition process leading to national elections in 2006. This peace process nominally ended the second war, but the armed groups that had emerged during the first two wars continued to be active in eastern DRC. In subsequent years these groups, some of which have enjoyed foreign backing, continued to evolve into distinct new groups and alliances. On-going conflicts in the provinces of North and South Kivu have involved armed Congolese Tutsi factions, in some cases drawn from mutinous elements of the national military. Other actors have included armed, largely Hutu refugee groups, some closely linked or led by accused Rwandan genocidaires or their associates; and elements of the Congolese military, the FARDC. Other actors have included local communal, often ethnically based defense militias known collectively as the Mai-Mai, and other small armed groups, including some rebel elements from neighboring countries. The situation has been complicated by the integration into the FARDC of multiple former non-state rebel groups, some of whom maintain command and control capabilities that are outside the control of national military authorities. Most of the smaller militias, notably Mai-Mai groups, have links to the larger armed groups. Neighboring countries, notably Rwanda, have also periodically militarily intervened in the region, often covertly but in some cases openly, including, on occasion in joint operations with DRC government forces, as in early 2009. In the district of Ituri, just north of the Kivus, there was a period of frequent conflict from 1999 to 2003 followed by a period of low-intensity conflict until 2007. Conflicts there involved ethnic factions; FARDC troops; international peacekeepers; and criminal gangs, some with linkages to ethnic political factions. South of the Kivus, in Maniema, Tanganyika, and Haut-Katanga provinces, Mai-Mai and FARDC elements some party to delayed disarmament processes have periodically fought one another and attacked civilian settlements, often out of criminal motivations. Appendix B. Regional and Industry Supply Certification and Due Diligence Initiatives International Conference on the Great Lakes Region Certification The Mineral Tracking and Certification Scheme of the International Conference on the Great Lakes Region (ICGLR), also known as the Regional Certification Mechanism (RCM), is designed to act as a regional mineral certification coordinating mechanism. It provides standards that national certification systems must meet or exceed and independent monitoring of those national systems. The RCM is part of a broader ICGLR effort, the Regional Initiative against the Illegal Exploitation of Natural Resources (RINR). RINR is aimed at supporting a legal, transparent, and conflict-free intra-regional and international exports minerals trade and ensuring that the mining sector contributes to sound socioeconomic development and economic growth. The RCM, which is at an early stage of implementation, is expected to provide a mechanism that downstream buyers (e.g., smelters, industrial producers, and manufacturers) can rely on to ensure conflict-free mineral purchases from the region and to supplement their own due diligence. The RCM is also designed to act as an early warning system, providing monitoring of mineral mining, trading, and financing-linked conflict risks in the region. The system allows for ongoing private sector initiatives, such as International Tin Research Institute's (ITRI's) Tin Supply Chain Initiative (iTSCi, see below), to be used as implementing mechanisms, as long as they comply with all RCM standards and processes. The United States, among other donors, is supporting the RCM. DRC Mining Legal Reforms and Minerals Certification Efforts Inter-agency DRC government working groups, with technical assistance from donors, are helping to promote DRC mining sector legal reforms and developing an ICGLR-compliant national traceability and certified trading chain (CTC) system known as the Certification National (CN). In addition to supporting traceability, the CN supports guarantees of "legal title, work site safety, environmental practices which include and exceed the standards of the ICGLR, Dodd-Frank, UN GoE [Group of Experts] and OECD guidance." Top priorities have been additions to the national mining code consisting of traceability, certification, and due diligence legal requirements, manuals, and procedures. Key reforms include a June 2010 accord providing a legal basis for iTSCi operation under the DRC's CN. DRC government decrees have also mandated the public disclosure of mineral contracts (May 2011); mandatory 3T and gold CN certification (June 2011); and compliance with the OECD Guidance (September 2011). Another proposed reform is the creation of a legal role for artisanal miners in eastern DRC. Most mine titles are held by formal sector firms that do not operate in the region due to insecurity and other factors, and artisanal extraction almost completely dominates mining in eastern DRC but, in many cases, is technically illegal. Concordance between provincial laws and regulations, which can vary by region, and national ones, is another possible area of reform. In addition, in early 2011 governmental agencies, civil society, and commercial mining sector actors from the provinces of North and South Kivu and Maniema signed a multi-stakeholder agreement in which they pledged to implement the DRC and ICGLR certification systems. Under the agreement, a prerequisite to the lifting in March 2011 of the DRC mining ban in the provinces, signatories also agreed to participate in Mine Monitoring Commissions that are intended to implement these systems locally. Implementation of the CN, which had been slated to be operational by late 2011, was delayed for a year due to the 2010-2011 mining ban, but is now underway. A DRC Mines Ministry working group is working on the establishment of a national mineral database. A national third party audit system under the CN was field tested in September 2011 at Nyabibwe, a cassiterite mine in South Kivu, and vetting of several other mine sites followed. Efforts are underway to assess and categorize these sites as green-, yellow-, or red-flagged, in accordance with ICGLR and OECD due diligence guidelines. In addition to Nyabibwe, at least 8 sites in South Kivu and 11 sites in North Kivu have been given green designations. The government, in collaboration with donors, has also produced several detailed maps of mining sites in the east showing which armed or other actors control them. Further mapping and related technical capacity building is ongoing, as is general CN outreach, training, and mining sector-focused public education. Another major facet of DRC's CN system is the establishment of mineral trading centers (Centres de N goce, or CdN) under a project initiated by the DRC government and the United Nations Stabilization Mission in the DRC (MONUSCO) in 2009. CdNs are designed to act as trading posts where legal minerals can be reliably traded under national and regional CTC/certification systems, and are linked by fixed air or land transport routes to regional border trading hubs (e.g., Bukavu or Goma). The initial goal is to establish five CdNs in the Kivus, with an eventual 16-17 in each of the Kivus, and 72 nationwide. Four CdNs have been completed to date. A fifth is expected to be completed soon. MONUSCO, with USAID assistance, is in the process of rehabilitating roads to the centers. There are also efforts to engage and train local comptoirs (mineral traders) and their associations in the Kivus and Maniema (see a multi-stakeholder agreement, above). Many local actors in the east, however, are reportedly not undertaking CN-required supply chain and risk assessments in part due to the de facto buyers' boycott discussed in the body of this report posing a serious threat to prospective CN success. In addition, limited state institutional capacity, funding, a history of state corruption, and varying levels of political will in various government agencies and jurisdictions may pose challenges to CN implementation and effectiveness, but many key local actors are undergoing CN training and appear to support the system. Furthermore, in contrast to eastern DRC, certified trading is reportedly working effectively in the southern province of Katanga, largely due to the greater formalization and structure of the 3Ts industry in the province, as well as stable security conditions; see text box. Industry Pilot Certification Systems ITRI Tin Supply Chain Initiative iTSCi (ITRI Tin Supply Chain Initiative), initially developed for the tin industry, and more recently for tantalum and tungsten, is the sole traceability system currently being used by most upstream actors in the DRC and Rwanda. The U.S. technical assistance non-profit Pact, a key USAID DRC minerals project implementer, helps local organizations in the DRC and Rwanda to run the scheme in collaboration with government officials and local stakeholder groups. Only large-scale mineral traders and other mineral chain actors may undergo a risk assessment and become iTSCi members, although the scheme incorporates data from smaller-scale actors in the mineral chain. iTSCi is designed to help upstream businesses notably including small and medium-size enterprises, co-operatives, and artisanal miners to comply with and implement the OECD Guidance , the ICGLR RCM, and national mineral certification system requirements. It is designed to comply with the Conflict-Free Smelter (CFS) program (see below). The two programs are expected to provide a joint mechanism enabling Section 1502 compliance, although there are some incompatibilities (primarily technical and definitional) between the systems. iTSCi has been in development since 2008. Since 2011, iTSCi has been implemented in Rwanda and the southern DRC province of Katanga, but is currently not in operation elsewhere in the DRC. iTSCi was piloted at Kalimbi mining area in South Kivu in 2010, but the 2010-2011 mining ban prompted suspension of the project. A pilot project in the Kivus, initially at one mine, is planned, but depends on several outcomes. These include the availability of funding, assurance of operational security, and the confirmation that prospective Dodd-Frank compliant buyers will re-enter the market. Rwanda's iTSCi program runs under the aegis of its broader national mineral CTC system. iTSCi may be extended to Burundi and Uganda and eventually to the entire Great Lakes Region. iTSCi, funded through industry levies, employs an OECD Guidance /ICGLR RCM-compliant mineral tagging and source monitoring chain of custody and database tracking system. In addition to shipment tracking, it emphasizes tax and border fee payment verification. This requirement can reportedly slow and otherwise hinder trading, as collections officials are often absent from their posts, and the reduction in earnings, for some, may be high enough to prompt abandonment of iTSCi participation. Two other key components are independent third party audits of iTSCi members, small-scale upstream actors in the mineral supply chain, and iTSCi data; and independent third party conflict risk assessments of vetted mines and transport routes, and conflict risks in the larger regional environment. In both DRC and Rwanda, government entities are responsible for affixing iTSCi tags to mineral bags. The role of state agencies has reportedly induced a few instances of illicit iTSCi tag sales by corrupt officials. There have also been reports that the iTSCi tags have been stolen, and that some independent traders accept stolen Rwandan ore and ore from the DRC that enters Rwanda through various means, including through the use of falsified iTSCi tags, without paperwork, or through smuggling. This ore may illicitly either transit Rwanda or be integrated into its trade stream through various means, leading the Group of Experts to conclude that "fraudulent tagging and the transit of untagged minerals through the country are threatening the credibility of Rwanda's certification system," although they also report that Rwandan border officials regularly seize illicit imports, as do DRC authorities, albeit to a lesser extent. The standard iTSCi model employs a tagged consignment logbook recording system that is reportedly somewhat cumbersome and expensive to implement. It is manually intensive at the field level although a paper-based system is arguably a technically sustainable, user-friendly format for use in underdeveloped eastern DRC and these data must then be transferred into a computer database overseas. Its cost is reportedly high enough to act as a disincentive for participation by some smaller commercial actors. In late 2011, the iTSCi cost in Katanga and Rwanda was $500 per tonne of minerals. The price is fixed, regardless of commodity price changes, which could reportedly hurt artisanal miners' already thin profit margin. By contrast, the CTC system in Rwanda reportedly costs $200 per tonne of minerals. Several firms working under the iTSCi system or the Rwandan national ICGLR-compliant CTC system have developed a computer-based system that uses iTSCi tags (which have a barcode) or radio-frequency identification (RFID) chip tags. These are placed on consignments and scanned on site, and the resulting data can immediately be uploaded to a server. The model is reportedly less costly and as technically robust as other traceability systems, but in some cases lacks market recognition. Conflict-Free Smelter (CFS) Program The Electronic Industry Citizenship Coalition (EICC) and Global e-Sustainability Initiative (GeSI) Conflict-Free Smelter (CFS) Assessment Program, initiated in 2009, supports conflict-free mineral sourcing through evaluation of the origin and status of smelter mineral input under an independent, CFS-vetted third party system. It allows a smelter to verify to buyers that it produces "conflict-free" metals. The main CFS elements are a review of an applicant firm's policies and practices on conflict minerals. The second is an assessment of smelter input materials to verify that they are conflict-free via vetting of mineral source locations; and, if the input material is not raw ore, vetting of compliance with CFS "recycled" materials standards. CFS, a voluntary program, currently covers tantalum and gold, but is slated to also cover tin and tungsten. EICC/GeSI assert that the CFS protocol is OECD Guidance -compliant. It is not publicly available, however; it is accessible only to select actors (certain NGOs, governments, and the OECD). It will again be reviewed and updated once Section 1502 rules are issued. Its sponsors seek to create a single, cross-industry, vetted conflict-free supply process. There are currently 17 CFS compliant smelters, owned by 11 firms. A CFS-vetted smelter can remain compliant for a year at a time before having to be vetted anew. The CFS incorporates a tiered country categorization system, but makes a major distinction between smelters that source from the DRC or adjoining countries and those that do not. The latter are immediately eligible to participate in a CFS assessment. To become CFS-eligible, the former must provide verified CFS-compliant/conflict-free custody/traceability documentation of the entire upstream (mine to smelter) supply chain. To a large extent, the CFS program is dependent on upstream due diligence schemes. In practice, it is aligned and works almost exclusively with iTSCi, with which it is largely congruent, despite some technical incompatibilities between the two systems. The CFS is complemented by a standard reporting and data analysis platform, the Conflict Minerals Reporting Template and Dashboard , which allows smelters and suppliers and buyers with whom they or their clients do business to prepare and share consolidated data on their mineral supply chains. Gold Industry Due Diligence Initiatives In June 2011, the World Gold Council released a draft chain of custody and conflict-free gold standards designed to ensure that gold purchases do not enable, fuel, or finance armed conflict. Compared to 3T-related industries, the gold industry appears to be at an earlier stage of developing conflict mineral-related due diligence. There are no clear indications that any applied, field-based pilot or other due diligence gold programs are yet being implemented. In March 2012, the Responsible Jewellery Council (RJC) also launched a voluntary Chain-of-Custody (CoC) Certification for gold and other precious metals aimed at helping firms support responsible sourcing and conflict-free due diligence in supply chains. The CoC lays out an independent, third party audit-based certification process and is aimed at enabling certified compliance with the OECD Guidance and Section 1502. Another reported gold industry due diligence effort is a London Bullion Market Association (LBMA) system "requiring third-party audit of all accredited refiners of gold bullion who are on the London Good Delivery list." Related Initiatives There are a variety of other standards of practice focused on human rights, social development, good governance, natural resource transparency, corporate operations, fair trade, labor rights, environment, corporate activities in unstable or conflict-prone zones, and other issues that firms can adapt to help ensure due diligence on the sourcing of minerals. These are sponsored by various industry and non-governmental coalitions. The collective goals of such initiatives are reflected in the work of the Global Reporting Initiative (GRI), an organization that produces a comprehensive "sustainability reporting" framework for application globally. Its core goals include the mainstreaming of disclosure on environmental, social, and governance performance.

"Conflict minerals" are ores that, when sold or traded, have played key roles in helping to fuel conflict and extensive human rights abuses, since the late 1990s, in far eastern Democratic Republic of the Congo (DRC). The main conflict minerals are the so-called the "3TGs": ores of tantalum and niobium, tin, tungsten, and gold, and their derivatives. Diverse international efforts to break the link between mineral commerce and conflict in central Africa have been proposed or are under way. Key initiatives include government and industry-led mineral tracking and certification schemes. These are designed to monitor trade in minerals to keep armed groups from financially benefitting from this commerce, in compliance with firm-level and/or industry due diligence policies that prohibit transactions with armed groups. Congress has long been concerned about conflicts and human rights abuses in the DRC. Hearings during successive Congresses have focused on ways to help end or mitigate their effects, and multiple resolutions and bills seeking the same goals have been introduced. Several have become law. The most extensive U.S. law aimed at halting the trade in conflict minerals, specifically the 3TGs, is Section 1502 of Title XV of the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203). Among other ends, Section 1502 requires the Securities and Exchange Commission (SEC) to issue rules mandating that SEC-regulated businesses that use conflict minerals in their products report if they obtained their mineral supplies from the DRC or nearby countries; be permitted to label as "DRC conflict free" products that they can credibly demonstrate do not incorporate minerals sourced in a manner that directly or indirectly finances or benefits armed groups in DRC or adjoining countries; and publicly report to the SEC on those of their products which do incorporate minerals that are not "DRC conflict free"—and which may not be labeled as such—and on diligence measures used to obtain these minerals. Section 1502 raises complex rule design, compliance, cost estimate, and implementation questions, and Section 1502 advocates and critics—many politically influential—have been urging the SEC to issue rules favorable to their respective views and interests. The complexity of the matters at issue and diversity of interests affected have prompted the SEC to repeatedly delay issuance of a final rule, although it is expected to act on the matter in mid-August 2012. Key rule-making issues under debate include timing and a possible phase-in of rule implementation; and what due diligence standards are to be used. There is widespread support for use of due diligence guidelines developed by the Organization for Economic Co-operation and Development (OECD) in eventual Section 1502 rules, both to ensure complementarity between U.S. and international conflict mineral trade abatement efforts, most of which employ the OECD guidelines, and to enable these schemes to mature. The State Department has provided to Congress a strategy aimed at breaking the link between mineral trade and conflict and, together with the U.S. Agency for International Development, is implementing programs in central Africa to support tracking and certification schemes; local small-scale mining communities; anti-mining labor abuse efforts; and related ends. In the short to medium term, Congress is likely to closely monitor Section 1502 rule-making and the effectiveness of any eventual rule and other conflict mineral-focused programs as they are implemented. Implementation is likely to be complex. While substantial financial and applied efforts are being invested in such efforts, conflict in eastern DRC has long posed a complex set of intractable security, governance, and human rights challenges, which such efforts alone are unlikely to overcome—and may complicate. An example of a possible unintended consequence of Section 1502 is a de facto buyers' boycott of minerals from eastern DRC attributed to the delayed rule-making process and to other factors. It has generated a local economic crisis and increased smuggling of minerals, but also reportedly reduced conflict funding and spurred conflict mineral trade control efforts.

<1. Introduction> The United Republic of Tanzania is an East African country of nearly 54 million people that is about twice as large as California. The International Monetary Fund (IMF) estimates it to have been the 31 st -poorest country globally in 2016 when ranked by per capita gross domestic product (GDP), which stood at $970 in 2016. The country has substantial natural resource wealth and agricultural potential, however, and multiple socioeconomic development indicators have generally improved in recent years. Its relative political stability and government reforms have attracted substantial official development aid, although there are abiding concerns regarding corruption and a difficult business climate. Despite such challenges, some sectors of the economy, most notably the extractive industries, are attracting private investment. President John Magufuli was elected in 2015 and is serving his first five-year term in office. U.S.-Tanzanian ties have generally been cordial and U.S. aid expanded significantly under the last two U.S. Administrations. Since the 2015 elections, however, U.S. concerns about Tanzania's governance have raised some tensions. Such concerns have centered on the nullification of the 2015 election results (and the subsequent rerun in 2016) in the semiautonomous coastal region of Zanzibar, restrictions on civil liberties, and similar issues. Citing such concerns, in March 2016, the U.S. Millennium Challenge Corporation (MCC) Board announced it would suspend its partnership with Tanzania, deferring a vote on the country's continued eligibility for a potential second large development compact; this effectively ended, for the time being, the development of a second MCC compact with Tanzania, following its completion of an initial compact between 2008 and 2013. The MCC had previously authorized and helped fund initial research and concept design activities focused on the development of a second compact, which had been expected to center on the electrical power sector and in mid-2015 had informed Congress of its intent to negotiate such a compact Tanzania. These developments ran counter to a prior narrative of improving governance and economic development in Tanzania and closer U.S. ties, underscored by former President Obama's July 2013 visit to the country, during which he highlighted such progress, as well as growing U.S. trade and investment ties. Despite the later tensions, the Obama Administration described bilateral ties as being characterized by a "strong" partnership focused on a "shared vision of improving the quality of life for all Tanzanians" in its FY2017 State Department/U.S. Agency for International Development (USAID) foreign aid budget submission to Congress. How bilateral ties may proceed under the Trump Administration and during the 115 th Congress has yet to be determined, but they appear likely to remain on a positive track. An April 26, 2017, press release issued under the name of Secretary of State Rex Tillerson characterized the U.S.-Tanzanian relationship as "strong," and "marked by a collaborative effort toward shared goals and close cooperation on a variety of programs and initiatives, from health and education, promoting economic growth and democratic governance, and advancing regional security," and projected similar trends in the future. Tanzania may also benefit from the fact that Mark Green, the new USAID Administrator, is a former U.S. ambassador to the country (2007 to 2009). In recent years, Tanzania has been the second- or third-largest annual recipient of such aid in sub-Saharan Africa, with funding reaching a high of $634.1 million in FY2015 and a low of $546.6 million in FY2017 (provisional current estimate; see Table 1 ). The Trump Administration has requested $535 million for Tanzania in FY2018, the second-highest level requested for a country in the region and a minimal 2% drop relative to the current FY2017 estimate for Tanzania. This decrease would be modest compared to the roughly one-third decrease in overall global aid levels proposed by the Trump Administration. The bulk of U.S. development aid for Tanzania in recent years has been provided under Obama Administration presidential development initiatives, including Feed the Future (FTF), the Global Health Initiative, the Global Climate Change Initiative, Power Africa, and Trade Africa. In 2014 Tanzania was selected as one of six initial partner countries under the Obama Administration's African Peacekeeping Rapid Response Partnership (APRRP). It was also chosen to be a Partnership for Growth (PFG) country, one of four worldwide. (See assistance section, below, for more on these efforts.) While most U.S. aid has focused on health and economic growth, bilateral security cooperation has also increased. Tanzania is a top African contributor of personnel to international peacekeeping operations. While there is generally little Tanzania-focused congressional activity or legislation, some Members of Congress occasionally travel to the country and periodically host visits from Tanzanian leaders, such as that of former President Jakaya Kikwete during the August 2014 U.S.-Africa Leaders Summit. Some Members have sponsored legislation advocating protections for albinos, who are the target of attacks, as discussed below. <2. Background> Tanzania, formed in 1964, is a union of Tanganyika, the mainland territory, which gained independence from Britain in 1961, and the Zanzibar archipelago. Zanzibar, which gained independence from the United Kingdom in 1963, remains semiautonomous, with its own government. Julius Nyerere, Tanzania's president from 1964 until 1985, remained influential until his death in 1999. Under Nyerere, Tanzania was governed as a socialist state, but maintained cordial, albeit sometimes tepid relations with the West. Nyerere advanced a set of national social policies known collectively as ujamaa ("socialism" in Swahili, the lingua franca), which centered on rural, village-based collectivism and self-reliance and the nationalization of key industries. U jamaa had a decidedly mixed record. At a national level, central state control of economic policy failed to spur transformative growth and industrialization and inhibited market-based economic transaction efficiencies and private sector growth, while at the village level, collectivization faced increasing resistance. Such factors, together with a range of global ones (e.g., the oil crisis of the 1970s and poor commodity prices for Tanzania's core agricultural exports) led the country to seek credit and technical cooperation with international financial institutions in the mid-1980s. This led to the gradual liberalization of the economy and later of the state. In contrast to the economic effects of ujamaa , Nyerere's leadership and policies are widely seen as having united an ethnically and religiously diverse population under a strong shared national identity. His leadership, by many accounts, spared the mainland from the ethnic tensions that have inhibited national unity or destabilized some other African countries. Zanzibar, however, has experienced some internal ethnic and religious frictions. Since the mid-1990s, successive governments have taken steps to further liberalize the economy, but Tanzania's business environment remains challenging, due, in part, to the enduring effects of state-centric policies and bureaucratization during the socialist period. A 2016 State Department assessment observed that "in certain sectors the legacy of socialist attitudes has not fully dissipated, sometimes resulting in suspicion of foreign investors and slow decision making." Despite a stated commitment to reform, corruption and poor service delivery have hampered Tanzania's efforts to curb widespread poverty and reduce reliance on subsistence agriculture. As is common in the region, Tanzania's aging infrastructure has suffered from chronic underinvestment. Nevertheless, the Obama Administration viewed the Tanzanian government as committed to development and governance reform, and provided substantial aid to spur progress in these areas, and to invest in infrastructure. <3. Politics and Governance> Tanzania's ruling party, Chama Cha Mapinduzi (CCM, Swahili for Party of the Revolution), was created by Nyerere in 1977 through the merger of the ruling parties of the mainland and Zanzibar. It has dominated Tanzanian politics since its inception, a key point of criticism by opposition parties. In the first multiparty elections in 1995, the CCM won a landslide victory in voting marred by irregularities. The party has continued to enjoy considerable electoral success on the mainland, in part due to the powers of incumbency, but opposition parties have won a growing share of legislative seats in successive elections. Still, opposition parties reportedly face periodic harassment and de facto restrictions on their activities. Increased political pluralism may distribute political power more widely, but it may also hold the potential to spur increasing ethnic, regional, and/or religious divisions, which the CCM long sought to avert. Recent years have seen a rise in the harassment of opposition political figures and restrictions on their activities. In September 2017, Tundu Lissu, a member of parliament and parliamentary chief whip of the opposition Chadema party ( Chama Cha Demokrasia na Maendeleo , the Party for Democracy and Progress), was shot by unknown assailants and seriously wounded. Lissu, who is also the president of the Tanganyika Law Society, is a fierce critic of President Magufuli and his government, but also a long-standing critic of corruption who may face hostility from many quarters. Lissu has often been arrested for his long-standing criticism of the government. The shooting was preceded by a firebombing of a local blue chip law firm, IMMMA Advocates, a local affiliate of the U.S. firm DLA Piper, which Lissu alleged police were involved in. Other opposition parliamentarians also face frequent duress from police. In late September 2017, police arrested a Chadema MP after a party event, and another complained that police were prohibiting his meetings with constituents, as had another in August. Such events have been preceded by many similar ones in recent years, notably during electoral periods. Similarly, newspapers have faced suspension or other sanction for coverage seen as critical of the government. Most recently, in September 2017, the publication of two newspapers was banned, in one case for 90 days and in another for two years, three months after another publication was also shuttered for two years. The strength of electoral challenges to the CCM has grown during the past two national elections, in 2010 and in 2015 (see below), notably from Chadema, which was formed prior to the 2000 elections. In 2014, opposition parties boycotted the process of drafting of a new constitution, claiming the CCM had refused to include opposition proposals to limit the power of the executive and establish a federal government system. The CCM-majority legislature then adopted a draft charter and the government scheduled a nationwide referendum for April 2015, but later postponed it indefinitely. Opposition parties had called for a referendum boycott and had legally challenged the reform process. Rivalry between the CCM and UKAWA (an opposition alliance made up of Chadema, the Civic United Front [CUF], and two smaller parties) remains a key focus of politics. <3.1. The 2015 Elections> Tanzania held national and Zanzibari elections on October 25, 2015. Key electoral issues included access to land, poverty and unemployment, state service provision, corruption, and political dominance of the state by the CCM, as well as energy sector development. Then-President Kikwete was constitutionally barred from running for a third term, but his CCM party was widely favored to win the polls, given its power of incumbency. The opposition, however, mounted a strong challenge, resulting in the closest presidential election in Tanzania's history. The CCM chose as its candidate, Dr. John Magufuli, a long-time government minister (see profile below), while the main UKAWA opposition coalition candidate was Edward Lowassa, of the Chadema party. Lowassa's candidacy was unusual, as he was a major CCM figure and former prime minister (2005-2008) albeit a controversial one who defected shortly before the election to become the main opposition candidate after not being selected in a contentious CCM nomination process, a major development in Tanzanian politics. Lowassa drew large crowds of supporters, and his challenge to the CCM was seen as energizing the 23 million-person electorate, especially among the large youth population, and as a credible threat to the CCM. The apparently close election contest raised tensions, and there was some limited campaign-period violence, notably between militant members of party youth wings and in Zanzibar, where opposition supporters were reportedly subject to intimidation. Opposition parties also complained of a few instances of police interference or limitations on assembly. In the presidential race, Magufuli won a 58.5% vote share, while Lowassa won 40%. The CCM also won 74% of elected legislative seats for which results were announced, while Chadema won just under 13%, the CUF 12%, and two minor parties less than 1% each. Due to additional indirect elections and seat apportionment, the CCM holds 69% of parliamentary seats, Chadema just under 19%, the CUF just over 11%, and the two minor parties each old one seat. <3.1.1. Zanzibar Election Controversy and Implications for Mainland Election> An October 27, 2015, European Union (EU) Election Observation Mission (EUEOM) characterized the national election as "largely well administered" but asserted that "insufficient efforts at transparency meant that both the National Electoral Commission (NEC) and the Zanzibar Electoral Commission (ZEC) did not enjoy the full confidence of all parties." In Zanzibar, this finding was strongly substantiated the next day, when the ZEC chairman announced a unilateral decision to nullify the Zanzibari elections while vote-counting was underway. His action came after soldiers reportedly "stormed the collation centre" and evicted journalists and observers, and two days after CUF candidate Seif Sharif Hamad had announced that he had won the Zanzibar presidency with 52% of votes. The ZEC chair later announced that new elections would be held. The ZEC chief's decision raised questions over the credibility of the Zanzibari vote and spurred electoral violence in Zanzibar. A string of small bombings using homemade devices occurred days after the annulment, along with some youth protests. The ZEC's actions also cast a shadow over the Union elections, as the latter took place in concert with the Zanzibar polls and at the same polling stations. Tanzania's NEC, however, did not take account of the Zanzibari poll nullification in its vote tallies, and coun ted Zanzibari votes in determining the outcome of the presidential election. The NEC decision also came despite opposition calls for a recount of the Union presidential vote, based on alleged voting irregularities and vote-tallying fraud. While the NEC's Union decision did not draw international concern, the ZEC's nullification did, along with criticism and calls for its reversal. There were several late 2015 ad hoc dialogue and mediation efforts involving the CUF and parties interested in finding a resolution, including figures in the CCM and foreign missions. Details about the focus and outcomes of these efforts were not made public, however, and they resulted in no changes to the outcome. Instead, despite CUF opposition, on March 21, 2016, the ZEC held a rerun of the Zanzibar vote, which the CUF boycotted. The ZEC subsequently announced that the CCM candidate, Ali Mohamed Shein, had won the election with 91% of votes and that his party had also won a majority in the House of Representatives and local councils. In a joint declaration on the election, the United States, 14 European governments, and the European Union stated that We regret the Zanzibar Electoral Commission's decision to hold a rerun of the 25 October 2015 election, without a mutually acceptable and negotiated solution to the current political impasse. In order to be credible, electoral processes must be inclusive and truly representative of the will of the people. We reiterate our call on the Government of Tanzania to exercise leadership in Zanzibar, and to pursue a negotiated solution ... with a view to maintaining peace and unity in ... Tanzania. We commend once again the population of Zanzibar for having exercised calm and restraint throughout this process, and call on all parties and their supporters to re-start the national reconciliation process to find an inclusive, sustainable and peaceful resolution. As discussed elsewhere in this report, due to the outcome of the Zanzibar vote and due to concerns over freedom of expression, in March 2016, the U.S. MCC Board voted to suspend the MCC's partnership with Tanzania. Since the vote there have been periodic acts of aggression against putative opposition supporters by so-called "Zombies," informal pro-CCM youth militia, and in the latter half of 2016, several opposition politicians were reportedly arrested. The CUF advocates the creation of a caretaker interim government of national unity and that it conduct new, fully legitimate elections. <3.2. Magufuli Administration> President Magufuli is a former MP who previously held several government ministerial posts, notably including two stints as public works minister. He came to office with a generally positive reputation for public service, based especially on his infrastructure project leadership. He also had a reputation as a loyal, mainstream party member not allied to any particular factions, rather than as a charismatic leader. Magufuli's running mate, Samia Hassan Suluhu, a former minister of state in the vice president's office, became Tanzania's first female vice president. Upon taking office, Magufuli took a tough, proactive line against corruption and state agency inefficiency, promoted civic service, and advocated austerity and cost-saving measures. These actions initially drew a degree of public support and humorous social media commentary centering on Magufuli's reputed penchant for thrift, frugality, and micromanagement as well as provisional support from Western donors. His presidency has also been characterized by a more controversial form of populist, often top-down leadership by the president in diverse issue areas. While his emphasis on austerity has reportedly caused some apprehension within the political establishment and others who have traditionally influenced or benefitted from state funding, he reportedly has remained popular. His unilateral decisionmaking often sans consultation with other relevant policymakers, absent the involvement of cabinet ministries and, in some cases, accompanied by procedural or legal irregularities has, however, prompted observers to raise concerns about an autocratic, and even semiauthoritarian governance pattern under his presidency. Such concerns have deepened amid efforts by Magufuli's administration to prosecute critics, censor critical media outlets, and otherwise curtail freedom of expression. <3.3. Corruption Challenges> Corruption a key Magufuli target is a long-persistent problem in Tanzania. A 2012 public audit revealed widespread corruption in several ministries and state entities, and six cabinet ministers resigned in connection with the controversy that year. Other scandals have arisen since, including, notably, the illicit diversion by senior government officials of $122 million in central bank funds, ostensibly to pay for energy contracts, to overseas accounts a finding which led international donors to suspend $490 million in budget support in October 2014 pending an investigation, and culminated in the resignation of three government ministers. Tanzania's ranking in Transparency International's Corruption Perception Index (CPI) has slipped in recent years (from 100 th in 2011 to 116 th in 2016, slightly up from its 119 th place ranking in 2014). <3.4. Security Challenges and Human Rights Trends> While Tanzania is generally stable and peaceful, there are periodic, usually generally limited threats to state and public security. There have been sporadic attacks on tourists in Zanzibar attributed to Islamist radicals, and there have been several unattributed armed attacks on police stations in which weapons have been looted, as in 2015, or on police personnel (with seven killed in April 2017 in the Pwani region). There have also been occasional bombings of Christian churches, among other targets, that analysts have speculatively attributed to Islamist radicals. Tanzania has occasionally arrested Islamic extremists, including 10 alleged members of the Somali Al Qaeda-linked terrorist group Al Shabaab, in April 2015. In May 2015, Tanzanian authorities also arrested Jamil Mukulu, the leader of the Allied Democratic Forces (ADF), a rebel group of Ugandan origin that is made up of Islamist extremists whom Uganda claims have ties with Al Shabaab. In July 2015, Tanzania extradited Mukulu who is also wanted in the Democratic Republic of the Congo, where the ADF is currently based to Uganda. Tanzania has a mixed human rights record. Freedom House rates Tanzania as "partly free" due to various legal restrictions on the press and nongovernmental organization operations, media bias favoring the CCM, and crackdowns on opposition protests. According to Tanzania's independent, nonprofit Legal and Human Rights Centre (LHRC) and other sources, key issues include a lack of capacity and institutional weakness in providing access to justice, as well as the conduct of security and law enforcement agencies. The U.S. State Department, in its 2016 Country Report on Human Rights on Tanzania, states: The most widespread human rights problems in the country were use of excessive force by security forces, resulting in death and injury; restrictions on assembly and political expression; and gender-based violence, including rape, domestic violence, and female genital mutilation/cutting. Other major human rights problems included harsh and life-threatening prison conditions, lengthy pretrial detention, limits to freedom of expression on the internet, restrictions on religious freedom, restrictions on the movement of refugees, official corruption at many levels nationwide, child abuse, discrimination based on sexual orientation, mob killings and injuries, and societal violence against persons with albinism. Trafficking in persons, both internal and international, and child labor were also problems. The State Department also reports that while the government took some steps to "investigate and prosecute officials who committed abuses ... generally impunity in the police and security forces was widespread"; and that while "security forces reported to civilian authorities ... there were instances in which elements of the security forces acted independently of civilian control." According to various reports, a particular human rights challenge faced by Tanzania is witchcraft-related killings and mutilation. Albinos are a notable target of such acts by attackers who reportedly harvest their body parts for use or sale in traditional witchcraft rites. There have been multiple reports of such albino murders and attacks in recent years. The problem has attracted the attention of some Members of Congress supportive of efforts to end such acts. In March 2017, four Tanzanian albino children who have lost limbs in attacks and had been living in so-called "safe houses" in Tanzania arrived in the United States to receive medical treatment and a "respite from a homeland where they are persecuted and feared." Lesbian, gay, bisexual, and transgender (LGBT) persons also face discrimination. Homosexuality is illegal in Tanzania, and homosexuals and transgender persons have been the focus of threatening comments by government officials, as well as police harassment. In 2016 the Tanzanian government halted "U.S.-funded programs that provide testing, condoms and medical care to gays," according to the Washington Post , and in 2017 reportedly prohibited 40 private clinics from providing services HIV/AIDS "to 'key populations' a category that includes gay men, transgender people and sex workers," according to National Public Radio. <4. The Economy> Tanzania's GDP stood at about $47.2 billion in 2016, and has grown at an estimated 6.6% annually, on average, over the past decade. This growth has been based largely on earnings from agricultural exports, such as coffee, tea, and cotton; tourism, which has steadily increased and is a key source of hard currency; and exports of gold, the price of which rose over the past decade and spiked in 2011, but has since declined. Gradual diversification into manufacturing is occurring, and development of uranium and gemstone mining is underway. Industry contributes about 26% of GDP. Tanzania also has coal, iron, and nickel resources, as well as a newly discovered massive reserve of helium, which remains critical to numerous technologies despite depleted worldwide supplies. The communications, transport, financial services, construction, and retail sectors are also growing rapidly. Services contribute about 43% of GDP. Agriculture, however, remains a mainstay of the economy, contributing about 31% of GDP. Roughly 68% and by some estimates up to 77% of the workforce engaged in agriculture in 2014, but agricultural growth has been relatively slow, at 3.1% between 2010 and 2015. The benefits of growth often have not reached the large rural population or been evenly distributed. Tanzania's per capita GDP, estimated at $970 in 2016, ranks low globally but higher than roughly half of countries in sub-Saharan Africa. Nearly 47% of Tanzanians live on $1.90 or less per day. Key barriers to economic development include poor infrastructure, low productivity growth, a high population growth rate, and a cumbersome and uncertain regulatory environment that generally deters foreign investment. Tanzania ranked 132 nd out of 190 countries surveyed in the World Bank's 2017 Doing Business index, notwithstanding marked recent improvements in ensuring access to credit. Tanzania's overwhelmingly youthful population, 71% of which is under the age of 30, poses a major challenge, as growing demand for health and education services could stir unrest. <4.1. Energy and Mining Sectors> Since 2010, the discovery of large reserves of natural gas off the southern coast, in a region near far larger reserves in Mozambican territory, has increased foreign investment and raised the prospect of export revenue. The government estimates that the country has 57 trillion cubic feet of natural gas reserves, and it may also have additional onshore resources. Key firms that have been active in exploring and/or developing Tanzania's reserves have included U.S.-based ExxonMobil and several European firms, including Statoil (Norway), Eni (Italy), and BG Group (United Kingdom), as well as several smaller ones . Many Tanzanians have welcomed the discoveries, especially as the resources at issue, notably gas, are slated to be used in part for domestic electricity generation, potentially vastly increasing Tanzania's limited supply of power. There have been sometimes violent protests against a natural gas pipeline in the southern port city of Mtwara, however, due to local fears that gas revenues from the Mnazi Bay gas field along the shore zones south of the city may not benefit the gas-rich region. The sector has been the subject of substantial periodic political controversy. In 2015, for instance, the CCM-dominated parliament overwhelmingly passed an oil and gas development and regulation bill after the speaker of the parliament suspended 40 opposition MPs for shouting during an earlier debate on the matter. The bill was controversial because it has important implications for future revenue earnings, state-corporate relations, and the role of the sector in helping to spur development, and transparency advocates asserted that its passage was rushed without adequate public scrutiny. Despite such controversies, many Tanzanians are generally likely to benefit from gas development and gas-fueled electricity generation. Transmission of gas has begun along a 330-mile natural gas pipeline run by Tanzania's state-run Petroleum Development Corp (TPDC). The line links gas reserves in Mnazi Bay area, along the southern coast, to gas-fired power plants near the commercial capital, Dar es Salaam. The government hopes to greatly expand gas-fired electricity generation capacity. Tanzania is also expanding its use of significant national coal reserves to fuel power production, and plans to construct a geothermal power plant within the next decade. A planned cross-border oil pipeline, which will carry crude oil from Western Uganda to a port in northern Tanzania, is scheduled to be completed by 2020. The expansion of gas-fueled, coal-fired, and geothermal power generation is in part intended to diversify the country's hydroelectricity-dependent energy mix, which is periodically hamstrung by recurrent droughts. In late 2015, for instance, drought conditions caused all of Tanzania's hydroelectric plants, which provide a reported 35% of power supplies, to temporarily suspend production. The manner in which a key 2015 oil and gas bill was enacted may raise questions among some analysts regarding whether Tanzania has adequately developed its energy governance capacity, as may its mixed record of implementing the Extractive Industries Transparency Initiative (EITI), an international effort to foster transparent and accountable governance in resource-rich countries. Under EITI, countries voluntarily agree to abide by EITI reporting guidelines, most notably including the public release of government revenues from extractive industry firm payments. Tanzania was suspended by the EITI Board in September 2015 for failing to issue a mandatory EITI transparency report; that suspension was lifted in late 2015. Tanzania has since complied with EITI reporting requirements, and began a new process of "validation" (i.e., proof of compliance with EITI standards) under the 2016 EITI Standard , an updated set of benchmarks that compliant countries must meet. As noted earlier (see text box entitled "Magufuli: Priorities in Action"), increased national beneficiation from the mining sector is another key priority of the Magufuli administration. In July, the government extended the normal parliamentary session and successfully pushed through legislative changes fundamentally reshaping the mining sector. The changes allow the government to annul current contracts with firms if they are found to be detrimental to the national interest, abolish the use of international arbitration in dispute resolution, give the government a 16% ownership share in mining projects (with an acquisition option of up to 50% of a project's value), require local processing of minerals prior to export and the deposit of mining sector earnings in local banks, and marginally increase the royalty rate on multiple mined commodities. The changes come on the heels of several disputes between the government and foreign mining firms. Observers see the changes as likely to negatively affect levels of foreign investment in Tanzania's mining sector. <5. Foreign Affairs> <5.1. Lake Malawi> Malawi and Tanzania have engaged in a long-standing dispute over competing sovereign claims to Lake Malawi (also known as Lake Nyasa); the dispute has periodically flared since the mid-1960s but never been resolved. The dispute reemerged in 2012, amid reports that the lake may contain deep-water fossil fuel reserves. Malawi has claimed the entire lake while Tanzania claims half, based on different interpretations of maps and the colonial administrative history of the lake. Regional efforts to mediate the dispute, which had stalled in recent years, have been facilitated by Mozambique's former president, Joaquim Chissano. The dispute recommenced in early 2016, when Malawi lodged a diplomatic protest with Tanzania's government after the latter published an official map showing the international border equally splitting the lake zone between the two countries. In May 2017, despite earlier statements that mediation would resume, Malawian President Peter Mutharika announced that Malawi would take the dispute to the International Court of Justice in the Hague, though the Court's jurisdiction would require the consent of both parties. Meanwhile, Malawi's government has allowed exploration for oil and gas in the lake to continue, drawing criticism from environmentalists and UNESCO. Some analysts contend that economic plans for the lake, including oil development and shipping projects, may remain stymied by uncertainty linked to the ongoing border dispute. <5.2. Refugee Flows> Tanzania has for decades hosted refugees from various conflicts and political crises in the conflict-afflicted and densely inhabited countries in the Great Lakes region of central Africa some for extended periods and has played a mediational role in attempts to resolve such crises. In 2014, Tanzania also naturalized a large number of long-term Burundian refugees. In September 2016, Tanzania participated in the Leaders' Summit on Refugees, an event hosted by then-President Obama and intended to increase shared global efforts to aid refugees worldwide. At the summit, Tanzania agreed to "continue to receive persons running from wars, conflicts, political instability and persecution," as per its commitments under various international accords, among other related pledges. Observers have nonetheless periodically questioned Tanzania's commitment to these principles, noting that Tanzanian domestic sensitives over land access and the country's regional diplomatic ties have sometimes led the government to curtail protections for refugees and asylum seekers, and/or pressure them to return to their countries of origin. Since 2015, Tanzania has faced a new influx of refugees from Burundi in connection with a political and security crisis rooted in that country's disputed 2015 elections. The number of refugees from both Burundi has grown steadily since the start of the Burundi crisis in April 2015, and stood at 358,600 in early September 2017. Almost all of the recently arrived Burundian refugee population resides in the Kigoma Region, adjacent to Burundi, in three large camps supported by Tanzanian and international public and nongovernmental humanitarian and social services agencies. Tanzania also hosts a smaller number of refugees from the Democratic Republic of the Congo (DRC). The United States and other donors provide funding to support these camps (see U.S. aid section below). Despite its 2016 pledges at the Leaders' Summit on Refugees, in early 2017, the Tanzanian government stopped providing prima facie refugee recognition of Burundian refugees, according to UNHCR. In July 2017, during a visit to Tanzania on his first foreign trip outside Burundi since a May 2015 putsch and his later controversial July 2015 reelection Burundian President Pierre Nkurunziza urged all Burundians in Tanzania to repatriate. President Magufuli mirrored his statement, calling on the refugees to "voluntarily return home," and later in the month suspended further registrations and naturalizations of Burundian refugees. In late August, Magufuli again called for the UNHCR to voluntarily repatriate thousands of Burundian refugees, and a Burundian-Tanzanian-UNHCR coordinating group met to discuss the purportedly voluntary repatriation of nearly 12,000 Burundians. These moves have sparked criticism from human rights advocacy groups, which assert that Burundi's crisis is far from settled; Amnesty International, for instance, called for a halt to what it called "mounting pressure" on Burundian refugees "to return to their country where they would be at risk of death, rape and torture." <5.2.1. Tanzania's Contribution to Mediation in Burundi> Tanzania facilitated the landmark peace settlement that helped end Burundi's decade-long civil war in the 1990s, and it is involved in halting regional mediation efforts aimed at resolving the current Burundian crisis. In March 2016, the East African Community (EAC) appointed former Tanzanian President Benjamin Mkapa to facilitate an "inter-Burundian dialogue," though President Yoweri Museveni of Uganda technically remains the chief EAC mediator. After consultations, Mkapa set out a plan of action at an EAC summit in September 2016 and later presented Museveni with a more detailed roadmap. It provided for a series of engagements beginning in late 2016 and culminating in a "final agreement" in mid-2017, an outcome that was not achieved. Mkapa has so far been unable to convene fully representative government-opposition talks. This has been due to disagreements over who is entitled to participate and Burundian opposition doubts over Mkapa's credibility and neutrality, and what they see as his bias toward the Burundian government, based on Mkapa's repeated assertion that Nkurunziza's 2015 reelection a highly contentious key factor driving the ongoing crisis was "legitimate." In May 2017, an EAC summit heard a progress report on Mkapa's efforts and the broader dialogue, but took no substantive actions to enhance its conflict mitigation approach. Individual EAC leaders, including President Magufuli, did, however, issue statements opposing U.S. and EU targeted sanctions on Burundi, angering the Burundian opposition. An EAC summit communiqu also tied the EU's sanctions on Burundi, among other issues of concern, to an ongoing EU-EAC negotiation over a proposed EU-EAC regional Economic Partnership Agreement. The U.N. Security Council (UNSC) has continued to endorse Mkapa's efforts and the overall "inter-Burundian dialogue" which, in an August 2017 statement, the UNSC called "the only viable process for a sustainable political settlement." The council also, however, stated that it "remains deeply concerned over the lack of progress in this dialogue" and a range of related human rights, political, and other developments inside Burundi. It also reiterated its "intention to pursue targeted measures against all actors, inside and outside Burundi, who threaten the peace and security of Burundi." The council has previously outlined similar concerns. <5.3. China> China is among Tanzania's top international partners. The two countries have a long history of warm political relations and close trade and economic development cooperation, dating back to the early postcolonial period and, notably, China's construction in the 1970s of the Tanzania Zambia Railway (TAZARA). China is Tanzania's largest trading partner, and several large Chinese firms are active there. China is also a key security partner for Tanzania; the two militaries share long ties and retain a close relationship. After Chinese President Xi Jinping took office in 2013, Tanzania was the first country he visited. The natural gas pipeline project noted above was financed by a $1.23 billion Chinese loan. Construction is also underway on a $10 billion megaproject at Bagamoyo, former President Kikwete's home town, which includes a multipurpose deep water port, special economic zone, and linked railway. The multiyear project is financed by China Merchants Holdings-International (CMHI), China's largest port operator, and Oman's State General Reserve Fund. CMHI is the designated construction manager and, according to some reports, may have multidecade concession rights to the facility. The Bagamoyo development with a planned annual 20 million container throughput capacity is projected to dwarf ports in Dar es Salaam and Mombasa, Kenya, and provide access to multiple countries in East and Southern Africa. In mid-2016, Tanzania's government also reported that China's Export-Import Bank had agreed to provide Tanzania with a $7.6 billion loan to fund construction of a railroad to boost linkages between Tanzania to its EAC neighbors. Other major deals in recent years include a $500 million housing project between Tanzania's SOE National Housing Corporation and China Railway Jianchang Engineering signed in 2013; several power project deals signed in 2013 worth more than $828 million; an integrated coal mine and power plant project; and an integrated iron ore mine and steel mill project worth a total investment of up to $3 billion. Tanzanian-Chinese bilateral trade reached a reported $4.67 billion in 2015, but fell to $4 billion in 2016. The balance of this trade varies considerably year to year, but in recent years has grown exponentially in favor of China (e.g., Chinese exports were almost 12 times larger than its imports from Tanzania in 2016). U.S.-Tanzanian trade, in comparison, is much lower, with U.S.-Tanzania trade totaling $278 million in 2015 and $309 million in 2016. Chinese-Tanzanian economic ties have periodically prompted domestic backlash among Tanzanians negatively affected by Chinese businesses, such as communities displaced during large construction projects or Tanzanian traders hurt by direct competition from Chinese retail rivals. <5.4. International Security> Tanzania actively contributes to regional and international peace and security efforts. In addition to being a troop contributor to United Nations (U.N.) peacekeeping operations, with personnel deployed in multiple African countries and Lebanon, Tanzania hosts large numbers of refugees from the region, including from Burundi and the Democratic Republic of the Congo. The International Criminal Tribunal for Rwanda, which tries Rwandan genocide suspects, is located in the northern Tanzanian city of Arusha, as is the African Union's African Court on Human and Peoples' Rights, a continental court with a mandate to protect human rights. In September 2017, Tanzania drew negative attention after U.N. sanctions investigators reported that they were "investigating information by a Member State" that North Korea's Haegeumgang Trading Corporation was "repairing and upgrading the surface-to-air missile Pechora (S-125) systems" of the Tanzanian military, which was also reported to be "repairing and upgrading its P-12 air defence radar." Both systems originate in the Soviet bloc. Such actions may violate various provisions in U.N. Security Council sanctions on North Korea, including arms and related materiel embargoes and proliferation-related and potentially financial-transaction-related sanctions. The investigators reported that the "prohibited military-related contracts" between Tanzania and North Korea were reportedly worth 10.5 million. Tanzania had not responded to the panel's enquiries as of the date of the report's publication. <6. U.S. Relations and Policy> U.S.-Tanzanian ties are robust and have grown in recent years, despite tensions since 2015 related to Tanzanian governance patterns, as discussed in this report's introduction. Another irritant in bilateral relations has been a contract dispute between TANESCO, the national power utility, and Symbion Power, a U.S. firm. Along with partners, Symbion received more than $110 million in MCC procurement awards to help improve Tanzania's electrical power sector and later reportedly expanded its business beyond its initial MCC contract. Notwithstanding these tensions, as of late 2016, the State Department portrayed the bilateral relationship as "an established partnership characterized by mutual respect, shared values, and aspirations for a more peaceful and prosperous future." Such sentiments had been reflected in cordial high-level engagements over several years. Former President Kikwete was the first African head of state to meet with former President Obama after Obama took office in 2009. Later, in 2013, then-President Obama visited Tanzania, and in 2014, President Kikwete attended the U.S.-Africa Leaders Summit. President Obama's 2013 trip followed prior high-profile visits (e.g., by then-Secretary of State Hillary Clinton in 2011 and then-President George W. Bush in 2008). How U.S.-Tanzanian relations may change under the Trump Administration, if at all, has yet to be determined but, as noted in the introduction of this report, they appear set to remain on a generally positive track. <6.1. Trade Issues> Tanzania is eligible for U.S. trade preferences, including apparel benefits, under the African Growth and Opportunity Act (AGOA, reauthorized under P.L. 114-27 ) and is a member of the East African Community (EAC) along with Burundi, Kenya, Rwanda, and Uganda. The EAC has taken several steps to promote regional integration: a customs union was formed in 2005, followed by a common market in 2010 and, in 2013, an agreement to establish a monetary union within the next decade. The bloc seeks to adopt a single currency by 2024. Many of its trade integration efforts have been supported under an Obama Administration-initiated initiative called Trade Africa. Tanzanian-U.S.-trade is moderate by global comparison. It hit a record $482 million in 2013, but later dropped. It stood at $310 million by 2016 (made up of nearly $153 million in U.S. imports from Tanzania and $157 million in U.S. exports). The proportion of U.S. imports from Tanzania that benefit from AGOA has risen markedly in recent years, reaching 24% in 2016. Top U.S. imports from Tanzania include precious stones, apparel, coffee, and cashews. U.S. exports are more diverse; top ones include machinery, used clothes, cereals, and aircraft and parts. In June 2017, the Office of the U.S. Trade Representative (USTR) initiated an out-of-cycle review of Tanzania's eligibility for AGOA trade benefits. It was launched in response to a petition by the Secondary Materials and Recycled Textiles Association (SMART), a U.S. used clothes exporting trade group whose member firms source used clothes in the United States, mostly from charity or other donations, and export them, mostly to developing countries. SMART asserts that a March 2016 EAC decision to initiate a phased-in ban on imports of used clothing and footwear, preceded by the imposition of large tariffs, has imposed a significant and "untenable" economic hardship on the U.S. used clothing industry. SMART outlined its concerns about EAC's actions at an August 2016 USTR annual AGOA eligibility hearing. A July 2017 out-of-cycle hearing spurred SMART's petition; Tanzanian and other EAC member country officials and other parties also testified. One expert at the hearing, Stephen Lande, head of Manchester Trade (a consulting firm), contended that that AGOA eligibility should not be determined based upon individual objections to "each and every trade restriction a country has," and that any decision to entirely revoke Tanzania's AGOA eligibility based on the complaint of an single industry group might cause disproportionate damage to overall trade and investment. USTR officials are to submit their out-of-cycle review recommendations to U.S. Trade Representative Robert E. Lighthizer, who is to then make his own recommendations to President Trump. USTR officials are also conducting a regular annual review of Tanzania's AGOA eligibility. They plan to announce the results of both reviews simultaneously, so that any resulting determinations on Tanzania's eligibility would come into effect in early January 2017, alongside the routine annual eligibility announcements for other AGOA-implementing countries. In 2012, U.S. and EAC officials agreed to pursue a trade and investment partnership dialogue potentially leading to a U.S.-EAC Investment Treaty and discuss a possible Trade Facilitation Agreement, among other ends. Toward such ends, the U.S. Department of Commerce opened a new office in Tanzania in 2014. In 2015, the United States and the EAC signed a cooperation agreement on technical cooperation to advance EAC implementation a the World Trade Organization (WTO) Agreement on Trade Facilitation, sanitary and phytosanitary trade capacity-building, and the reduction of technical barriers to trade. In late 2016, U.S. officials also launched a $194 million, five-year grant in support of the EAC. It centers on institutional capacity-building for the EAC's Secretariat, and increasing regional economic integration and U.S.-EAC member state trade and investment, enhancing the sustainable management of natural resources in the Lake Victoria Basin and Mara River ecosystems, and increasing access to integrated healthcare in border areas. The grant complements Trade Africa, a U.S. trade capacity-building and related assistance initiative aimed at increasing U.S.-Africa and intra-African trade and investment. It was initially focused primarily on the EAC and its member states, but has been expanded to other regions of Africa. <6.2. U.S. Bilateral Assistance> U.S. assistance to Tanzania has focused primarily on health, food security, agricultural development, infrastructure, and environmental conservation. The State Department and USAID administer most of this aid. In addition, Tanzania implemented an MCC Compact between 2008 and 2013 (see below). Under the Obama Administration, the bulk of U.S. aid for Tanzania was channeled through several global presidential development initiatives most of which were launched under the Obama Administration, most notably Feed the Future (FTF), the Global Health Initiative, and the Global Climate Change Initiative as well as two initiatives launched by former President George W. Bush: the President's Emergency Plan for AIDS Relief (PEPFAR), the President's Malaria Initiative (PMI). Tanzania was also a focus country under the Obama Administration's African Peacekeeping Rapid Response Partnership (APRRP, see below) and its Partnerships for Growth (PFG) initiative. In practice, Tanzania's applied PFG goals largely centered on and have largely been subsumed under Power Africa, a presidential initiative launched under President Obama to vastly increase access to electricity in Africa. Power Africa is expected to continue under the Trump Administration. Tanzania is also a beneficiary of the regional Trade Africa initiative (see above). In mid-2016, Tanzania and USAID signed a five-year strategic agreement for continued development assistance to support Tanzania's transition toward middle income status by 2025, including through programs in the areas of health, agriculture, natural resource management, education, energy, and democratic governance. Like most African countries, Tanzania is also a participant in the U.S. Young African Leaders Initiative (YALI), initiated during the Obama Administration. YALI has been retained by the Trump Administration, albeit potentially at a reduced level. Tanzanians also participate in several other educational or professional State Department exchange programs, and there is a Peace Corps program in Tanzania with roughly 220 volunteers, who work in various areas, such as agriculture, education, and health, as of September 2017. <6.2.1. Focus on Healthcare Assistance> Health funding has comprised the bulk of State Department/USAID aid, and accounted for $480.1 million, or nearly 88% of a total of $546.6 million (provisional estimate) in FY2017 bilateral aid. Health aid would be funded at $511.5 million (95.5% of total aid) under the Trump Administration's total bilateral $535.3 million FY2018 aid request. Such health aid has been largely devoted to fighting HIV/AIDS under PEPFAR, and HIV/AIDS-centered aid would make up about 92% of all FY2018 total health spending under the Trump Administration's FY2018 proposal. Antimalaria programs carried out under the President's Malaria Initiative (PMI) are another key focus of U.S. health programs, as are maternal and child health efforts, although both are funded at far lower levels than are HIV/AIDS programs. Tanzania is also a partner country under the Global Health Security Agenda (GHSA), which seeks to mitigate the impact of disease outbreaks, notably those that threaten global health. According to UNAIDS, in 2016 Tanzania had an adult HIV/AIDS prevalence rate of 4.7% and a total population of 1.4 million people living with the disease, and suffered 55,000 new infections but averted 1.1 million additional ones. The State Department's U.S. Global AIDS Coordinator reports that Tanzania's HIV/AIDS epidemic varies greatly by region (between 0.1% and 14.8%) and is higher in urban areas (7.2%) than in rural ones (4.3%) and by gender (male prevalence stands at 3.8% and that for females at 6.2%). Tanzania is making efforts to achieve the UNAIDS "90-90-90" target the goal of ensuring that by 2020, 90% of people living with HIV are diagnosed, 90% of those diagnosed receive antiretroviral treatment (ART), and 90% of those in treatment have fully suppressed viral loads. It is making fair progress toward the "first 90" goal, as 70% of those with HIV are diagnosed, and is quickly progressing toward the second, as 88% of those diagnosed are in treatment. The overall estimated treatment rate (including those who are estimated to be HIV-positive but may not be diagnosed) is lower, at 62%. Data were insufficient to determine progress toward the third goal. Tanzania has also made substantial progress toward prevention of mother-to-child HIV transmission; 84% of pregnant women who needed antiretroviral therapy were receiving it. According to PEPFAR, key challenges relating to improved HIV/AIDS responses include "weak health infrastructure, shortages of health and social workers, high levels of stigma, and cumbersome government procurement systems." PEPFAR efforts support HIV/AIDS prevention, care, and treatment and related health systems and governance programs, and center on helping Tanzania to meet the UNAIDS 90-90-90 targets and diverse related goals outlined under its national HIV/AIDS multisectorial framework and other plans. Tanzania is one of 13 focus countries under the Trump Administration's PEPFAR Strategy for Accelerating HIV/AIDS Epidemic Control (2017-2020) , released by Secretary of State Rex Tillerson in September 2017. Key PEPFAR foci to date have included prevention of mother-to-child transmission (PMTCT) through antiretroviral therapy throughout pregnancy and breastfeeding for affected women. Others have included efforts to scale up ART coverage, expand access to and participation in voluntary medical male circumcision (VMMC), increase HIV counseling and testing (HCT), and enhance prevention through the provision of condoms. PEPFAR programs prioritize gender-differentiated strategies, given the higher female rate of infection, and pediatric treatment is another special priority. To decrease new infections and enhance epidemic control, PEPFAR efforts are also being shifted toward prioritizing responses in high-prevalence and high-burden geographic areas and population sub-groups facing high HIV/AIDS infection risks or prevalence rates. PEPFAR also supports efforts to counter cervical cancer through a public-private partnership called Pink Ribbon Red Ribbon (PRRR). Between FY2011 and 2015, an average of 29% of PEPFAR funds in Tanzania went to prevention, 21% to care, 34% to treatment, and 16% to health governance and system support. <6.2.2. Development Assistance> Agriculture development aid, which constituted $54 million of the Obama Administration's FY2017 request, has been the second-largest target of U.S. support in recent years, but funding would fall to $10 million under the Trump Administration's FY2018 request. Such aid has been channeled primarily through Feed the Future, a major global U.S. food security and agricultural economic growth initiative. In Tanzania, it has focused on improving agricultural productivity and rural infrastructure, including roads and irrigation; bolstering staple food and horticulture commodity value chain and marketing efficiency; improving access to nutrition for children and mothers; and improving private- and public-sector policymaking, including regarding land tenure. Roughly 80% of FTF resources are focused on southern Tanzania, an area that the government sees as having great untapped agricultural potential, while much of the balance is devoted to work in the Zanzibar region and selected areas of central and northern Tanzania. FTF activities have also involved collaboration with U.S. global health programming. Tanzania is also a participant in the New Alliance for Food Security and Nutrition, a Feed the Future-supported, G8-led global agricultural investment initiative in Africa. It has also received U.S. support under the Scaling Seeds and Other Technologies Partnership, a project of the Alliance for a Green Revolution in Africa, an international multistakeholder effort to boost African farm production. The future of FTF is uncertain. U.S. assistance has also supported strengthening of governance; infrastructure building (roads, power, water, and sanitation); economic growth; primary education; law enforcement capacity-building (see below); and biodiversity preservation. <6.2.2.1. Focus on Wildlife Conservation> A range of U.S. bilateral and regional programs support Tanzanian efforts to combat wildlife trafficking. In mid-2015, the U.S. embassy in Tanzania launched a five-year project called the Promoting Tanzania's Environment, Conservation, and Tourism (PROTECT) Project, a $14.5 million, five-year contractor-implemented project. Its aim is to enhance conservation and combat wildlife poaching and trafficking nationwide by supporting capacity building centered on wildlife resource management policymaking and institutions and trafficking law enforcement and prosecution. It also aims to enhance cooperation between civil society and the government and support development of community capabilities relating to the management of wildlife management areas (WMAs, locally controlled natural areas). PROTECT activities are accompanied by $2.75 million in natural resource small grants supporting wildlife management innovation, incentives for private investment, and other purposes. A second, $14 million, five-year program called "Endangered Ecosystems Northern Tanzania Project," launched later in the year, aims to increase antipoaching incentives and directly support WMAs, communities, and tourism operations in order to improve wildlife management in northern Tanzania. Another is the Southern Highlands and Ruaha-Katavi Protection Program (SHARPP), an $8.5-million, five-year program launched by USAID in 2014, centering on Support for WMAs; livelihoods; habitat management; and elephant monitoring and protection. These efforts follow on similar ones in prior recent years. <6.2.3. Other Assistance> The U.S. Department of Labor (DOL) Bureau of International Labor Affairs also funds projects aimed at combatting child labor in Tanzania, particularly in agricultural and domestic service contexts. U.S. assistance to support Tanzania's hosting of refugees is administered by the State Department's Bureau of Population, Refugees, and Migration (PRM), which reports that U.S. funding for refugee support in Tanzania totaled roughly $1.2 million in FY2014, $16.7 million in FY2015, $36.2 million in FY2016, and $12 million in FY2017 to date, with more planned. <6.2.4. Millennium Challenge Corporation> In September 2013, Tanzania completed a $698 million, five-year MCC compact. Awarded in 2008, this compact sought to reduce poverty and stimulate economic growth through targeted investments in roads and access to electrical services and potable water. In late 2014, the MCC agreed to provide an additional $9.78 million to support further feasibility studies and other work linked to the development of a second compact focused on the power sector. In June 2015 the MCC Board stated that a second compact "will not be considered for approval until, among other pending items," Tanzania's government "makes progress on energy sector reform commitments made in 2014." The agency stated that once a compact was prepared, the MCC would again "scrutinize the government's track record on good governance, including control of corruption and freedom of expression." In March 2016, the MCC suspended negotiations toward a second compact that would reportedly have been worth $472 million. It did so on the basis that Tanzania had "moved forward with a new election in Zanzibar that was neither inclusive nor representative, despite the repeated concerns of the U.S. Government and the international community." Another issue was that Tanzania had "not taken measures to ensure freedom of expression and association are respected in the implementation of the Cybercrimes Act," which had also been the focus of repeated U.S. expressions of concern. In addition to stating that the elections in Zanzibar had not been credible, the Board stated that "Tanzania has taken no measures to ensure freedom of expression and association are respected in the implementation of the Cybercrimes Act." <6.2.5. Security Cooperation> U.S. security cooperation and assistance has grown since the 1998 Al Qaeda bombing of the U.S. Embassy in Dar es Salaam, but it remains limited compared to that pursued with Tanzania's East African neighbors. Peacekeeping support is a top main focus of military cooperation and aid ties, and expanded in FY2014-FY2016 under APRRP. That initiative's future is uncertain, as the Trump Administration has not requested funding to continue it. Tanzanian troops have also received training under the U.S. Global Peace Operations Initiative (GPOI) and its train-and-equip African Contingency Operations Training and Assistance (ACOTA) program, which seeks to increase available international peacekeeping troops. Such assistance is complemented by a U.S. International Military Education and Training (IMET) program, which supports military professionalization and institutional reform in the Tanzanian military. Tanzania receives some counterterrorism assistance through the State Department-led, multicountry Partnership for Regional East Africa Counterterrorism (PREACT). It also hosts the regional East and Southern Africa Anti-Money Laundering Group, in which the United States has observer status, and receives U.S. regional funding to combat terrorist financing. Smaller U.S. security aid programs center on strengthening border security and improving police capacity to deter crime and terrorism. Some recent military-to military or U.S. military activities, all in 2016, have included the following: U.S. and Tanzanian participation, with other partner nations, in Eastern Accord 2016, an annual, combined, joint military exercise that took place in Tanzania and centered on a simulated peacekeeping operation command post exercise. The Tanzania military's hosting of the U.S.-aided African Land Forces Summit (ALFS), a seminar of land military chiefs from across Africa focused on developing cooperative solutions to regional challenges and threats. Specialized training of Tanzanian game scouts by U.S. military personnel on "surveillance and patrol techniques, arrest and detention procedures, search and seizure, crime scene investigation, first aid, human rights and rules of engagement" aimed at enhancing their ability to counter wildlife poaching and trafficking. <6.2.6. Law Enforcement Cooperation> The United States and Tanzania have increasingly cooperated in a limited number of criminal cases and with respect to joint efforts to build Tanzania's law enforcement capabilities. Among the most notable recent cases, cooperation occurred between 2016 and 2017. In May 2017, a Tanzanian named Ali Khatib Haji Hassan (a.k.a. "Shkuba") and two associates were extradited to the United States to face a U.S. federal indictment brought against them by a Houston, TX, grand jury charging them with conspiracy to possess and then distribute heroin between 2010 and 2015. In March 2016, the U.S. Department of the Treasury's Office of Foreign Assets Control (OFAC) had designated Hassan and his trafficking organization as significant foreign narcotics traffickers under the Foreign Narcotics Kingpin Designation Act (Kingpin Act). Recent U.S. law enforcement capacity training has focused on such activities as the following: canine training by U.S. Customs and Border Protection (CBP) aimed at detecting illegal drugs and ivory at ports and airports, as well as related investigations and prosecutions; anticorruption training of Tanzanian prosecutors and investigators by the U.S. Embassy's Office of Overseas Prosecutorial Development, Assistance and Training (OPDAT); and wildlife crime scene investigations and evidence collection training by USAID and the U.S. Fish and Wildlife Service (FWS), in at least one case facilitated by the conservation and antipoaching organization the PAMS Foundation, whose cofounder was murdered in 2017 (see above). <7. Outlook> Tanzania is likely to remain a generally stable but poor developing country for the foreseeable future. Increasing multiparty competition may contribute to gradual growth in demand for political change, democratic accountability, improved governance, and greater political pluralism but potentially also to increased political tension. Growing access to information, notably via mobile phones, may spur similar trends by increasing exposure to information on current events, and global social and governance norms. It may also contribute to market growth through increased information to pricing data and improved social services. Such changes, along with continuing infusions of foreign assistance, including from the United States, and gradually improving public infrastructure and government services, are likely to spur increasing economic activity, production, and trade, thus improving quality of life for the Tanzanian people. The United States, while expressing periodic concern over issues such as corruption, appears likely as suggested by bilateral relations trends and aid levels in recent years to continue to support the strengthening of Tanzania's democratic system and the socioeconomic development of its people, and to look to Tanzania as a key development partner in East and Southern Africa.

Tanzania is an East African country comprising a union of Tanganyika, the mainland territory, and the semiautonomous Zanzibar archipelago. The United States has long considered Tanzania a partner in economic development and, increasingly, in regional security efforts. With nearly 54 million people, Tanzania is one of the largest countries in Africa by population and is endowed with substantial natural resource wealth and agricultural potential. Over the past decade, it has experienced robust economic growth based largely on favorably high gold prices and tourism; growth has averaged nearly 7% annually. The ongoing development of large reserves of offshore natural gas discovered in 2010 has raised the prospect of substantial foreign investment inflows and export revenue. Nevertheless, corruption and poor service delivery have hindered efforts to curb widespread poverty, and extensive development challenges remain. Since 1977, Tanzanian politics have been dominated by the ruling Chama Cha Mapinduzi (CCM, Party of the Revolution), created through the merger that year of the single parties that had controlled the mainland and Zanzibar since 1964. Opposition parties face periodic harassment and de facto restrictions on their activities. President John Magufuli, who leads the CCM, was elected in late October 2015 and is serving his first five-year term in office. His predecessor, Jakaya Kikwete, also of the CCM, assumed power in 2005 and won reelection in 2010, but was constitutionally barred from running for a third term. The 2015 polls featured a close contest between the CCM and a coalition of the leading opposition parties. Tanzania is generally stable and peaceful, despite periodic threats to public safety. These include sporadic attacks on tourists in Zanzibar, several unattributed armed attacks on police, and occasional bombings of Christian churches and other targets. Tanzania has occasionally arrested suspected Islamic extremists, as in April 2015, when a group of 10 alleged members of the Somali Al Qaeda-linked terrorist group Al Shabaab were taken into custody. U.S.-Tanzanian relations are cordial, but have suffered tensions over the contentious 2015/2016 election in Zanzibar, restrictions on civil liberties, and other issues. President Kikwete was the first African head of state to meet with former President Obama after the latter took office, and President Obama stated that a "shared commitment to the development and the dignity of the people of Tanzania" underpins bilateral ties. Tanzania also maintains close economic and political ties with China. Under the Obama Administration, aid cooperation was generally robust. How ties and assistance cooperation may proceed under the Administration of President Donald Trump and during the 115th Congress has yet to be determined. U.S. aid for Tanzania has focused primarily on health, food security, agricultural development, and infrastructure, largely under multiple major presidential initiatives. U.S. assistance has also supported Tanzania's hosting of large numbers of refugees from the region. Tanzania is eligible for African Growth and Opportunity Act (AGOA) trade benefits and in 2013 completed a $698 million Millennium Challenge Corporation (MCC) compact focused on poverty reduction and economic growth. The MCC has since suspended activity in support of a possible second compact, citing governance concerns. U.S. security assistance increased after the 1998 Al Qaeda bombing of the U.S. Embassy in Dar es Salaam. Tanzania was one of six initial participants in the Obama Administration's African Peacekeeping Rapid Response Partnership (APRRP), which aims to build the peacekeeping capacity of African militaries. Tanzania is a troop contributor to United Nations (U.N.) peacekeeping operations in multiple African countries and Lebanon.

<1. Introduction> Within a week of each other, Senator Grassley and Representative Goodlatte, chairmen of the Senate and House Judiciary Committees, introduced parallel sentencing reform bills with bipartisan cosponsors. By and large in identical language, the two would amend existing mandatory minimum sentence provisions found in federal drug and firearms laws, by and large in identical language. The most obvious difference is that the Senate proposal, S. 2123 , the Sentencing Reform and Corrections Act of 2015, features an extensive corrections title, which the House proposal, H.R. 3713 , the Sentencing Reform Act of 2015, lacks. <2. Mandatory Minimums> <2.1. Controlled Substances> The Controlled Substances Act and the Controlled Substances Import and Export Act establish a series of mandatory minimum sentences for violations of their prohibitions. Trafficking that is, importing, exporting, manufacturing, growing, or possessing with the intent to distribute a very substantial amount of various highly addictive substances, such as more than 10 grams of LSD ( 841(b)(1)(A)), is punishable by imprisonment for not less than 10 years or more than life. A subsequent conviction carries a sentence of imprisonment for not less than 20 years or more than life. When substantial but lesser amounts are involved, such as 1 gram of LSD ( 841(b)(1)(B)), sentences of imprisonment for not less than 5 years or more than life are called for, and imprisonment for not less than 10 years or more than life in the case of a subsequent conviction. As noted in Table 1 below, S. 2123 and H.R. 3713 would reduce the mandatory minimum sentences that must be imposed on repeat offenders. <2.2. Safety Valve> The so-called safety valve provision of 18 U.S.C. 3553(f) allows a court to sentence qualified defendants below the statutory mandatory minimum in controlled substance trafficking and possession cases. To qualify, a defendant may not have used violence in the course of the offense. He must not have played a managerial role in the offense if it involved group participation. The offense must not have resulted in a death or serious bodily injury. The defendant must make full disclosure of his involvement in the offense, providing the government with all the information and evidence at his disposal. Finally, the defendant must have an almost spotless criminal record, that is, not more than 1 criminal history point. Criminal history points and categories are a feature of the U.S. Sentencing Commission's Sentencing Guidelines. The Guidelines assign points based on the sentences imposed for prior state and federal convictions. For example, the Guidelines assign 1 point for any past conviction that resulted in a sentence of less than 60 days incarceration; 2 points for any conviction resulting in a sentence of incarceration for at least 60 days; and 3 points for any conviction resulting in a sentence of incarceration of more than a year and a month. The Sentencing Commission's report on mandatory minimum sentences suggested that Congress consider expanding safety valve eligibility to defendants with 2 or possibly 3 criminal history points. The report indicated that under the Guidelines a defendant's criminal record "can have a disproportionate and excessively severe cumulative sentencing impact on certain drug offenders." The Commission explained that the Guidelines are construed to ensure that the sentence they recommend in a given case calls for a term of imprisonment that is not less than an applicable mandatory minimum. In addition, the drug offenses have escalated mandatory minimums for repeat offenders. Moreover, similarly situated drug offenders may be treated differently, because the states punish simple drug possession differently and prosecutors decide when to press recidivism qualifications differently. S. 2123 and H.R. 3713 would modify the safety valve in several respects. First, a defendant would be safety valve eligible with 3 or fewer criminal history points and had not been convicted previously of either a drug trafficking offense, a violent offense, or a "3-point offense" (i.e., one for which he was incarcerated for 60 days or more). Second, the two proposals would permit the court to waive the criminal history disqualification, in cases other than those involving a past serious drug felony or serious violent felony conviction, if it concluded that the defendant's criminal history score overstated the seriousness of his criminal record or the likelihood that he would commit other offenses. Third, the bills would create additional safety valve. They would allow the sentencing court to treat a statutory 10-year drug trafficking mandatory minimum the penalty for first-time 841(b)(1)(A) offenses and 960(b)(1) offenses as though it were a 5-year mandatory minimum. A defendant would be eligible for this mini-safety valve if he had no prior convictions for a serious drug felony or serious violent felony; he did not use violence in connection with the offense; he was not an organizer or supervisor of others in connection with the offense; he was not an importer, high-level supplier, or manufacturer of the drugs; he did not distribute drugs to or with a child; and he told authorities everything he knew of the offense. The mini-safety valve would only apply to future convictions. <2.3. Firearms> There are two firearms-related offenses that call for the imposition of a mandatory minimum sentence of imprisonment. One, the so-called three strikes provision, also known as the Armed Career Criminal Act (ACCA), imposes a 15-year mandatory minimum sentence on an offender convicted of unlawful possession of a firearm who has three prior convictions for a drug offense or a violent felony. The other, 18 U.S.C. 924(c), imposes one of a series of mandatory terms of imprisonment upon a defendant convicted of the use of a firearm during the course of a drug offense or a crime of violence. The ACCA limits qualifying state and federal drug offenses to those punishable by imprisonment for more than 10 years. The qualifying federal and state violent felonies are burglary, arson, extortion, the use of explosives, or any other felony which either has the use or threat of physical force as an element. S. 2123 and H.R. 3713 would reduce the mandatory minimum penalty from 15 years to 10 years. They would also make the modification retroactively applicable in the same manner as the proposed mandatory minimum reductions in the case of controlled substances. That is, they would also permit federal courts to reduce the terms of imprisonment of defendants previously sentenced, after considering the defendant's conduct after his initial sentence, "the nature and seriousness of the danger to any person or the community," and the generally applicable sentencing factors of 18 U.S.C. 3553(a). Again, however, H.R. 3713 's retroactivity would only apply to defendants without a prior serious violent felony conviction. Section 924(c) brings firearm mandatory minimum tack-on status to any federal drug felony and to any other federal felony, which either has the use of physical force or threat of physical force as an element or which by its nature involves a substantial risk of the use of physical force. While the ACCA calls for a single 15-year mandatory minimum, 924(c) imposes one of several different minimum sentences when a firearm is used or possessed in furtherance of another federal crime of violence or of drug trafficking. The mandatory minimums, imposed in addition to the sentence imposed for the underlying crime of violence or drug trafficking, vary depending upon the circumstances: imprisonment for not less than 5 years, unless one of the higher mandatory minimums below applies; imprisonment for not less than 7 years, if a firearm is brandished; imprisonment for not less than 10 years, if a firearm is discharged; imprisonment for not less than 10 years, if a firearm is a short-barreled rifle or shotgun or is a semi-automatic weapon; imprisonment for not less than 15 years, if the offense involves armor-piercing ammunition; imprisonment for not less than 25 years, if the offender has a prior conviction for violation of 924(c); imprisonment for not less than 30 years, if the firearm is a machine gun or destructive device or is equipped with a silencer; and imprisonment for life, if the offender has a prior conviction for violation of 924(c) and if the firearm is a machine gun or destructive device or is equipped with a silencer. One of 924(c)'s distinctive features is that its repeat offender provision has been construed to include conviction of an earlier count within the same prosecution. Under this stacking of counts, a defendant convicted of several counts arising out of a single crime spree involving the robbery of several convenience stores, for example, may face a mandatory term of imprisonment of well over 100 years. The two sentencing reform bills would make clear that a conviction must have become final before it could be counted or purposes of enhancing the mandatory minimum. They would also reduce the repeat offender mandatory minimum from imprisonment for not less than 25 years to not less than 15 years. The proposals, however, would expand the repeat offender mandatory minimum to include recidivists with prior violent state crime convictions. And with one exception, they would both permit courts to apply the changes retroactively to cases that had become final, provided they took to account the defendant's post-conviction conduct, the nature and seriousness of threats to individual or community safety, and the generally applicable sentencing factors. H.R. 3713 differs from S. 2123 in one respect. It would not afford retroactive application to a defendant who has a prior conviction for a serious violent felony. S. 2123 and H.R. 3713 each have a third firearms amendment that, although not a strict mandatory minimum amendment, would increase the likelihood of imprisonment by operation of implementing sentencing guidelines by simply increasing the maximum sentence authorized for the offense or offenses. The two bills would increase from imprisonment for not more than 10 years to not more than 15 years the sentences for the following firearms offenses: false statements in connection with the purchase of a firearm or ammunition; sale of a firearm or ammunition to, or possession by, a convicted felon or other disqualified individual; while in the employ of a disqualified individual, receipt or possession of a firearm or ammunition; knowing transportation of stolen firearms or ammunition; knowing sale, possession, or pledge as security of stolen firearms or ammunition; or transfer or possession of a machine gun under certain circumstances. <2.4. Fair Sentencing Act> Originally, the Controlled Substances Act made no distinction between powder cocaine and crack cocaine (cocaine base). The 1986 Anti-Drug Abuse Act introduced a 100-1 sentencing ratio between the two, so that trafficking in 50 grams of crack cocaine carried the same penalties as trafficking in 5,000 grams of powder cocaine. The 2010 Fair Sentencing Act (FSA) replaced it with the present 500-28 ratio, so that trafficking in 280 grams of crack cocaine carries the same penalties as 5,000 grams of powder cocaine. The Sentencing Commission subsequently revised the Sentencing Guidelines to reflect the change and made the modification retroactively applicable at the discretion of the sentencing court. The FSA reductions apply to cocaine offenses committed thereafter. They also apply to offenses committed beforehand when sentencing occurred after the time of enactment. Federal courts have discretion to reduce a sentence imposed under a Sentencing Guideline that was subsequently substantially reduced. The FSA, however, does not apply to sentences imposed prior to its enactment, and it does not apply in sentence reduction hearings triggered by new Sentencing Guidelines. In such proceedings, the courts remain bound by the mandatory minimums in effect prior to enactment of the FSA. S. 2123 and H.R. 3713 , in roughly the same terms, would change that and would allow a court to reduce a sentence, imposed for an offense committed prior to the FSA, to reflect its provisions, unless the court had already done so or unless the original sentence was imposed consistent with the FSA amendments. <3. New Mandatory Minimums> H.R. 3713 would create no new mandatory minimum sentencing provisions. S. 2123 , on the other hand, would establish two: one for interstate domestic violence offenses and another for certain violations of the International Emergency Economic Powers Act (IEEPA). Existing federal law criminalizes interstate domestic violence and interstate stalking, and penalizes them equally. S. 2123 would establish a mandatory minimum sentence of imprisonment for not less than 10 years when death resulted from interstate domestic violence. In addition, it would increase the maximum penalties for interstate domestic violence from imprisonment for not more than 20 years to not more than 25 years when life-threatening or permanent disfigurement resulted and from imprisonment for not more than 10 years to not more than 15 years when a dangerous weapon was used or serious bodily injury resulted. Otherwise, the Senate proposal would leave the penalties for interstate domestic violence and interstate stalking unchanged. IEEPA authorizes the President to exercise various authorities to "deal with any unusual and extraordinary [overseas threat] ... to the national security, foreign policy or economy of the United States." Presidents have used this authority to issue executive orders banning various unlicensed transactions with various countries, entities, and individuals. IEEPA violations are punishable by imprisonment for not more than 20 years. S. 2123 would create a separate mandatory minimum sentence of imprisonment for not less than five years for three types of IEEPA violations. One prohibits IEEPA violations that involve providing defense articles or services as defined by the Arms Export Control Act to countries under an arms embargo. Another prohibits IEEPA violations that involve supplying goods or services for the foreign development of weapons of mass destruction. The third prohibits IEEPA violations that furnish certain foreign entities with goods and services that are subject to export restrictions. <4. Inventory of Federal Crimes> S. 2123 alone would call for an inventory of federal crimes. Section 109 of the bill would direct the Attorney General to prepare and provide the House and Senate Committees on the Judiciary an inventory of federal statutory crimes and of federal regulatory offenses. The compilation of federal statutory crimes would have to identify the penalties, mens rea, and frequency of prosecution of each offense. The compilation of federal regulatory offenses would be organized by enforcing agency and note the penalties and frequency of prosecution for each. The Attorney General and pertinent agency head would also be responsible for the creation of a publicly available online index of such offenses.

As introduced, the Sentencing Reform and Corrections Act of 2015, S. 2123, and the Sentencing Reform Act of 2015, H.R. 3713, use virtually identical language to reduce the impact of the mandatory minimum sentences which federal courts must now impose for certain drug trafficking and firearms offenses. Key Takeaways Existing law requires long minimum sentences for certain drug traffickers who have prior drug convictions. S. 2123 and H.R. 3713 would shorten the mandatory minimums, but apply them for both prior drug and violent felony convictions. The safety valve permits judges to ignore mandatory minimums for certain low-level, nonviolent drug traffickers with virtually no criminal record. The bills would make the safety valve available to traffickers with slightly more serious criminal records. The bills would establish a mini-safety valve which would permit judges to treat the 10-year drug trafficking mandatory minimums as if they were 5-year mandatory minimums for the benefit of nonviolent defendants with no prior serious drug or violent crime convictions. The proposals would permit retroactive application of the 2010 Fair Sentencing Act crack/powder cocaine amendments under some circumstances. S. 2123 and H.R. 3713 would reduce the Armed Career Criminal mandatory minimum to 10 years from 15 years. The bills would increase to 15 years the maximum penalties for possession of a firearm by a felon and various other firearms offenses. H.R. 3713, but not S. 2123, would add a consecutive term of imprisonment for not more than five years to the mandatory minimums in drug trafficking cases which involve heroin or fentanyl (a heroin cutter and counterfeit). S. 2123, but not H.R. 3713, would establish new mandatory minimums for certain interstate domestic violence offenses and International Emergency Economic Powers Act (IEEPA) violations. S. 2123, but not H.R. 3713, would direct the Attorney General to prepare an inventory of federal statutory crimes and various federal agencies to prepare a comparable inventory of federal regulatory offenses.

<1. Background> <1.1. HIV/AIDS> <1.1.1. Revised Epidemic Estimates> The Joint United Nations Program on HIV/AIDS (UNAIDS) estimates that 33.2 million people are living with human immunodeficiency virus/ acquired immunodeficiency syndrome (HIV/AIDS); some 16% fewer people than it initially estimated in 2006 (about 39.5 million). UNAIDS asserts that the decline reflects improvements in data collection and analysis. Expanded and improved HIV surveillance systems and household surveys reportedly provided a more precise count of HIV prevalence than earlier studies. In most of the 30 countries where household studies were conducted, prevalence rates in 2007 were lower than those reported in 2006 ( Table 1 ). UNAIDS also used the expanded studies to adjust prevalence estimates of countries that had not conducted household surveys but had similar epidemics. After retrospectively applying the improved methodology, UNAIDS estimated that in 2006, 32.7 million people were living with HIV (adjusted from the original estimate of 39.5 million). The revised estimates for India (2.5 million, down from 5.7 million), combined with revisions in five sub-Saharan African countries (Angola, Kenya, Mozambique, Nigeria, and Zimbabwe) accounted for 70% of the reduction. <1.1.2. 2007 Estimates> UNAIDS notes that HIV/AIDS prevalence rates have largely stabilized since 2001 and HIV/AIDS incidence rates are mostly declining ( see Table 2 ). Although prevalence rates have stabilized and incidence rates are mostly declining, the total number of people living with HIV/AIDS continue to rise, though at a slower rate. UNAIDS predicts that 2.5 million people will contract HIV in 2007, compared to the estimated 3.2 million who became HIV-positive in 2001. UNAIDS does not expect the number of HIV/AIDS-related deaths to decrease, however; in 2007, some 2.1 are expected to die from AIDS, while 1.7 million died in 2001. <1.2. Tuberculosis> HIV/AIDS is contributing to rising TB prevalence in areas with high HIV/AIDS prevalence, particularly in Africa. The weakened immune systems of HIV-positive people places them at greater risk of contracting TB. Correspondingly, TB considerably shortens the survival of people with HIV/AIDS. In 2005, about 80% of all HIV-positive people with TB were found in Africa. That year, nearly 630,000 people were co-infected with HIV/AIDS and TB, some 500,000 of whom were African. About 160,000 of the nearly 195,000 co-infected patients who died from TB were African, representing 82% of those deaths. Although most forms of TB are curable, the World Health Organization (WHO) estimates that in 2005 (the year for which the most current data are available), the disease killed 1.6 million people, including 195,000 who were also infected with HIV/AIDS. Some 8.8 million people contracted the disease in 2005, of which 84% of the cases occurred in 22 countries. All but three of those high-burden countries were found in Africa or Asia. About half of all new TB cases were in six countries: Bangladesh, China, India, Indonesia, Pakistan, and the Philippines. <1.3. Malaria> While HIV/AIDS, TB, and malaria are preventable diseases, their impacts have been catastrophic, particularly in sub-Saharan Africa. Researchers have found that people infected with one of the three illnesses are more likely to contract either of the other two, and the symptoms are more severe in people with two or more of the diseases. According to WHO, each year there are about 300 million acute malaria cases, which cause more than 1 million deaths annually. Health experts believe that between 85% and 90% of malaria deaths occur in Africa, mostly among children, killing an African child every 30 seconds. <1.4. Global Spending on HIV/AIDS> UNAIDS asserts that it would cost $15 billion in 2006, $18 billion in 2007, and $22 billion in 2008 to effectively fight HIV/AIDS. In FY2006, Congress provided $3.4 billion for global HIV/AIDS, tuberculosis (TB), and malaria programs ( Table 3 ). Most recent statistics indicate that in 2006, global spending reached nearly $9 billion, $6 billion less than UNAIDS advocated. <2. Policy Options for Congress> In 2003, Congress authorized $3 billion for each fiscal year from 2004 through 2008 to support the President's Emergency Plan for AIDS Relief (PEFAR). The 5-year initiative was created to aid the millions of people sickened and killed by HIV/AIDS, malaria, and tuberculosis (TB). Some estimate that since HIV/AIDS was first identified in 1981, 65 million people have contracted the virus and it has killed more than 25 million. PEPFAR provided an unprecedented amount of assistance for global HIV/AIDS efforts. The United States remains the largest single donor for global HIV/AIDS efforts in the world, providing nearly 50% of all donor funds. As Congress prepares to consider whether, and at what level, to reauthorize PEPFAR, there has been considerable debate about the effectiveness of PEPFAR. Some health experts contend that the life-saving intention of PEPFAR is weakened by the single-disease approach. Other critics contend that ideological factors lessen the effectiveness of the plan. A number of HIV/AIDS advocates urge the United States to harmonize its anti-HIV/AIDS efforts with other donors to boost the impact of PEPFAR. Some of the key policy prescriptions are discussed below. <2.1. Define Focus of PEPFAR> As Congress considers reauthorizing PEPFAR, there may be some debate on how many diseases the initiative should address. The U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 ( P.L. 108-25 ), requires the President to submit annual reports to appropriation committees that describe how U.S. funds support efforts to prevent HIV/AIDS, TB, and malaria and provide care and treatment for those affected by the three diseases. However, since President Bush launched the President's Malaria Initiative (PMI) in June 2005, the Office of the Global AIDS Coordinator (OGAC) determined that it would no longer include malaria spending in its annual reports to Congress and that budgetary requests for the disease would be made separately from HIV/AIDS and TB requests. The Administration requests support for PMI through the U.S. Agency for International Development (USAID) as the coordinating agency. For comparability, and because P.L. 108-25 considers efforts to combat malaria as a critical part of PEPFAR, Table 3 includes appropriations to malaria programs. As Congress considers whether to authorize funds to extend PEPFAR, Members might decide whether to define it as solely an HIV/AIDS initiative or one that includes the three diseases. <2.2. Revisit Prevention Efforts> As Congress considers reauthorizing PEPFAR, there is likely to be considerable debate on how much funding to allocate to prevention. Consensus is growing among health experts that greater emphasis needs to be placed on HIV prevention in global HIV/AIDS programs. The international community has supported a tremendous increase in the number of people receiving HIV/AIDS treatment. In 2001, about 240,000 people had access to anti-retroviral treatment (ARVs); in 2006, more than 2 million were treated. Nonetheless, WHO estimated that in 2006, an additional 5.1 million people who needed treatment received none. In sub-Saharan Africa, more than 1.3 million people received treatment, reaching some 28% of those in need; three years prior, 100,000 were treated and coverage amounted to 2%. In spite of these advances, the rate at which individuals become infected with HIV far outpaces the rate at which they are treated. In 2006, 4.3 million people contracted HIV, 2.8 million of whom were African (65%), and 2.9 million people died of AIDS, 2.1 million of whom were African (72%). <2.2.1. Increase Prevention of Mother to Child HIV Transmission (PMTCT) Initiatives> Many health experts advocate greater spending on PMTCT initiatives. Advocates of greater PMTCT spending argue that providing ARVs during pregnancy is a well-documented way to avert millions of HIV infections in a cost-efficient and effective manner, including in low-resource settings. UNAIDS estimates that 1,800 children worldwide become infected with HIV each day, the vast majority of whom are newborns. More than 85% of children infected with HIV live in sub-Saharan Africa, although mother-to-child transmission (MTCT) rates are rapidly rising in Eastern Europe and Central Asia. UNAIDS estimates that in 2005, just less than 8% of pregnant women in low- and middle-income countries had access to services that could prevent the transmission of HIV to their babies. Two-thirds of all women who lack access to PMTCT interventions come from 10 countries, all but one of which are in Africa; India is the exception. <2.2.2. Provide Contraceptives to HIV-Positive Women> Some reproductive health experts want HIV/AIDS and family planning services to be better integrated should PEPFAR be reauthorized. Supporters of this idea contend that women who receive PMTCT services should be subsequently offered contraceptives to lessen the likelihood that they might give birth to HIV-positive children. Additionally, women who fear being stigmatized if they visit an HIV center could receive PMTCT services while receiving standard prenatal care. Members who endorsed the Ensuring Access to Contraceptives Act ( H.R. 2367 ) demonstrated their support for expanding access to family planning and contraceptives. The bill would authorize $150 million for such services in each of fiscal years 2008 and 2009. Some in Congress also support the United Nations Population Fund Women's Health and Dignity Act ( H.R. 2604 ), which would provide financial and other support to UNFPA's activities that save women's lives, limit the incidence of abortion and maternal mortality associated with unsafe abortion, promote universal access to safe and reliable family planning, and assist women, children, and men in developing countries live better lives. <2.2.3. Address Gender Inequities> Women's rights advocates also assert that the lower status of women in many of the most affected countries must be better addressed in order to prevent new HIV infections. In many countries, legal and social structures leave women feeling as though they have little control over their own bodies and do not have the option to reject their husbands' sexual advances; even when they are aware of their husbands' extramarital relationships. Research has shown that in Africa, married girls and women are more likely to contract HIV than their single counterparts. For example, 30% of married adolescents' spouses were HIV-positive in Kenya, while 11.5% of the partners of their unmarried counterparts were infected with HIV. Similarly, in Zambia, 31.6% of married girls' partners were found to carry HIV, while 16.8% of unmarried girls' boyfriends were HIV-positive. Societal forces also weaken women's options, rights advocates contend, because in many countries, health workers require women to obtain their husbands' permission before providing them contraception. <2.2.4. Expand Access to Condoms> Global health activists also insist that OGAC's policy of limiting condom distribution to "high risk groups" ignores gender inequities and limits the effectiveness of prevention programs. U.S. condom distribution strategies do not include married women, unless their husbands test positive for HIV. Supporters of U.S. condom distribution guidelines counter that the definition of "high risk" individuals is broad enough to include the most vulnerable groups. Some HIV/AIDS proponents advocate that Congress expand the definition of "high risk" individuals to include married young people. Advocates hope that an expanded definition might enable young married people to access condoms through U.S.-supported programs. <2.2.5. Explore the Potential Impact of Circumcision> Health experts have begun to debate the role that circumcision could play in HIV prevention efforts. Three randomized trials conducted in South Africa, Kenya, and Uganda demonstrated that male circumcision reduced the risk of acquiring HIV by more than half. Some believe that if mass circumcision was to be conducted in areas of high transmission, the procedure could avert about 5.7 million new HIV infections and 3 million deaths over 20 years among both men and women. WHO and UNAIDS have endorsed the practice to be added to HIV prevention initiatives. The organizations warn, however, that the practice should not be seen as a "magic bullet," as it does not prevent men from acquiring the virus, it only reduces the risk of infection. As a result, health experts urge those who perform the surgeries to counsel the men and explain that they must maintain other protective practices, such as abstaining from sex, reducing their number of sexual partners, and using condoms. Some observers argue that the studies should not yet be widely embraced, particularly since only a few trials have been conducted. A number of scientists question the validity of the studies since they were terminated early; a practice, critics contend, that skews the results. Dissenters argue that there may be other explanations for the drop in transmission. Skeptics contend that circumcision reduces the incidence of genital symptoms, allowing men to receive fewer unsafe injections and other blood exposures during treatment. Also, in sub-Saharan Africa, circumcised virgins and adolescents are reportedly more likely to be HIV-infected than their uncircumcised counterparts. Researchers suspect that unhygienic circumcision procedures might be a large factor in this phenomenon. Critics and advocates of the practice agree that additional studies need to be conducted and a number of precautions must be taken should the practice be implemented on a larger scale. Additional research is needed to determine how the procedure might impact HIV transmission to women, the most affected population in Africa. There is consensus that male circumcision must be considered part of a comprehensive HIV prevention package, which includes treatment for sexually transmitted infections; the promotion of safer sex practices; and the provision of male and female condoms and promotion of their correct and consistent use. HIV/AIDS advocates maintain that men and their sexual partners must also be counseled to prevent them from developing a false sense of security and engaging in high-risk behaviors that could undermine the partial protection provided by male circumcision. Health experts agree that African health systems need to be strengthened in order to ensure safe and clean operations. Circumcision must be done under hygienic conditions by trained personnel with access to sterile surgical instruments and anaesthesia. Many facilities on the continent, however, lack sufficient supplies, such as gloves, clean needles, and antiseptics. Some health experts fear that greater investment in circumcision might disrupt other health care programs. Global health advocates urge Congress to ensure that male circumcision services are integrated with other services, particularly in areas with severe shortages of skilled health workers, should it include support for the practice in PEPFAR. <2.3. Reconsider Spending Restrictions and Requirements> <2.3.1. Evaluate the Impact of the Prostitution Pledge> A number of global health experts contend that some current U.S. AIDS-related spending restrictions and requirements are ideologically based, negatively impact the effectiveness of PEPFAR programs, and complicate implementing partners' efforts. The U.S. Leadership Against HIV/AIDS, TB, and Malaria Act ( P.L. 108-25 ) mandates that no funds made available to carry out the act may be used to assist any group or organization that does not have a policy explicitly opposing prostitution and sex trafficking. This policy has become widely known as "the prostitution pledge." Critics of the pledge contend that the restriction should be eliminated, because it limits implementing partners' HIV/AIDS prevention efforts. Opponents argue that groups serving sex workers fear that by signing the pledge and openly opposing prostitution, they may isolate the very group that they are attempting to help. <2.3.2. Evaluate the Impact of the Mexico City Policy> The "Mexico City Policy" has also come under considerable scrutiny. The policy prohibits reproductive health organizations from providing information about abortion. Critics contend that, in some countries, this policy has had devastating effects, because reproductive health services is the only form of health care that many women receive. The House and Senate included language in their reports ( H.Rept. 110-197 and S.Rept. 110-128 ) for FY2008 Foreign Operations appropriations ( H.R. 2764 ) that prevented the "Mexico City Policy" from being the sole reason that U.S. funds could not be used to provide contraceptives. A conference is pending. Opposing Members expect the President to veto any bill that repeals the "Mexico City Policy." <2.3.3. Evaluate the Impact of the Abstinence-Until-Marriage Stipulation> Some health experts assert that congressional HIV prevention stipulations are not well-balanced, place too much emphasis on abstinence until marriage, and limit countries' ability to use prevention funds in a manner that is most relevant to local conditions. P.L. 108-25 , which delineates how PEPFAR funds should be allocated, stipulates that between FY2006 and FY2008, 20% of global HIV/AIDS funds are to be used for prevention efforts, of which at least 33% should be expended for abstinence-until- marriage programs. In 2006, the Government Accountability Office (GAO) found that PEPFAR's spending requirements limited the flexibility with which prevention funds could be spent. GAO estimated that in order to meet the 33% proviso, between FY2004 and FY2006, OGAC increased spending on prevention by almost 55% and mandated that country teams spend half of prevention funds on sexual transmission prevention and two-thirds of those funds on abstinence/faithfulness (AB) activities. In its congressionally mandated report, the Institute of Medicine (IOM) reached similar conclusions. Some health specialists argue that these policies consume limited resources and time, as they place additional reporting requirements on implementing partners. Britain's Department for International Development (DFID) reports that from 2003 to 2004 and 2006 to 2007, the Ugandan government was reporting on 684 different aid instruments and associated agreements. Critics suggest that if Congress reauthorizes PEPFAR, it should eliminate these spending restrictions, coordinate reporting requirements and funding processes with other donors, and urge the United States to sign on to the International Health Partnership. Some in Congress have supported legislation that was introduced to remove the spending provisions. The HIV Prevention Act ( S. 1553 ) and the Protection Against Transmission of HIV for Women and Youth Act ( H.R. 1713 ) would strike the 33% abstinence-until-marriage spending requirement from P.L. 108-25 . The FY2008 House Foreign Operations Appropriations would allow the Administration to determine whether to apply the 33% abstinence-until-marriage provision to global HIV/AIDS programs. <2.4. Expand Access to Generic Anti-Retroviral Medication> Access to generic HIV/AIDS treatments is another possible issue to arise in reauthorization debates. Shortly after PEPFAR was launched, the Bush Administration expressed skepticism about broad-based use of generic ARV medication. The Administration asserted that WHO's prequalification process was inadequate, and that generic drugs purchased with PEPFAR funds had to be first inspected by the U.S. Food and Drug Administration (FDA). The Administration argued that since WHO is not a regulatory body, its adherence to stringent FDA standards could not be ensured. This policy sparked a debate with critics contending that the process was unnecessary and delayed the distribution of ARVs. In January 2005, GAO reported that the policy limited the selection of ARV products available, did not fully support the treatment strategies of the focus countries, and was not optimally coordinated with other multinational initiatives. GAO indicated that "better coordination with the Focus Countries and with other treatment initiatives could facilitate more rapid implementation of the Emergency Plan. Moreover, given the intended scale of the plan, lower prices for ARVs could result in savings of hundreds of millions of dollars, which could be used to treat additional patients or to support other aspects of the program." In March 2007, IOM found that in many of the Focus Countries, a number of those implementing HIV/AIDS programs complained that the U.S. treatment policy complicated national treatment efforts. The Institute recommended that OGAC work to support WHO prequalification as the accepted global standard for assuring the quality of generic medications and work with other donors to support strengthening the process. According to OGAC's third annual report to Congress, OGAC has strengthened its coordination with WHO, by sharing information on the WHO-approved generics. OGAC estimates that in FY2006, 27% of all ARVs purchased under PEPFAR were generic. Since FDA began reviewing generic drug applications, more than 50 generic versions of patented ARVs have been approved or tentatively approved for use in PEPFAR treatment plans. <2.5. Improve Integration of Health Programs> In considering whether to extend PEPFAR, HIV/AIDS experts encourage Congress to stipulate stronger integration of PEPFAR-supported programs with other health programs that save lives. Many health experts contend that PEPFAR's disease-specific approach threatens to supplant support by the United States and recipient countries for other health areas, including nutrition, maternal and child heath, and other infectious diseases. <2.5.1. Improve Food Security> Malnutrition and lack of food may heighten exposure to HIV, raise the likelihood of engaging in risky behavior (e.g., transactional sex), increase susceptibility to infection, and complicate efforts to provide anti-retroviral (ARV) medication. Furthermore, those sickened by HIV/AIDS are often too ill to till the land, lessening agricultural productivity. The United Nations' Food and Agriculture Organization (FAO) estimates that food consumption drops by 40% in homes affected by HIV/AIDS, due in large part to diminished capacity to farm. In communities struggling with food security, decreased food production can complicate efforts to maintain treatment regiments. If patients do not consume adequate amounts of nutritious food, they can suffer significant side effects while taking ARVs and the drugs can be less effective. At the 2006 International AIDS Conference, one AIDS advocate cited a study that showed that patients who were malnourished when they started ARV therapy were six times more likely to die than well-nourished patients, and were more likely to suffer side-effects, which often caused them to stop taking the treatments. These issues are particularly acute in rural communities, where AIDS incidence is rapidly increasing and access to care is usually more limited than in urban areas. In the 25 most AIDS-affected countries in Africa, more than 2/3 of the population live in rural areas and rely on agriculture for their livelihoods. In April 2007, the House Foreign Affairs Committee held a hearing on the progress of PEPFAR. At the hearing, Global AIDS Coordinator Mark Dybul testified that PEPFAR funds provided "limited food assistance for specific, highly vulnerable populations," and cited support for a pilot program that enables a local food manufacturer to distribute nutrient-dense food to orphans and vulnerable children, clinically malnourished HIV-positive people, and HIV-positive pregnant and lactating women enrolled in PMTCT programs. He also indicated that in FY2006, OGAC had contributed $2.45 million contribution to the World Food Program (WFP) and would contribute an additional $4.27 million in FY2007. Ambassador Dybul conceded that PEPFAR's engagement in food insecurity is limited. He contended, however, that efforts are intentionally limited, because OGAC prefers to remain focused on HIV/AIDS. At the hearing, Ambassador Dybul testified that PEPFAR supports other "wrap around" programs that support HIV-affected populations, such as clean water programs, education initiatives, and gender projects. <2.5.2. Support Maternal and Child Health> According to the United Nations, maternal and neonatal mortality rates could be significantly reduced if more women, particularly in Africa, had sufficient access to skilled health personnel who are trained to detect problems early and can effectively provide or refer women to emergency obstetric care. The United Nations has found that regions with the lowest proportions of skilled health attendants at birth also have the highest number of maternal deaths. In sub-Saharan Africa, 1 of every 16 women who becomes pregnant will die from complications arising during her pregnancy or childbirth. For comparison, the rate in industrialized countries is one in 3,800. Experts have also found that child survival rates are higher in areas with ample numbers of health workers to administer immunizations, clean water, controlled mosquito populations, and sufficient access to nutritious food. <2.5.3. Address Other Diseases That Kill> Those who support integrating PEPFAR into other health programs contend that disease-specific programs like PEPFAR fail to address adequately the intersection of diseases. Research has demonstrated that since HIV weakens the immune systems of those infected, they are more susceptible to a range of illness, including malaria. HIV-positive people are more likely to be hospitalized and sickened by malaria than those not carrying the virus. According to WHO, Africa is the only region in the world where incidence of new TB infections continues to rise, due in large part to HIV/AIDS co-infection. In 2004, more than 740,000 people who contracted TB were co-infected with HIV/AIDS. Some 600,000 of those co-infected with TB and HIV/AIDS were found in sub-Saharan Africa, representing more than 80% of all co-infected cases. About 205,000 of the more than 248,000 co-infected patients who died from TB were African, representing 83% of those deaths. Most poorly equipped health systems in Africa are unable to contain TB, as they have limited case detection capacity; meager financing; too few health workers in numbers and who are sufficiently trained; inconsistent drug supplies; and little means to monitor and evaluate TB control programs. <2.6. Strengthen Health Systems> PEPFAR critics urge Congress to consider not only the degree to which resources are skewed towards HIV/AIDS initiatives, but also what impact such unbalanced spending has on health systems overall. Many global health experts maintain that the generous salaries and other incentives (such as housing stipends) offered by donor-supported HIV/AIDS programs draw health workers from public health facilities and threaten other life-saving interventions offered at those clinics, such as maternal and child survival health initiatives. <2.6.1. Address Health Worker Shortages> According to WHO, the global shortage of health care workers is the single most important health issue facing countries today. While the greatest shortages of health care workers in absolute terms are in southeast Asia (mostly in Bangladesh, India, and Indonesia), sub-Saharan Africa suffers from the greatest proportional shortage of health care workers in the world ( Table 4 ). WHO estimates that there are 57 countries with critical shortages of health care workers; 36 are in Africa and none are in industrialized nations. Globally, WHO estimates that an additional 4.3 million health workers are needed, and that Africa would need to increase its number of health workers by about 140% in order to meet the minimum threshold. None of the countries in Table 5 have enough doctors to meet the most basic health care needs; though when nurses and midwives are included, some do meet the minimum standard. The amount and quality of health worker numbers are positively associated with immunization coverage, outreach of primary care, as well as infant, child, and maternal survival. After the release of the World Bank's report, International Migration, Remittances, and the Brain Drain , a number of articles in the press featured the issue, and highlighted some of the data provided in the work. It is estimated that 20,000 skilled professionals leave Africa each year. Erik Schouten, the HIV Coordinator for the Malawi Ministry of Health announced that over the last five years, the government had lost 53% of its health administrators, 64% of its nurses, and 85% of its physicians mostly to foreign NGOs, largely funded by Britain, the United States, and the Gates Foundation. According to Mr. Schouten, the Ministry is now implementing a program, supported by PEPFAR, to attract Malawi health workers back to the country. Their tasks, however, will be to distribute antiretoriviral medication. There is reportedly no support for programs to attract health workers to treat malaria, diarrhea, and other common killers, such as dysentery and respiratory infections. <2.6.2. Consider the Impact of Disease-Specific Approach on Health Systems> Ambassador Dybul asserted at the April 2007 House hearing that PEPFAR strengthens health systems and expands the health workforce. This assertion counters the findings that the Institute of Medicine published in its March 2007 report, PEPFAR Implementation: Progress and Promise. Though IOM concluded that "PEPFAR has made a promising start," it found PEPFAR might further limit health care options for those not suffering from HIV/AIDS. PEPFAR's HIV/AIDS activities have sometimes negatively affected other aspects of public health systems and exacerbated resource constraints, particularly those related to national human resource settings. If Focus Countries' national plans for expanding their health workforce are not supported, PEPFAR might worsen national shortages by shifting a disproportionate share of the workforce to HIV/AIDS activities, which might cause other health areas to be neglected.... PEPFAR's initial emergency approach to meeting personnel needs has been to focus on HIV-specific training of existing clinicians and other health care workers. Support for expansion of the professional clinical workforce has been limited, even when such expansion is an explicit part of the country's HIV/AIDS plan, and the effort is endorsed and supported by other donors... PEPFAR Country Teams often expressed concern that they were not allowed to fund activities unless those activities were specifically part of the HIV/AIDS effort and so could not support, for example, the training of new clinical officers, who in some countries are the mainstay of the treatment efforts. IOM recommended that OGAC work more closely with governments to analyze the impact that PEPFAR-supported programs might have on public health systems, particularly in areas related to maternal and child health and immunizations. IOM suggested that the analysis consider whether PEPFAR's incentives and salaries draw workers out of public systems and shift a disproportionate share of the workforce to HIV/AIDS efforts. The report also asserted that PEPFAR should increase support to the education of new health professionals. <2.6.3. Support Global Efforts to Strengthen Health Systems> There is a growing consensus that health systems, including those that address HIV/AIDS, must be strengthened in order for health interventions to be effective. On August 22, 2007, British Prime Minister [author name scrubbed] and German Chancellor Angela Merkel announced their intention to launch an International Health Partnership (IHP) aimed at accelerating progress towards reducing child and maternal mortality, combating infectious diseases, including HIV/AIDS, TB, and malaria, and strengthening health systems. The leaders acknowledged in their statement that the fragmented method of applying global health aid has reduced the effectiveness of aid, in large part because donors compete for limited trained staff and implement the projects without considering the countries' priorities and structures. According to DFID, there are more than 40 bilateral donors and 90 global health initiatives each maintaining their own reporting requirements and most focusing on specific health issues, such as HIV/AIDS. DFID asserts that few global health efforts focus on activities that would strengthen struggling health systems, such as training doctors and nurses, building clinics, or supporting basic health services. Parties of the IHP commit to improving donor coordination, focusing on health systems rather than specific diseases or health issues, and supporting the health plans of recipient countries. The leaders did not indicate how much would be allocated towards this initiative or how it would be implemented, though seven countries were identified as "first wave" partner countries. <2.6.4. Provide Support for Health Systems Research> Some health experts would like Congress to boost support for health systems research if it were to extend PEPFAR. The Global Health Council estimates that less than 1% of research dollars are spent on health systems research, though it could identify where health systems failures exist, make health interventions more effective and affordable, and improve the accessibility of health care. In HIV/AIDS programs, health systems research could help administrators develop effective forecasting and distribution systems for drugs and other commodities and make stock-outs and shortages of contraceptives, ARVs, and other commodities less frequent. Advocates assert that health systems research could improve retention of health personnel, because they would have sufficient tools to perform their jobs. Data from health systems research would reveal which sort of care, prevention, and treatment programs are needed for the target population, and which would make the programs more effective and efficient, proponents contend. <2.6.5. Consider Role of International Financial Institutions> Some have argued that structural adjustment programs mandated by international financial institutions have led to a decline in public sector employment and limited investment in health worker education. In many of the countries with health worker shortages, there are thousands of unemployed health workers. While Kenya has a shortage of some 10,000 nurses in the public sector, for example, thousands of unemployed nurses are leaving for Britain to find jobs, as the Kenyan government is under a recruitment freeze due to World Bank and International Monetary Fund (IMF) stipulations. Health sector reform, critics argue, has led to a decline in the quality of education and training opportunities for medical students, a perpetual shortage of health supplies and equipment (e.g., sanitation gloves and hyperdermic needles), insufficient medicine and vaccine stocks, and "brain drain" of African health workers. According to WHO, on average each year, the 57 countries with severe shortages of health workers spend an average of about $33 per person on health ( Table 6 ). The entire continent of Africa spends about 1% of the world's expenditure on health, the WHO contends. Comparatively, each year the United States spends approximately $5,711 per capita on health. Some analysts have expressed concern about the extent to which countries rely on the World Bank to fund their health programs. The Bank estimates that it has lent $15 billion in health, nutrition, and population funds from 1997 to 2006; an average of about $1.5 billion per year. Observers worry that the loans add to significant debt loads that many countries already face and to which they commit considerable portions of their annual gross national products. In some countries, governments are reportedly paying more on debt service than public health programs. Oxfam estimates that of the 26 countries participating in the Highly Indebted Poor Countries (HIPC) Initiative, half are still spending 15% or more of government revenues on debt payments. Some health advocates urge Congress to use its vote to encourage the IMF to maintain its debt relief commitments and accelerate its plans. In the 110 th Congress, legislation has been introduced in the House and Senate that authorizes additional funds to voluntary family planning activities, improves coordination of HIV/AIDS and other health initiatives, and strengthens supply chain logistics. The Focus on Family Health Worldwide Act ( H.R. 1225 ) would provide funds to expand access to voluntary family planning programs in developing countries. The U.S. Commitment to Child Survival Act ( S. 1418 ) would provide assistance to improve the health of newborns, children, and mothers in developing countries. The African Health Capacity Investment Act ( S. 805 ) would amend the Foreign Assistance Act of 1961 to assist countries in sub-Saharan Africa achieve internationally recognized goals in the treatment and prevention of HIV/AIDS and other major diseases, reduce maternal and child mortality, improve human health care capacity, and improve the retention of medical health professionals. <2.7. Address the Needs of Children Affected by HIV/AIDS> UNAIDS estimates that there are 2.5 million children living with HIV around the world, up from 1.5 million in 2001. Nearly 90% of all HIV-positive children live in sub-Saharan Africa. The rate at which children are contracting the virus is declining, however, with 460,000 having acquired HIV in 2001 and 420,000 in 2007. AIDS is also killing fewer children. In 2001, 330,000 children succumbed to the virus; in 2005, 360,000 died from AIDS. But in 2007, the number fell to an estimated 330,000. HIV/AIDS affects not only those children living with the virus, but also those who lose their parents to the virus and who live in homes that have taken in orphans. Children who have been orphaned by AIDS may be forced to leave school, begin working to supplement lost income, suffer from depression and anger, or engage in survival sex, an activity that heightens their risk of contracting HIV. Children who live in homes that take in orphans may see a decline in the quantity and quality of food, education, love, nurturing, and may be stigmatized. Impoverished children living in households with one or more ill parent are also affected, as health care increasingly absorbs household funds, which frequently leads to the depletion of savings and other resources reserved for education, food, and other basic needs. A number of HIV/AIDS advocates call for increased spending on programs, such as skills building, microcredit lending, daycare subsidization, and education, for caretakers of children orphaned by HIV/AIDS. The U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 authorizes 10% of HIV/AIDS funds to be used to support children affected by the virus. Some of PEPFAR's implementing partners have reportedly suggested that in areas with high HIV/AIDS prevalence, all children should be considered affected by or made vulnerable by HIV/AIDS; and that in high prevalence areas, programs should allow communities to define vulnerability related to their contexts and to identify which children participate in programs. In the 109 th Congress, Congress enacted the Assistance for Orphans and Other Vulnerable Children in Developing Countries Act of 2005 ( P.L. 109-95 ), which established a monitoring and evaluation system to measure the effectiveness of related assistance activities; required the Secretary of State to appoint a Special Advisor for Assistance to Orphans and Vulnerable Children within USAID; and required an annual report on project implementation. Congress did not appropriate funds for these activities. A number of HIV/AIDS advocates encourage Congress to appropriate funds to make permanent and bolster the power and influence of the Special Advisor. Those who would like for Congress to fund such a permanent position suggest that the advisor would report directly to the Secretary of State and have independent authority to approve and coordinate all U.S. spending on activities related to orphans and vulnerable children. Supporters of this idea also maintain that the Special Advisor would need appropriations for an office that would be similar in structure to the one at USAID for the President's Malaria Initiative. Proponents contend that the office's staff would: 1) devise a comprehensive U.S. strategy to address the needs of children affected by HIV/AIDS; 2) ensure efficient use of U.S. funds by coordinating all related U.S. programs, including those funded by OGAC, USAID, and other U.S. Departments, international organizations like UNICEF, and public private partnerships; and 3) monitor, evaluate, and submit reports to Congress that detail U.S. spending on related programs. Critics of this idea counter that this position would duplicate and add to the overhead costs of implementing U.S. global HIV/AIDS activities. According to UNAIDS, more than 2.5 million children and infants are living with HIV/AIDS worldwide, representing more than 7% of all cases; and some 420,000 children under 15 years are expected to contract the virus in 2007, almost 17% of all new HIV infections. OGAC asserts that children have disproportionately low access to HIV treatment and care relative to adult populations in most developing countries. Without treatment and care, approximately 50% of all HIV-positive children will die before age two and 75% will die before age five. Some advocates for children urge Members to increase spending on pediatric HIV/AIDS ARVs so that funding meets the needs of children without access to treatment. OGAC estimates that in FY2006, it allocated 9% of all spending on ARVs to children. <2.8. Reconsider Emphasis on Focus Countries> HIV/AIDS analysts advocate that other countries where the virus is rapidly spreading be included in GHAI. In Eastern Europe and Central Asia, HIV has become more entrenched. According to UNAIDS, the number of people living with HIV in those regions has increased by more than 150% since 2001. An estimated 1.6 million people are living with HIV/AIDS in the region, up from 630,000 in 2001. Nearly 90% of newly reported HIV diagnoses in this region in 2006 were from two countries: the Russian Federation (66%) and Ukraine (21%). A number of health experts are also concerned about the HIV/AIDS epidemic in the Caribbean. Estimates indicate that prevalence rates have largely stabilized in the region, though they remain high in Haiti and the Dominican Republic. Nearly 75% of all people living with HIV/AIDS in the Caribbean reside in the two countries. Some 230,000 people are HIV-positive in the Caribbean, of whom 11,000 UNAIDS expect to die from the virus. In February 2007, Representative Luis Fortu o introduced H.R. 848 , to Amend the State Department Basic Authorities Act of 1956 to Authorize Assistance to Combat HIV/AIDS in Certain Countries of the Caribbean Region. Some caution that before Members consider expanding the number of Focus Countries, Congress might first need to determine the extent of its commitment to supporting global HIV/AIDS efforts. A number of HIV/AIDS advocates point out that HIV/AIDS is a chronic disease that requires long-term care. In order for countries to assume ownership of HIV/AIDS initiatives and expand them, this view holds, they must first know how much support to expect from the United States and for how long that support might last.

The Joint United Nations Program on HIV/AIDS (UNAIDS) estimates that 33.2 million people are living with human immunodeficiency virus/acquired immunodeficiency syndrome (HIV/AIDS). The U.N. organization believes that in 2007, some 2.5 million people will contract HIV and it will kill about 2.1 million. Sub-Saharan Africa is the most affected region, with about 68% of the world's HIV-positive population, 90% of all HIV-infected children, and more than 11 million children who have lost one or both parents to the virus. UNAIDS anticipates that in 2007, about 420,000 children will contract HIV, due in large part to inadequate access to drugs that prevent mother-to-child HIV transmission; about 8% of pregnant women in low- and middle-income countries have access to PMTCT services. In January 2003, President George Bush proposed that the United States spend $15 billion over five years to combat HIV/AIDS, tuberculosis (TB), and malaria through the President's Emergency Plan for AIDS Relief (PEPFAR). The President proposed concentrating most of the resources ($9 billion) in 15 countries, where the Administration estimated 50% of all HIV-positive people lived. The proposal allotted $5 billion of the funds to research and other bilateral HIV/AIDS, TB, and malaria programs, and $1 billion for contributions to the Global Fund to Fight AIDS, Tuberculosis, and Malaria (Global Fund). The President estimated that from FY2004 to FY2008, PEPFAR funds would support the purchase of anti-retroviral treatments (ARV) for 2 million people; the prevention of 7 million HIV infections; and care for 10 million people affected by HIV/AIDS, including children orphaned by AIDS. In May 2003, Congress passed the U.S. Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003 (P.L. 108-25), which authorized funds for PEPFAR and created the Office of the Global AIDS Coordinator (OGAC) to manage U.S. funds aimed at addressing the three diseases in 15 Focus Countries. As of March 31, 2007, PEPFAR has supported the treatment of 1.1 million people; and as of September 30, 2006, supported PMTCT service provision during more than 6 million pregnancies and facilitated care for nearly 4.5 million people, including more than 2 million orphans and vulnerable children. From FY2004 to FY2007, Congress provided nearly $13.5 billion for U.S. global HIV/AIDS, TB, and malaria programs. In FY2008, the President requested $5.8 billion for global HIV/AIDS, TB, and malaria efforts; the House and Senate proposed spending almost $6.2 billion and nearly $6.1 billion, respectively. On May 30, 2007, President Bush requested that Congress authorize $30 billion to fund PEPFAR an additional five years. The President asserts that from FY2009 to FY2013, the plan would support treatment for 2.5 million people, prevent more than 12 million new infections, and care for more than 12 million people, including 5 million orphans and vulnerable children. Supporters of the Administration's plan applauded the President and congratulated him for leading global efforts to address HIV/AIDS. Critics asserted that PEPFAR could treat more than 2.5 million HIV-infected people and that PEPFAR's spending requirements should be eliminated. This report focuses on some of the key issues that Congress might consider as it faces the issue of whether, and at what level, to reauthorize PEPFAR.

<1. Regular and Special Elections of the Speaker> The traditional practice of the House is to elect a Speaker by roll call vote upon first convening after a general election of Representatives. Customarily, the conference of each major party in the House selects a candidate whose name is formally placed in nomination before the roll call. A Member may vote for one of these nominated candidates or for another individual. In the great majority of cases, Members vote for the candidate nominated by their own party conferences, since the outcome of this vote in effect establishes which party has the majority and therefore will organize the House. Table 1 presents data on the votes cast for candidates for Speaker of the House of Representatives in each Congress from 1913 (63 rd Congress) through 2019 (116 th Congress). It shows the votes cast for the nominees of the two major parties, other candidates nominated from the floor, and individuals not formally nominated. Included in the table are not only the elections held regularly at the outset of each Congress but also those held during the course of a Congress as a result of the death or resignation of a sitting Speaker. Such elections have occurred five times during the period examined: in 1936 (74 th Congress) upon the death of Speaker Joseph Byrns; in 1940 (76 th Congress) upon the death of Speaker William Bankhead; in 1962 (87 th Congress) upon the death of Speaker Sam Rayburn; in 1989 (101 st Congress) upon the resignation of Speaker Jim Wright; and in 2015 (114 th Congress) upon the resignation of Speaker John Boehner. On the two earlier occasions among these five, the election was by resolution rather than by roll call vote. On the more recent three, the same procedure was followed as at the start of a Congress. <2. Size of the House and Majority Required to Elect> The data presented here cover the period during which the permanent size of the House has been set at 435 Members. This period corresponds to that since the admission of Arizona and New Mexico as the 47 th and 48 th states in 1912. The actual size of the House was 436, and then 437, for a brief period between the admission of Alaska and Hawaii (in 1958 and 1959) and the reapportionment of Representatives following the 1960 census. By practice of the House going back to its earliest days, an absolute majority of the Members present and voting is required in order to elect a Speaker. A majority of the full membership of the House (218, in a House of 435) is not required. Precedents emphasize that the requirement is for a majority of "the total number of votes cast for a person by name." A candidate for Speaker may receive a majority of the votes cast, and be elected, while failing to obtain a majority of the full membership because some Members either are not present to vote or instead answer "present" rather than voting for a candidate. During the period examined, this kind of result has occurred five times: in 1917 (65 th Congress), "Champ" Clark was elected with 217 votes; in 1923 (68 th Congress), Frederick Gillett was elected with 215 votes; in 1943 (78 th Congress), Sam Rayburn was elected with 217 votes; in 1997 (105 th Congress), Newt Gingrich was elected with 216 votes; and in 2015 (114 th Congress), John Boehner was elected with 216 votes. In addition, in 1931 (72 nd Congress), the candidate of the new Democratic majority, John Nance Garner (later Vice President), received 218 votes, a bare majority of the membership. The table does not take into account the number of vacancies existing in the House at the time of the election; it therefore cannot show whether any Speaker may have been elected lacking a majority of the then qualified membership of the House. If no candidate obtains the requisite majority, the roll call is repeated. On these subsequent ballots, Members may still vote for any individual; no restrictions have ever been imposed, such as that the lowest candidate on each ballot must drop out, or that no new candidate may enter. Because of the predominance of the two established national parties during the period examined, only once in the period did the House fail to elect on the first roll call. In 1923 (68 th Congress), in a closely divided House, both major party nominees initially failed to gain a majority because of votes cast for other candidates by Members from the Progressive Party or from the "progressive" wing of the Republican Party. Many of these Members agreed to vote for the Republican candidate only on the ninth ballot, after the Republican leadership had agreed to accept a number of procedural reforms these Members favored. Thus the Republican was ultimately elected, although (as noted earlier) still with less than a majority of the full membership. <3. Third and Additional Candidates> In the first portion of the period covered by Table 1 , it was common for candidates other than those of the two major parties to receive votes. Such action occurred in 11 of the 16 Congresses (63 rd -78 th ) that convened from 1913 through 1943. On 7 of those 11 occasions, candidates other than those of the two major parties were formally nominated. These events reflect chiefly the influence in Congress, during those three decades, of the progressive movement. The additional nominations were offered in the name of that movement, and the votes cast for Members other than the major party nominees also generally represent an expression of progressive sentiments. During this period, the occurrence of additional nominations (displayed in the table) reflects changing views of Members identifying themselves as "progressives" about whether to constitute themselves in the House as a separate Progressive Party caucus or as a wing of the Republican Party. So does the pattern of shifts in the party labels by which these nominees and others receiving votes chose to designate themselves. The last formal Progressive Party nominee appeared in 1937 (75 th Congress). After defeats in the following election, the only two remaining Members representing the Progressive Party were reduced to voting for each other for Speaker, and beginning in 1947 (80 th Congress), the last standard-bearer of the tendency accepted the Republican label. The demise of this movement in the House represented the final stage in the establishment of a two-party system at the national level. From 1945 through 1995 (79 th -104 th Congresses), only the official nominees of the two major parties received votes for Speaker. This pattern, in other words, persisted from the end of World War II and the advent of the "modern Congress" until after the Republicans had regained the majority in the 104 th Congress (1995-1996) after four decades as the minority party. During this period, the presumption became firmly established that a Member's vote for Speaker will reliably reflect his or her party membership. The opening of the 105 th Congress in 1997, accordingly, marked the first time since 1943 that anyone other than the two major party candidates received votes for Speaker. In 10 of the 13 speakership elections since then (1997-2019), at least one Member has voted for a candidate other than ones formally nominated by the major party conferences. Early in this period, votes cast for other candidates seem to have usually reflected specific circumstances and events, but in the most recent instances, some of them may be regarded as reflecting action by identifiable political factions or groupings. During this period, only in the initial election of 2015 have the names of any candidates other than those of the party conferences been formally placed in nomination. The ballots in 1997, 2013, 2015 (both instances), and 2019 were also notable because votes were cast for candidates who were not Members of the House at the time. In the initial election in 2015, two of the votes cast were for sitting Members of the Senate; in 2019, one such ballot was cast. Although the Constitution does not require the Speaker (or any other officer of either chamber) to be a Member, the Speaker has always been so; it is not known that any votes for individuals other than Members to be Speaker had ever previously been cast in the history of the House. Notably, in 2001, a Member who bore the designation of one major party voted for the nominee of the other. Although the table below does not indicate the party affiliation of the Members voting for each candidate, examination of other available records confirms that no such action had occurred at least for the previous half century.

Each new House elects a Speaker by roll call vote when it first convenes. Customarily, the conference of each major party nominates a candidate whose name is placed in nomination. A Member normally votes for the candidate of his or her own party conference but may vote for any individual, whether nominated or not. To be elected, a candidate must receive an absolute majority of all the votes cast for individuals. This number may be less than a majority (now 218) of the full membership of the House because of vacancies, absentees, or Members answering "present." This report provides data on elections of the Speaker in each Congress since 1913, when the House first reached its present size of 435 Members. During that period (63rd through 116th Congresses), a Speaker was elected five times with the votes of less than a majority of the full membership. If a Speaker dies or resigns during a Congress, the House immediately elects a new one. Five such elections occurred since 1913. In the earlier two cases, the House elected the new Speaker by resolution; in the more recent three, the body used the same procedure as at the outset of a Congress. If no candidate receives the requisite majority, the roll call is repeated until a Speaker is elected. Since 1913, this procedure has been necessary only in 1923, when nine ballots were required before a Speaker was elected. From 1913 through 1943, more often than not, some Members voted for candidates other than those of the two major parties. The candidates in question were usually those representing the "progressive" group (reformers originally associated with the Republican Party), and in some Congresses, their names were formally placed in nomination on behalf of that group. From 1945 through 1995, only the nominated Republican and Democratic candidates received votes, reflecting the establishment of an exclusively two-party system at the national level. In 10 of the 13 elections since 1997, however, some Members have voted for candidates other than the official nominees of their parties. Only in the initial election in 2015, however, were any such candidates formally placed in nomination. Usually, the additional candidates receiving votes have been other Members of the voter's own party, but in one instance, in 2001, a Member voted for the official nominee of the other party. In the 1997, 2013, 2015 (both instances), and 2019 elections, votes were cast for candidates who were not then Members of the House, including, in the initial 2015 election and the 2019 election, sitting Senators. Although the Constitution does not so require, the Speaker has always been a Member of the House. The report will be updated as additional elections for Speaker occur.

<1. Introduction> Three important themes support an understanding of public health and medical preparedness and response. First, preparedness and response are different. At each level of government, they involve different leadership roles, legal authorities, organizational structures, and funding mechanisms. Generally, during an incident, certain conditions must be met before a jurisdiction can implement response activities, or access funds reserved for that purpose. Second, states, rather than the federal government, are the seats of authority and responsibility for the oversight of both health care and emergency management. For example, state laws generally authorize governors to order and enforce the evacuation of residents in emergency situations. Except under extraordinary circumstances, the federal government generally does not dictate the conduct of health care or emergency management activities to state or local officials, or to health care providers. Finally, while most public health functions are inherently governmental, the nation's health care system is, in contrast, primarily private and for-profit. Providers and facilities operate in an increasingly competitive marketplace in which emergency planning is not always seen as a necessary expense. When there is a catastrophe in the United States, state and local governments take the lead in response activities. State and local legal authorities are the principal means to support these activities. When the resources of states and localities are overwhelmed, the President can provide certain additional assets and personnel to aid stricken communities, and can provide funding to individuals and to government and not-for-profit entities to assist them in response and recovery. This assistance is provided under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act), upon a presidential declaration of an emergency (a lower level of assistance) or a major disaster (a higher level of assistance). Recent incidents the September 11 and anthrax attacks of 2001, and several major hurricanes have shown the limitations of existing funding mechanisms in supporting public health and medical incident response. First, it is not clear that Stafford Act major disaster assistance is available for the response to infectious disease threats, whether intentional (i.e., bioterrorism) or natural (e.g., pandemic influenza, or "flu"). Second, the Secretary of Health and Human Services (HHS) has authority under the Public Health Service Act (PHS Act) to draw upon a special fund to support departmental activities in response to unanticipated public health emergencies, but there is at present no money in the fund. Finally, there is no existing comprehensive mechanism to provide federal assistance for uninsured or uncompensated individual health care costs that may be incurred as a result of a natural disaster or terrorist incident, though there is not general agreement that such assistance should be a federal responsibility. This report focuses on incident response activities (versus preparedness activities) and examines (1) the statutory authorities and coordinating mechanisms of the President (acting through the Secretary of Homeland Security) and the Secretary of HHS in providing routine assistance, and in providing assistance pursuant to emergency or major disaster declarations and/or public health emergency determinations; (2) mechanisms to assure a coordinated federal response to public health and medical emergencies, and overlaps or gaps in agency responsibilities; and (3) existing mechanisms, potential gaps, and proposals to fund the costs of a response to public health and medical emergencies. A listing of federal public health emergency authorities is provided in the Appendix . This report will be updated as needed. For more information on aspects of public health and medical preparedness and response in general, and in the context of specific disasters or threats, see the following CRS Reports: CRS Report R40159, Public Health and Medical Preparedness and Response: Issues in the 111th Congress ; CRS Report RL33589, The Pandemic and All-Hazards Preparedness Act (P.L. 109-417): Provisions and Changes to Preexisting Law ; CRS Report RL33927, Selected Federal Compensation Programs for Physical Injury or Death ; CRS Report RL31719, An Overview of the U.S. Public Health System in the Context of Emergency Preparedness ; CRS Report RL33096, 2005 Gulf Coast Hurricanes: The Public Health and Medical Response ; CRS Report RL33083, Hurricane Katrina: Medicaid Issues ; CRS Report RL33738, Gulf Coast Hurricanes: Addressing Survivors' Mental Health and Substance Abuse Treatment Needs ; CRS Report RL33145, Pandemic Influenza: Domestic Preparedness Efforts ; and CRS Report RL34190, Pandemic Influenza: An Analysis of State Preparedness and Response Plans . <2. Federal Authority and Plans for Disaster Response> <2.1. Federal Statutory Authorities for Disaster Response> <2.1.1. Stafford Act: Major Disaster Declaration> A major disaster declaration issued pursuant to the Stafford Act authorizes the President to provide a variety of types of assistance to eligible entities. A major disaster declaration must meet three tests definition, need, and action . The statute defines a major disaster as follows: ...any natural catastrophe (including any hurricane, tornado, storm, high water, winddriven water, tidal wave, tsunami, earthquake, volcanic eruption, landslide, mudslide, snowstorm, or drought), or, regardless of cause, any fire, flood, or explosion, in any part of the United States, which in the determination of the President causes damage of sufficient severity and magnitude to warrant major disaster assistance under this chapter to supplement the efforts and available resources of States, local governments, and disaster relief organizations in alleviating the damage, loss, hardship, or suffering caused thereby. Second, the incident must result in damages significant enough to exceed the resources and capabilities not only of the affected local governments, but the state as well. The requirement is set forth as follows: All requests for a declaration by the President that a major disaster exists shall be made by the Governor of the affected State. Such a request shall be based on a finding that the disaster is of such severity and magnitude that effective response is beyond the capabilities of the State and the affected local governments and that Federal assistance is necessary. Third, the state must implement its authorities, dedicate sufficient resources, and commit to meet its share of the costs, as follows: As part of such request, and as a prerequisite to major disaster assistance under this chapter, the Governor shall take appropriate response action under State law and direct execution of the State's emergency plan. The Governor shall furnish information on the nature and amount of State and local resources which have been or will be committed to alleviating the results of the disaster, and shall certify that, for the current disaster, State and local government obligations and expenditures (of which State commitments must be a significant proportion) will comply with all applicable cost-sharing requirements of this chapter. Based on the request of a Governor under this section, the President may declare under this chapter that a major disaster or emergency exists. <2.1.2. Stafford Act: Emergency Declaration> By comparison with a major disaster declaration, considerably less assistance is authorized under an emergency declaration. However, the Stafford Act gives the President considerably broader discretion in issuing an emergency declaration. First, the definition of "emergency" does not include the specific causal events listed in the definition of "major disaster." The President instead may determine whether circumstances are sufficiently dire for the affected state to call for an emergency declaration. Also, of importance to a flu pandemic or other public health threat, the protection of public health is to be considered by the President, as seen in the following: "Emergency" means any occasion or instance for which, in the determination of the President, Federal assistance is needed to supplement State and local efforts and capabilities to save lives and to protect property and public health and safety, or to lessen or avert the threat of a catastrophe in any part of the United States. As with the major disaster authority, an emergency declaration must meet tests pertaining to need and action . However, as with the definition of "emergency," the President is granted a wider degree of discretion. While governors requesting assistance must take certain required actions, they do not have to identify that state and local resources have been committed. They must, however, identify the type and extent of federal aid required. Also, the President has discretion to act in the absence of a gubernatorial request if the emergency creates a condition that primarily or solely constitutes a federal responsibility. The Stafford Act procedure for an emergency declaration follows: (a) Request and declaration. All requests for a declaration by the President that an emergency exists shall be made by the Governor of the affected State. Such a request shall be based on a finding that the situation is of such severity and magnitude that effective response is beyond the capabilities of the State and the affected local governments and that Federal assistance is necessary. As a part of such request, and as a prerequisite to emergency assistance under this chapter, the Governor shall take appropriate action under State law and direct execution of the State's emergency plan. The Governor shall furnish information describing the State and local efforts and resources which have been or will be used to alleviate the emergency, and will define the type and extent of Federal aid required. Based upon such Governor's request, the President may declare that an emergency exists. (b) Certain emergencies involving Federal primary responsibility. The President may exercise any authority vested in him by Section 5192 of this Title or Section 5193 of this Title with respect to an emergency when he determines that an emergency exists for which the primary responsibility for response rests with the United States because the emergency involves a subject area for which, under the Constitution or laws of the United States, the United States exercises exclusive or preeminent responsibility and authority. In determining whether or not such an emergency exists, the President shall consult the Governor of any affected State, if practicable. The President's determination may be made without regard to subsection (a) of this section. The emergency declaration authority in the Stafford Act has previously been used by a President to respond specifically to a public health threat. In the fall of 2000, President Clinton issued emergency declarations for New York and New Jersey to help the states contain the threatened spread of the West Nile virus. <2.1.3. Public Health Emergency Authorities> With some exceptions, state and local governments, rather than the federal government, are the seats of responsibility and authority for public health activities, both in general, and in response to public health and medical emergencies. As with catastrophes in general, the federal government may provide various forms of assistance to state and local governments, non-profit entities, families, and others, in response to public health threats. In response to public health threats, the Secretary of HHS can provide a considerable degree of assistance to states, upon their request, through the Secretary's standing (i.e., non-emergency) authorities. There is neither a defined threshold, nor a requirement to demonstrate need, as with the Stafford Act. For example, simply upon the request of a State Health Official, and without the involvement of the President, the Centers for Disease Control and Prevention (CDC) can provide financial and technical assistance to states for outbreak investigation and disease control activities. These activities are carried out under the Secretary's general authority to assist states, pursuant to Sections 311 and 317 of the PHS Act, among others. There are a number of authorities in the PHS Act that allow the Secretary of HHS to take certain actions in the face of a "public health emergency." That term is defined in different ways, or in some cases is not defined. The principal such authority is in Section 319 of the PHS Act, which grants the Secretary of HHS broad authority to determine that a public health emergency exists. Pursuant to such a determination, the Secretary may waive certain administrative requirements, provide additional forms of assistance, and take certain other actions to expand federal aid to state and local governments, not-for-profit entities, and others. The Secretary must provide written notice of such determinations to the Congress within 48 hours, but is not required to publish notice of such determinations in the Federal Register . The Secretary's authority to determine that a public health emergency exists is as follows: If the Secretary determines, after consultation with such public health officials as may be necessary, that (1) a disease or disorder presents a public health emergency; or (2) a public health emergency, including significant outbreaks of infectious diseases or bioterrorist attacks, otherwise exists, the Secretary may take such action as may be appropriate to respond to the public health emergency, including making grants, providing awards for expenses, and entering into contracts and conducting and supporting investigations into the cause, treatment, or prevention of a disease or disorder as described in paragraphs (1) and (2). Making such a determination enables the Secretary to take three types of actions that can be especially useful for incident response. First, such a determination authorizes the Secretary to draw from a special emergency fund. (The fund does not currently have any monies available, however. See the subsequent section " The Public Health Emergency Fund .") Second, it enables the Secretary to implement an authority in the Federal Food, Drug, and Cosmetic Act the so-called Emergency Use Authorization allowing for the use of unapproved medical treatments and tests, under specified conditions, if needed during an incident. Third, if there is a concurrent declaration pursuant to the Stafford Act or the National Emergencies Act, the Secretary is authorized to waive a number of administrative requirements, principally involving reimbursement through the Medicare and Medicaid programs, that can be useful if patients must be relocated due to damage to or inaccessibility of health care facilities. Among other things, these waivers allow beneficiaries to receive services despite having lost their documentation of eligibility, and allow providers to provide services in alternate temporary facilities. A listing of these and other federal public health emergency authorities is provided in the Appendix . Although the waivers described above can streamline access to care for individuals who have health insurance, they do not provide coverage for individuals who do not. Bills introduced in the 110 th Congress ( H.R. 6569 / S. 3312 ) would authorize the Secretary of HHS, pursuant to a Section 319 public health emergency determination, to use the PHEF to provide temporary emergency health care coverage for uninsured or underinsured individuals affected by the emergency. The proposals would require the Secretary to consider, in making such a determination, the extent to which the situation has or is likely to overwhelm health care providers in the affected area, and the potential financial burdens those providers may face as a result. A concurrent declaration under the Stafford Act would not be required to enable this authority. The emergency authorities of the Secretary of HHS are not strictly comparable to authorities in the Stafford Act. Stafford Act major disaster assistance is intended to assist states and individuals with needs that exceed the scope of assistance routinely provided by federal agencies, and is often triggered by large-scale infrastructure damage. In contrast, the response to public health emergencies (such as infectious disease outbreaks) often involves extensions of routine program activities, such as technical assistance for epidemiologic and laboratory investigation, workforce assistance, or the provision of special drugs or tests. Table 1 lists public health emergency determination made pursuant to Section 319 of the PHS Act since 2000. These determinations are less common than are disaster or emergency declarations made pursuant to the Stafford Act. Two factors may explain this. First, as noted above, the Secretary of HHS has standing (non-emergency) authority to render many forms of aid to state and local governments and others, without the need to make such a determination. Second, although making such a determination authorizes the Secretary to draw from a Public Health Emergency Fund (PHEF), the fund has not had a balance in it for many years. Consequently, none of the determinations issued since 2000 had the effect of mobilizing any additional funds beyond what would otherwise have been available. It is possible that if funds were available to the Secretary of HHS in the PHEF, it could influence the Secretary's decision to make a public health emergency determination, or the pressures put upon the Secretary to do so. Given that, Congress may consider whether the degree of discretion afforded to the HHS Secretary in making such a determination, and the accompanying reporting requirements, are appropriate. <2.1.4. Intersection of Stafford Act and Public Health Emergency Authority> Disaster and emergency authorities pursuant to the Stafford Act are generally independent of public health emergency authorities. Only one provision in current law allowing for the waiver of a number of HHS statutory, regulatory and program requirements, discussed above requires a concurrent Section 319 public health emergency determination, and a declaration pursuant to either the Stafford Act or the National Emergencies Act. When multiple declarations are in effect as a result of a specific incident, it can pose a greater challenge for officials in understanding the scope and interaction of their response authorities. <2.2. Federal Coordinating Mechanisms for Disaster Response> <2.2.1. National Response Framework> Pursuant to congressional mandate, the Department of Homeland Security (DHS) released the National Response Plan (NRP) in December 2004 to establish a comprehensive framework for the coordination of federal resources under specified emergency conditions. In January 2008, the NRP was replaced by the National Response Framework (NRF), following a lengthy stakeholder engagement intended, among other things, to capture lessons learned from the flawed response to Hurricane Katrina. The NRF is under the overall coordination of the Secretary of Homeland Security, and its implementation is delegated to the Federal Emergency Management Agency (FEMA). It sets forth the responsibilities and roles of federal agencies; identifies tasks to be performed by specified federal officials; and includes annexes with details on support resources and mechanisms that are integral to its implementation. It is not a source of new authority for incident response. While it may be used to guide response activities that flow from Stafford Act declarations, it is not a source of funding for these activities. It is applicable to incidents whether or not they have led to a Stafford Act declaration. Finally, it is intended to be a national coordinating blueprint, describing and integrating roles for state, local, territorial and tribal governments and the private sector, as well as federal agencies. <2.2.2. National Response to an Influenza Pandemic> In addition to the NRF, which guides a coordinated national all-hazards response (i.e., to a variety of incidents), numerous federal and other planning documents that are specific for the response to a flu pandemic have been published. Selected planning documents are listed below. Unless otherwise noted, they can be found on a government-wide pandemic flu website managed by HHS. The National Strategy for Pandemic Influenza, November 2005: outlines general responsibilities of individuals, industry, state and local governments, and the federal government in preparing for and responding to a pandemic. National Strategy for Pandemic Influenza, Implementation Plan, May 2006: assigns more than 300 preparedness and response tasks to departments and agencies across the federal government; includes measures of progress and timelines for implementation; provides initial guidance for state, local, and tribal entities, businesses, schools and universities, communities, and non-governmental organizations on the development of institutional plans; provides initial preparedness guidance for individuals and families. The HHS Pandemic Influenza Plan, November 2005: provides guidance to national, state and local policy makers and health departments, outlining key roles and responsibilities during a pandemic and specifying preparedness needs and opportunities. This plan emphasizes specific preparedness efforts in the public health and health care sectors. The HHS Pandemic Influenza Implementation Plan, Part I, November 2006: discusses department-wide activities: disease surveillance; public health interventions; medical response; vaccines, antiviral drugs, diagnostic tests, and personal protective equipment (PPE); communications; and state and local preparedness. Department of Defense Implementation Plan for Pandemic Influenza, August 2006: provides policy and guidance for the following priorities: (1) force health protection and readiness; (2) the continuity of essential functions and services; (3) Defense support to civil authorities (i.e., federal, state, and local governments); (4) effective communications; and (5) support to international partners. VA Pandemic Influenza Plan , March 2006: provides policy and instructions for Department of Veterans Affairs (VA) in protecting its staff and the veterans it serves, maintaining operations, cooperating with other organizations, and communicating with stakeholders. Pandemic Influenza Preparedness, Response, and Recovery Guide for Critical Infrastructure and Key Resources , September 2006: provides business planners with guidance to assure continuity during a pandemic for facilities comprising critical infrastructure sectors (e.g., energy and telecommunications) and key resources (e.g., dams and nuclear power plants). State pandemic plans: All states were required to develop and submit specific plans for pandemic flu preparedness, as a requirement of grants provided by HHS. <2.3. Would the Stafford Act Apply in a Flu Pandemic?> Each of the pandemic influenza plans listed above was written with the premise that the NRP would have been applicable to guide a coordinated federal response to a flu pandemic. The NRF, which was published subsequently, similarly notes that it could serve as the blueprint for a coordinated national response to this incident. As noted earlier, the NRF serves as a coordinating mechanism, but does not confer additional authorities or serve as a source of funding for response activities. When a Stafford Act emergency or major disaster is declared, the Disaster Relief Fund may be used to pay for authorized response activities and assistance. There is precedent for a Stafford emergency declaration in response to an infectious disease threat: as noted earlier, emergency declarations pursuant to the Stafford Act were made in response to West Nile virus in 2000. However, there is no relevant precedent regarding whether Stafford Act major disaster assistance could be provided in response to a flu pandemic. FEMA has in the past, in the context of the national TOPOFF exercises, interpreted intentional biological incidents as ineligible for major disaster assistance pursuant to the Stafford Act. However, the view of the George W. Bush Administration was that the President's authority to declare a major disaster pursuant to the Stafford Act could be applied to a flu pandemic, and in 2007, FEMA issued a Disaster Assistance Policy regarding major disaster assistance that may be provided in response to this threat. The matter of the applicability of a Stafford Act declaration to a flu pandemic is important for two reasons. First, the level of funding that may be available to support federal activities, and provide assistance to state and local governments and individuals, is substantially greater following a major disaster declaration than it is following an emergency declaration. Second, the federal leadership structure for incident response may be different depending on whether the incident results in a Stafford Act declaration (of either type), or is a "non-Stafford" incident. The Stafford Act requires the President, upon making an emergency or major disaster declaration, to appoint a Federal Coordinating Officer (FCO) to operate in the affected region. This individual has historically reported to the head of FEMA, who in turn reports to the President and assumes overall operational control of the federal government's incident response. The NRF, and the NRP before it, also established the role of Principal Federal Official (PFO), a different individual who reports directly to the Secretary of Homeland Security during an incident response. Confusion about the respective roles and authorities of these individuals was identified following Hurricane Katrina, and has remained a matter of concern to Congress. It is reported that in December 2006, the Secretary of Homeland Security predesignated, in the event of a response to a flu pandemic, one national and five regional FCOs, and one national and five regional PFOs. The respective roles of these individuals all of whom would presumably be involved in response activities if a Stafford Act declaration were made have not been clarified in any publicly available pandemic planning documents. It is widely agreed that emergency assistance under the Stafford Act could be provided by the President in the event of a flu pandemic, although questions remain as to whether major disaster assistance would be available. A legal analysis of the question, conducted by CRS, suggests that this issue was not addressed by Congress when it drafted the current definition of a major disaster, and that neither inclusion nor exclusion of a flu pandemic from major disaster assistance is explicitly required by the current statutory language. In the 109 th Congress, Section 210 of S. 3721 would have made any outbreak of infectious disease explicitly eligible for major disaster assistance, but it was not enacted. <3. NRF Emergency Support Function 8:Roles and Challenges> <3.1. Overview> The Hurricane Katrina response, and planning for a flu pandemic, each demonstrate the scope of public health and medical activities needed in response to a large-scale catastrophe. A successful public health response would involve such activities as monitoring and assurance of the safety of food and water, prevention of injury, control of infectious diseases, and a host of other activities, which are primarily carried out by government and private not-for-profit entities. A successful medical response would perhaps be more complicated, requiring the coordination of numerous activities and services, and involving federal, state or local government agencies, and private for-profit and not-for-profit entities. These elements are (1) patients, who may require rescue or medical evacuation; (2) a treatment facility, which may be an existing hospital, or a field tent with cots; (3) a competent health care workforce; (4) appropriate medical equipment and non-perishable medical supplies; (5) appropriate drugs, vaccines, tests and other perishable medical supplies; (6) a system of medical records; and (7) a health care financing mechanism. According to the NRF (and the earlier NRP), the Secretary of HHS is tasked with coordinating Emergency Support Function 8 (ESF-8), the NRF annex that addresses the public health and medical response to incidents. (ESF-8 is one of 15 ESFs in the NRF. Other annexes include public safety, energy supplies, and transportation, for example.) ESFs are coordinating mechanisms, not funding mechanisms. The response to a flu pandemic is likely to involve ESF-8 primarily, and public health and medical needs could be substantial. A flu pandemic would not likely impose the mass dislocations and destruction of health care infrastructure that can result from major hurricanes. But, as a pandemic would affect all areas of the nation nearly simultaneously, responders could not necessarily count on the state-to-state mutual aid that is often critical in disaster response. And planners note that a severe pandemic could still constitute a multi-sector incident. Staffing shortages and supply chain disruptions could disrupt services, and possibly affect the integrity of infrastructure, in the transportation, public works, and energy sectors, among others, engaging ESFs for those sectors in the response as well. The Secretary of HHS is responsible for coordinating the following response activities under ESF-8, and may request assistance from 14 designated support agencies and the American Red Cross as needed: assessment of public health and medical needs; health surveillance; medical care personnel; health/medical/veterinary equipment and supplies; patient evacuation; patient care; safety and security of human and veterinary drugs and medical devices, and human biologics; blood and blood products; food safety and security; agriculture safety and security; all-hazard public health and medical consultation, technical assistance and support; behavioral health care; public health and medical information; vector control (e.g., control of disease-carrying insects and rodents); potable water, wastewater and solid waste disposal; mass fatality management, victim identification and decontaminating remains; and veterinary medical support. Depending on the incident, HHS may need other agencies to carry out certain of their ESF activities (e.g., public safety, road clearing, and power restoration) before some ESF-8 activities could begin. Some specific concerns resulting from overlaps or gaps in defined ESF duties are discussed below. <3.2. Unclear Federal Leadership for Certain Response Functions> In the response to Hurricane Katrina, it became apparent that federal responsibility to coordinate certain support activities was not clear in the existing ESF assignments in the NRP. The NRF has addressed some of these concerns, left others unclear, and possibly raised some new concerns. Some had questioned whether the NRP clearly defined federal ESF-8 leadership, or whether the respective roles of the Secretaries of Homeland Security and HHS could conflict during a response. Some, including congressional investigators, felt this conflict was evidenced during the response to Hurricane Katrina. Others were concerned that the respective roles were insufficiently clear to guide a coordinated response to a flu pandemic. In October 2006, the President signed P.L. 109 - 295 , the Post-Katrina Emergency Management Reform Act of 2006 (called the Post-Katrina Act or PKA, in DHS appropriations for FY2007), which reauthorized and reorganized programs in FEMA. Among other things, the law also codified the position of Chief Medical Officer (CMO) at DHS, the individual who coordinates all departmental activities regarding medical and public health aspects of disasters. The Post-Katrina Act provided that the CMO "shall have the primary responsibility within the Department for medical issues related to natural disasters, acts of terrorism, and other man-made disasters." (Emphasis added.) Subsequently, in December 2006, the President signed P.L. 109 - 417 , the Pandemic and All-Hazards Preparedness Act, which provided that "The Secretary of Health and Human Services shall lead all Federal public health and medical response to public health emergencies and incidents covered by the National Response Plan.... " (Emphasis added.) The Government Accountability Office (GAO) has recommended, in the context of pandemic flu planning, that the two departments (DHS and HHS) conduct rigorous testing, training and exercises to ensure that these roles are clearly defined. Responsibility for the health and safety of disaster response workers was a matter of concern in the NRP, and remains so in the NRF. GAO found that OSHA's efforts during the response to Hurricane Katrina were hampered by confusion about the agency's role, and noted in particular that disagreements between FEMA and OSHA regarding OSHA's role delayed FEMA's authorization of mission assignments to fund OSHA's response activities. Some Members of Congress and others sought to have worker health and safety elevated to an Emergency Support Function in the NRF, which would give OSHA more autonomy in commencing its response activities. Instead, the NRF contains a revised Worker Safety and Health Support Annex. Following Hurricane Katrina, the 109 th Congress enacted the SAFE Port Act ( P.L. 109 - 347 ). One of its provisions authorizes the President, acting through the Secretary of HHS and pursuant to a major disaster declaration under the Stafford Act, to establish medical monitoring programs, if needed, to track the health status of individuals (not limited to responders) who may experience hazardous exposures as a result of the disaster. The authority has not yet been implemented. According to GAO, as of May 2008, HHS had not articulated a plan for doing so. Federal agency responsibilities and funding mechanisms are not clear without such a plan. For example, within HHS, at least three components the ASPR, as well as the Agency for Toxic Substances and Disease Registry and the National Institute for Occupational Safety and Health, both in CDC have relevant authorities and responsibilities that overlap. Also, as noted above, a major disaster typically triggers federal coordinating mechanisms laid out in the NRF, which places OSHA in the lead in assuring responder health and safety. In 2008, GAO recommended that HHS develop plans to register all responders during a disaster, as part of a comprehensive departmental plan to assure responder health during and after disasters. GAO said that such a plan should also include a means to implement medical monitoring programs, or to assist states and localities in doing so. To meet the intent of the SAFE Port Act, such a plan must also address affected individuals who are not responders. Although both the NRP and the NRF address mass fatality management, the NRP did not, and the NRF does not, clearly delegate responsibility for the retrieval of human remains in mass fatality events. HHS is responsible for the ESF-8 function of coordinating federal assistance to identify victims and determine causes of death. Federal Disaster Mortuary Assistance Teams (DMORTs) comprise medical examiners, pathologists, dental technicians and other medical personnel. These teams are not skilled in the safe retrieval of remains from hazardous sites such as waterways or collapsed buildings. Other responders, including Urban Search and Rescue teams and the U.S. Coast Guard, are trained to work safely in such dangerous conditions, but their mission is to rescue the living, not recover the dead. The matter of mass fatality management is of considerable concern in planning for a flu pandemic, and this gap could be problematic during such an incident. At times the distinction between ESF-6 and ESF-8 may be blurred. Emergency Support Function 6 (ESF-6), Mass Care , under the leadership of FEMA, lays out the coordination of emergency shelter, feeding, and related activities for affected populations. As was evident in the response to Hurricane Katrina, the ESF functions overlapped when evacuees in Red Cross shelters required medical care, or when large numbers of hospital patients evacuated to ESF-8 field hospitals required food and water. The revised ESF-6 and ESF-8 annexes accompanying the NRF provide substantially more detail regarding the coordination of these functions than did the corresponding NRP annexes. Also, this problem was reportedly considered by FEMA, HHS, and the American Red Cross in their reviews of the hurricane response, and in their subsequent preparedness planning. HHS assets and personnel were deployed extensively for the evacuation and care of individuals with special needs before and during Hurricanes Gustav and Ike in the fall of 2008. In the NRF, as with the NRP, leadership for the federal coordination of mental and behavioral health services following a disaster appears to be split between ESF-6 and ESF-8. "Crisis counseling" is among the responsibilities delegated in ESF-6, while federal coordination of "behavioral health care" including assessing mental health and substance abuse needs, and providing disaster mental health training for workers is delegated in ESF-8. Hence, federal leadership for disaster mental health in the NRF is delegated to both FEMA and to HHS. (When the disaster involves terrorism or other forms of violence, the Department of Justice may also be a key federal partner. ) Finally, the NRF resolves a gap in the NRP regarding federal responsibility for pets during disasters. Often people are reluctant or unwilling to abandon pets, and will remain at home in contravention to an evacuation order if they cannot take pets with them. In the Post-Katrina Act and the Pets Evacuation and Transportation Standards Act of 2006 ( P.L. 109 - 308 ), the 109 th Congress required DHS, in developing standards for state and local emergency plans, to account for the needs of individuals with household pets and service animals before, during, and after a major disaster or emergency, in particular with regard to evacuation planning and planning for the needs of individuals with disabilities. In addition, the President is authorized to make Stafford Act assistance available to states and localities to carry out pet rescue and sheltering activities in the immediate response to a major disaster. Neither act addressed federal leadership for the needs of pets in disasters, but this is addressed in the NRF. FEMA, when coordinating federal efforts to provide human sheltering services per ESF-6 (Mass Care), is to ensure that the needs of pets can also be accommodated. (This is often referred to as "co-sheltering.") USDA's Animal and Plant Health Inspection Service, per ESF-11 (Agriculture and Natural Resources), is to ensure that the sheltering needs of the pets are met. In 2007, FEMA issued a policy directive regarding eligible costs related to pet evacuations and sheltering, for which state and local governments would be reimbursed. <4. Federal Funding to Support an ESF-8 Response> Hurricane Katrina was the greatest test of ESF-8 since the establishment of DHS and the publication of the NRP. A variety of public health and medical activities were undertaken in the hurricane response. The costs of these activities were borne by agencies at the federal, state and local levels, not-for-profit groups, businesses, health care providers, insurers, families, and individuals. Private insurance covered some of the property damage, health care, and other costs resulting from the disaster. Congress provided additional assistance through emergency appropriations to cover expanded federal agency activities and a portion of uninsured health care costs. Some other costs, such as those to rebuild the devastated health care infrastructure in New Orleans, have not been fully met at this time, either through existing assistance mechanisms or mechanisms developed since the storm. The response to Hurricane Katrina, and ongoing pandemic flu preparedness efforts, each offer a glimpse of the complexity of the challenge, and the adequacy of existing mechanisms to fund the costs of an ESF-8 response. <4.1. Funding Sources and Authorities> <4.1.1. The Disaster Relief Fund> Activities undertaken pursuant to the Stafford Act are funded through appropriations to the Disaster Relief Fund (DRF), administered by FEMA. Federal assistance supported by the DRF is used by states, localities, and certain non-profit organizations to provide mass feeding and shelter, restore damaged or destroyed facilities, clear debris, and aid individuals and families with uninsured needs, among other activities. Federal agencies also receive mission assignments from FEMA to provide assistance pursuant to the NRF, and are reimbursed through funds appropriated to the DRF. Through mission assignments, the DRF supported a variety of federal public health activities in the response to Hurricane Katrina, including activities to assure the safety of food and water, monitor population health status (including mental health), control infectious diseases and mosquitoes, and evaluate potential health threats associated with chemical releases. However, the DRF is not generally available to pay or reimburse the costs of health care for affected individuals, though it may pay such costs to a limited extent. (See "Federal Assistance for Disaster-Related Health Care Costs," below.) <4.1.2. The Public Health Emergency Fund> In 1983, Congress established authority for a no-year Public Health Emergency Fund (PHEF) to be available to the HHS Secretary. In 2000, Congress reauthorized the fund, clarifying that it could only be used when the Secretary had made a determination of a public health emergency, pursuant to Section 319 of the PHS Act, as follows: (1) In general. There is established in the Treasury a fund to be designated as the "Public Health Emergency Fund" to be made available to the Secretary without fiscal year limitation to carry out subsection (a) only if a public health emergency has been declared by the Secretary under such subsection. There is authorized to be appropriated to the Fund such sums as may be necessary. (2) Report. Not later than 90 days after the end of each fiscal year, the Secretary shall prepare and submit to the Committee on Health, Education, Labor, and Pensions and the Committee on Appropriations of the Senate and the Committee on Commerce and the Committee on Appropriations of the House of Representatives a report describing (A) the expenditures made from the Public Health Emergency Fund in such fiscal year; and (B) each public health emergency for which the expenditures were made and the activities undertaken with respect to each emergency which was conducted or supported by expenditures from the Fund. Between 1988 and 2000, the fund was authorized for annual appropriations sufficient to have a balance of $45 million at the beginning of each fiscal year. Despite this prior authorization of annual appropriations, the fund received appropriations only in response to a few public health threats (e.g., the emergence of hantavirus in the Southwest in 1993-1994), but did not receive an appropriation for its intended use as a reserve fund for unanticipated events. The fund has not received an appropriation since it was explicitly linked to the public health emergency authority in the PHS Act in 2000. As a result, the fund was not available for the response to public health emergency determinations made subsequently. (See Table 1 for a listing.) In 2002, Congress reauthorized the National Disaster Medical System (NDMS) in language suggesting that the emergency fund could be used to support additional activities of the HHS Secretary, including NDMS deployments, as follows: ... For the purpose of providing for the Assistant Secretary for Public Health Emergency Preparedness and the operations of the National Disaster Medical System, other than purposes for which amounts in the Public Health Emergency Fund under Section 319 are available, there are authorized to be appropriated such sums as may be necessary for each of the fiscal years 2002 through 2006. Depending on the availability of funds, this mechanism could be used to fund NDMS deployments that were ineligible for Stafford Act assistance. Legislation introduced in the 110 th Congress ( H.R. 6569 / S. 3312 ) proposed to authorize the HHS Secretary, when he or she has made a Section 319 public health emergency determination, to use the PHEF to provide temporary emergency health care coverage for uninsured individuals affected by the emergency. (For more information, see the subsequent section "Health Care Financing Proposals for Future Emergencies.") These bills were not enacted. <4.1.3. The Public Health and Social Services Emergency Fund> The Public Health and Social Services Emergency Fund (PHSSEF) is an account at HHS that has been used to provide annual or emergency supplemental appropriations for one-time or short-term public health activities in a variety of agencies and offices. Providing funding to the PHSSEF, which does not have an explicit authority in law, separates these amounts from an agency's annual "base" funding. Recent activities funded through the PHSSEF include preparedness activities for a flu pandemic, one-time purchases for the Strategic National Stockpile (SNS), and grants for state public health and hospital preparedness. Amounts appropriated to the PHSSEF may or may not be designated as emergency spending. Because the PHSSEF has been used only to fund certain planned activities, it is not a reserve fund for unanticipated events. In FY2006, Congress appropriated certain amounts that had previously been provided through the PHSSEF directly to the various agencies overseeing the programs. These included funding for the SNS and grants for upgrading state and local public health capacity, amounts now appropriated in CDC's "Terrorism and Public Health Preparedness" budget line, and grants to states for hospital preparedness, previously administered by the Health Resources and Services Administration (HRSA, an agency in HHS), and transferred to the HHS Assistant Secretary for Preparedness and Response (ASPR) in the Pandemic and All-Hazards Preparedness Act. <4.2. Funding the ESF-8 Response to Hurricane Katrina> In response to the widespread destruction caused by Hurricane Katrina, the 109 th Congress enacted two FY2005 emergency supplemental appropriations bills ( P.L. 109 - 61 and P.L. 109 - 62 ), which together provided $62.3 billion for emergency response and recovery needs. The FY2006 appropriations legislation for the Department of Defense ( P.L. 109 - 148 ) subsequently reallocated $23.4 billion in funds appropriated in the two emergency supplemental statutes, and an additional amount from a government-wide rescission, primarily to pay for the restoration of damaged federal facilities. In June 2006, Congress provided an additional $6 billion to the DRF in P.L. 109 - 234 , the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006. A portion of supplemental appropriations to the DRF supported federal ESF-8 response activities. FEMA reports to Congress on expenditures for mission assignments to both HHS, and separately to CDC, for the responses to Hurricanes Katrina, Rita and Wilma. A number of HHS agencies in addition to CDC were involved in the response to the hurricanes, and their activities, when requested by FEMA, were presumably reimbursed through the DRF. There were likely many other HHS activities carried out in response to the hurricanes that would not fall within the scope of activities that are reimbursable by the DRF pursuant to the Stafford Act. For example, on September 16, 2005, CDC issued guidance to state grantees permitting them to redirect funds from a number of grant programs to their hurricane relief efforts as needed. According to CDC, funds could be used for alternate activities within the state, or to support state-to-state mutual aid pursuant to the Emergency Management Assistance Compact (EMAC). States were permitted to redirect funds from the following federal grant programs: infectious diseases (including immunization, sexually transmitted disease prevention, tuberculosis, West Nile virus, hepatitis, HIV, emerging infections and laboratory programs); environmental health; injury prevention; and terrorism and emergency preparedness. CDC noted at the time that "No supplemental appropriations have been provided to CDC for Katrina relief, so any existing CDC funds used for relief will reduce the overall amount available to work non-relief grant issues." Information regarding the overall amount of funds that may have been redirected by HHS agencies to support Hurricane Katrina response activities, and, for those expenditures that were not reimbursable by the DRF, whether there were alternate mechanisms to "backfill" the accounts, is not publicly available. Besides what was reimbursed from the DRF or mobilized through redirection of its own departmental funds, HHS received very little in direct supplemental appropriations for its response to Hurricane Katrina, namely $8 million to CDC for mosquito abatement and other pest control activities, and $4 million to HRSA to re-establish communications capability in health departments, community health centers, major medical centers, and other entities that would continue to provide health care in areas affected by Hurricane Katrina. <4.3. Federal Assistance for Disaster-Related Health Care Costs> <4.3.1. Overview> When Stafford major disaster assistance is available, it can be invaluable in supporting public health response activities under ESF-8. Typically, these activities are inherently governmental, and are generally reimbursable from the DRF. But even when a Stafford major disaster declaration applies, it is limited in meeting the uninsured or uncompensated costs of health care for disaster victims, or in reimbursing institutions and providers who may have provided care without compensation. There is no federal assistance program designed purposefully to cover the uninsured or uncompensated costs of individual health care that may be needed as a consequence of a disaster. In a typical year, there are dozens of Stafford Act major disaster declarations (most resulting from weather-related events), potentially affecting millions of people. Given that some U.S. uninsured health care needs go unmet under normal circumstances, there is not consensus that the costs of health care for these disaster victims should be a federal responsibility. However, policy debates following two recent disasters, and concerns about pandemic flu, suggest that some Members of Congress and others are interested in exploring possible mechanisms to provide such assistance, at least in certain situations. Following Hurricane Katrina, Congress provided $2.1 billion through the Medicaid program to assist states in providing for the health care needs of Katrina evacuees for five months following the storm. The storm's victims continue to report physical and mental health problems and difficulties in accessing health care in disproportionate numbers, however. Persistent problems such as these may linger beyond the duration of assistance programs that may be available to disaster victims. Although there is not consensus that the costs of health care for disaster victims should be borne by the federal government, there has nonetheless been considerable discussion about the needs of victims of the terrorist attack of September 11, 2001, and whether terrorism should place upon the federal government a different responsibility for its victims than for victims of non-terrorist disasters. <4.3.2. Existing Mechanisms> Several federal assistance mechanisms are available to provide limited coverage for the costs of health care services that are rendered during, or required as a result of, a catastrophe. These programs provide a patchwork of coverage that in some cases fails to optimally match services with need (e.g., the Crisis Counseling Program), or in other cases fails to meet the magnitude of need (e.g., the FEMA Individuals and Households program). Furthermore, these programs are not generally coordinated with each other at the federal level, though programs that support state activities to finance or deliver health care services may be coordinated at that level. These programs include: Services provided by the National Disaster Medical System (NDMS) or other federalized employees while carrying out mission assignments requested by FEMA, pursuant to a Stafford Act declaration, may be reimbursed by the DRF, though efforts may be made to seek reimbursement from patients' insurers when possible. Assistance may be provided under both major disaster and emergency declarations that involve the provision of health and safety measures and the reduction of threats to public health and safety. The FEMA Individuals and Households Program (IHP) provides, pursuant to a Stafford Act declaration and reimbursed from the DRF, cash assistance that may be used for uninsured medical expenses. Recipients might have to use the funds to meet other needs concurrently, such as rent and other costs of living. The amount available is the same for an individual or a household, and is capped in statute, with an annual adjustment based on the Consumer Price Index. The maximum amount available for Hurricane Katrina relief was $26,200, and the current ceiling (for FY2009) is $30,300. Certain medications and supplies may be provided to patients from pre-paid stockpiles for which reimbursement is not expected. Examples include supplies used in first aid stations or distributed to states from the CDC's Strategic National Stockpile. Agencies' costs may be reimbursed from the DRF if the incident resulted in a Stafford Act declaration. The Stafford Act authorizes the President, pursuant to a major disaster declaration, to provide financial assistance to state and qualified tribal mental health agencies for professional counseling services, or training of disaster workers, to relieve disaster victims' mental health problems caused or aggravated by the disaster or its aftermath. FEMA and the Substance Abuse and Mental Health Services Administration (SAMHSA) in HHS jointly administer the Crisis Counseling Assistance and Training Program (CCP). Costs are reimbursed from the DRF. Public Health Service agencies in HHS may provide support to states and other entities through existing non-emergency mechanisms to assist in managing surges in health care needs for specific populations. In some cases, agencies have received supplemental appropriations to support these activities. Examples include SAMHSA Emergency Response Grants (SERG) to states, territories, and federally recognized tribal authorities for crisis mental health and substance abuse services, and expanded federal support, including personnel, for health centers in disaster-affected areas. Certain federal compensation programs may cover some or all health care costs for certain disaster victims, although these programs generally flow from the individual's employment status rather than from their status as disaster victims. Such programs include workers' compensation programs for federal workers whose injuries are related to employment, and benefits for federal, state, and local public safety officers (including police officers and firefighters) who are killed or permanently disabled while performing their duties. For victims of disasters resulting from terrorism, certain forms of assistance to crime victims may be available to help defray health care costs. <4.3.3. Health Care Needs of 9/11 Responders> Within two weeks of the terrorist attack on the World Trade Center (WTC) in New York City, Congress established the September 11 th Victim Compensation Fund (VCF). The program provided compensation for physical injury or death, from any cause, that resulted from an individual's presence at the sites at the time of the crashes or in their immediate aftermath. The deadline for filing a claim was December 22, 2003. Thousands of responders worked on the site in a rescue, recovery, and cleanup operation that lasted more than a year. Many responders and some residents in the area are experiencing, many years later, various respiratory, psychological, gastrointestinal and other problems felt to be related to their exposures at the site. Physical hazards to which these individuals were potentially exposed include asbestos and other particulates, heavy metals, volatile organic compounds, and dioxin. Congress provided funding to the CDC to establish the World Trade Center Health Registry, an effort to identify and periodically survey people who were exposed at the site or in the general vicinity, to track their health status over a 20-year period. In addition, several medical monitoring programs were established to develop and deliver initial, and sometimes follow-up, health examinations to groups of individuals potentially at risk of future illness. While recruitment for both activities continues, the monitoring programs have identified a number of people with serious health problems presumably related to their WTC exposures, some of whom have died. Congress has provided intermittent appropriations to support the costs of medical treatment for some of these individuals, through treatment programs established after the terrorist attack. The VCF is not available to assist individuals whose symptoms arose after the fund's closing date. Routine sources of health care coverage may also elude these individuals. Some may have lost employer-based health insurance coverage, if they have become too sick to work. For some with health insurance, the plan may not cover needed prescription drugs or specialty care, or coverage may be denied if an insurer asserts that an illness is work-related and should be covered by workers' compensation. Some workers, such as volunteers or immigrants, may lack workers' compensation coverage. Others who have this coverage may still find that employers and insurers contest their claims on the basis that an illness is not work-related. Congressional interest in this issue has focused on matters of short- and long-term financing and accountability for the registry, monitoring, and treatment programs, and whether or how financial responsibility for the long-term needs of affected individuals should be shared, if at all, among the federal government, local governments, private insurers, and others. H.R. 847 , introduced in the 111 th Congress, would establish programs to pay health care or other costs for workers and others who may be ill as a result of their exposures following the WTC incident. <4.3.4. Financing Health Care Needs Following Hurricane Katrina> Hurricane Katrina was the largest mass casualty incident in recent times. Many of the storm's victims were dislocated to different states, separated from their documentation of health insurance, or both. Others lost employer-based health insurance due to the destruction or closure of businesses. In many cases, care was rendered without definitive financing mechanisms, while federal, state and private entities worked to retrofit these mechanisms in the disaster's aftermath. In response, HHS expanded a number of existing programs to assist state and local agencies, health care providers and the storms' victims with a variety of health and public health needs. Information regarding the overall cost of these expansions is not publicly available. In 2002, Congress gave the Secretary of HHS authority to waive certain administrative requirements for provider participation in Medicare, Medicaid and the State Children's Health Insurance Program (SCHIP) when there are in effect, concurrently, a Stafford Act declaration and a determination of public health emergency pursuant to Section 319 of the PHS Act. This authority was exercised in a number of affected and host states following Hurricane Katrina. While this authority may improve access to health care services in affected areas, it does not directly address the financing of these services. A significant challenge following Hurricane Katrina involved setting up or re-establishing health care financing mechanisms for displaced individuals. Ultimately, the Medicaid program became the mechanism by which affected and host states financed certain health care costs that were not compensated through other public or private insurance sources. After several months of debate, Congress provided, in the Deficit Reduction Act of 2005, authority and funding to cover, for certain states through January 31, 2006, the Medicaid and SCHIP matching requirements for individuals enrolled in these programs, and the total cost of uncompensated care for the uninsured, for eligible individuals who had been displaced from declared major disaster areas. Congress provided up to $2 billion for these activities. This was in addition to $100 million provided earlier in supplemental appropriations to NDMS to cover expenses related to the hurricane response. (Through an interagency agreement, most of the $100 million was transferred from FEMA to the HHS Centers for Medicare and Medicaid Services (CMS), which administered the funding. ) According to HHS, as a result of this mechanism, eight states were able to reimburse providers that incurred uncompensated care costs as a result of serving an estimated 325,000 evacuees, and 32 states were able to provide continuity of coverage for up to five months for displaced low-income individuals by temporarily enrolling them in a host state's Medicaid program through a simplified enrollment process. Individuals, institutions, providers, and others affected by Hurricane Katrina continue to face challenges that are beyond the scope of the nation's disaster assistance mechanisms. The storm's victims continue to report physical and mental health problems and difficulties in accessing health care in disproportionate numbers, however, and the New Orleans area continues to struggle with rebuilding its health care infrastructure. <4.3.5. ESF-8 Funding Needs During a Flu Pandemic> Although a severe flu pandemic may constitute a national catastrophe, requiring a robust ESF-8 public health and medical response, funding needs may not be readily addressed through existing assistance mechanisms pursuant to the Stafford Act (to the extent that they apply), and could outstrip existing government and private resources. While the need for public health and medical services could be considerable, extensive damage to public or private infrastructure is not anticipated. Costs associated with workforce surge capacity (e.g., overtime pay) and consumption of certain supplies (e.g., for public health laboratory tests) could increase substantially. Presuming a surge of patients in the health care system, non-urgent procedures (which are often more lucrative) could be postponed for weeks or months at a time. This has raised questions regarding whether there would be shifts in overall revenue to providers for services rendered during a pandemic, and how such shifts could affect providers and insurers. Finally, given that millions of Americans lack health insurance, the cost of providing health care services during a pandemic is of concern to many. Some are concerned that disease control efforts could suffer if some subgroups of the population were unwilling, because of their insurance status or for other reasons, to seek care or otherwise interact with disease control authorities during a pandemic. In March 2007, FEMA issued a Disaster Assistance Policy for pandemic flu, outlining, among other types of assistance, the types of health care services that would be reimbursable through the Disaster Relief Fund (DRF), presuming that a Stafford Act declaration were made. Assistance would be provided to eligible entities (including state and local government agencies) to support a number of ESF-8 activities, including establishing temporary medical facilities, public communication, and mass fatality management. With respect to the costs of medical care provided to individuals, the policy states that the following services may be eligible for reimbursement, for a period of time to be determined by the Secretary of Homeland Security or his or her designee: "Emergency medical care (non-deferrable medical treatment of disaster victims in a shelter or temporary medical facility and related medical facility services and supplies, including emergency medical transport, X-rays, laboratory and pathology services, and machine diagnostic tests.... )" Neither "emergency medical care" nor "non-deferrable medical treatment" are defined. Given the potential for there to be many casualties of a flu pandemic who require extended critical medical care, the extent to which the DRF could be tapped to support the costs of such care is not entirely clear. As previously noted, following Hurricane Katrina, Congress provided $2.1 billion to states to cover the states' usual share of Medicaid and SCHIP costs for storm victims for a defined time period, and the cost of uncompensated care for the uninsured. This assistance mechanism required legislative action and took nearly six months to enact, in the absence of a pre-existing mechanism to provide such federal assistance. Whether this could serve as a model for federal assistance during a flu pandemic is unclear. An important element of the discussion regarding the Katrina assistance was the desire to help both states that had been directly affected, and states that had assumed fiscal liability by accepting evacuees. While the element of victim displacement would not likely be seen during a pandemic, Congress may nonetheless debate the merits of expanding federal assistance for health care costs during a flu pandemic, and the model developed following Hurricane Katrina may serve as a useful starting point for discussion. <4.3.6. Health Care Financing Proposals for Future Emergencies> Legislation introduced in the 110 th Congress ( H.R. 6569 / S. 3312 ) proposed requiring the Secretary to establish a program to provide temporary emergency health care coverage for uninsured or underinsured individuals affected by public health emergencies. The Secretary would be authorized to provide such coverage when he or she has determined there to be a public health emergency pursuant to Section 319 of the PHS Act, after considering the extent to which the situation may overwhelm health care providers in the affected area, and the potential financial burdens those providers may face as a result. The program would apply certain administrative approaches used in other federal health care programs (e.g., Medicare payment rates), but would be financed solely through appropriations to the Public Health Emergency Fund. The proposals would authorize the appropriation of $7 million for each fiscal year, beginning with FY2009, for program planning, and for an outreach and education campaign for providers and the public about the potential availability of this assistance in a public health emergency. The proposals would also require that if the Secretary activates the program of emergency health care coverage, he or she shall also establish a program for medical monitoring and reporting on the health care needs of the affected population over time. These proposals were not enacted. <5. Conclusion> Both the Secretaries of Homeland Security and HHS have statutory authority to provide additional assistance to state and local governments, and others, in response to catastrophes. Following Hurricane Katrina, Congress defined in statute the roles of the two Secretaries with respect to the public health and medical response to catastrophes. Numerous aspects of these relationships are yet to be sorted out, through specific planning, exercises, and other approaches. In carrying out the federal response to public health and medical emergencies and disasters, the Secretary of HHS has broad authority and considerable discretion in providing assistance, but lacks a sound funding source to support the response to these unanticipated events. In contrast, the President, acting pursuant to the Stafford Act, has, in the Disaster Relief Fund (DRF), a ready source of funds to support an immediate response to emergencies and disasters. Stafford Act assistance is, however, not especially well-tailored for the response to public health and medical threats. Indeed, some of these threats (e.g., bioterrorism) may not even trigger Stafford Act major disaster assistance. <5.1. Appendix. Federal Public HealthEmergency Authorities101> Broad Authority in Section 319 of the PHS Act The Secretary of HHS has broad authority to determine that a public health emergency exists. Congress reauthorized this authority in 2000, as follows: If the Secretary determines, after consultation with such public health officials as may be necessary, that (1) a disease or disorder presents a public health emergency; or (2) a public health emergency, including significant outbreaks of infectious diseases or bioterrorist attacks, otherwise exists, the Secretary may take such action as may be appropriate to respond to the public health emergency, including making grants, providing awards for expenses, and entering into contracts and conducting and supporting investigations into the cause, treatment, or prevention of a disease or disorder as described in paragraphs (1) and (2). This authority, found in Section 319 of the PHS Act and codified at 42 U.S.C. 247d, is the basis for much, but not all of, the Secretary's authority to waive or streamline administrative requirements and certain statutory requirements, and to take certain other actions, when needed, to prepare for or respond to non-routine threats to public health. See Table 1 for a listing of public health emergency determinations made pursuant to this authority since 2000. Also in 2000, Congress reauthorized a no-year public health emergency fund that is available to the HHS Secretary for use during a public health emergency, determined pursuant to the authority above, as follows: There is established in the Treasury a fund to be designated as the 'Public Health Emergency Fund' to be made available to the Secretary without fiscal year limitation to carry out subsection (a) only if a public health emergency has been declared by the Secretary under such subsection. There is authorized to be appropriated to the Fund such sums as may be necessary. ... Not later than 90 days after the end of each fiscal year, the Secretary shall prepare and submit to the Committee on Health, Education, Labor, and Pensions and the Committee on Appropriations of the Senate and the Committee on Commerce and the Committee on Appropriations of the House of Representatives a report describing (A) the expenditures made from the Public Health Emergency Fund in such fiscal year; and (B) each public health emergency for which the expenditures were made and the activities undertaken with respect to each emergency which was conducted or supported by expenditures from the Fund. Subsequent to the 2000 reauthorization, Congress expanded or clarified the Section 319 emergency authority, as follows: Duration of emergency, notification of Congress: "Any such determination of a public health emergency terminates upon the Secretary declaring that the emergency no longer exists, or upon the expiration of the 90-day period beginning on the date on which the determination is made by the Secretary, whichever occurs first. Determinations that terminate under the preceding sentence may be renewed by the Secretary (on the basis of the same or additional facts), and the preceding sentence applies to each such renewal. Not later than 48 hours after making a determination under this subsection of a public health emergency (including a renewal), the Secretary shall submit to the Congress written notification of the determination." Data submittal and reporting deadlines: "In any case in which the Secretary determines that, wholly or partially as a result of a public health emergency that has been determined pursuant to subsection (a), individuals or public or private entities are unable to comply with deadlines for the submission to the Secretary of data or reports required under any law administered by the Secretary, the Secretary may, notwithstanding any other provision of law, grant such extensions of such deadlines as the circumstances reasonably require, and may waive, wholly or partially, any sanctions otherwise applicable to such failure to comply. Before or promptly after granting such an extension or waiver, the Secretary shall notify the Congress of such action and publish in the Federal Register a notice of the extension or waiver." Requirement for notification: During the period in which the Secretary of HHS has determined the existence of a public health emergency under 42 U.S.C. 247d, the Secretary "shall keep relevant agencies, including the Department of Homeland Security, the Department of Justice, and the Federal Bureau of Investigation, fully and currently informed." Emergency use of countermeasures: The Secretary may declare an emergency justifying expedited use of certain medical countermeasures on the basis of: (1) a determination by the Secretary of Homeland Security that there is a domestic emergency, or a significant potential for a domestic emergency; or (2) on the basis of a determination by the Secretary of Defense that there is a military emergency, or a significant potential for a military emergency; or (3) on the basis of a "determination by the Secretary of a public health emergency under Section 247d of Title 42 that affects, or has a significant potential to affect, national security, and that involves a specified biological, chemical, radiological, or nuclear agent or agents, or a specified disease or condition that may be attributable to such agent or agents." This provision in the Federal Food, Drug and Cosmetic Act is referred to as the Emergency Use Authorization . Waiver of certain requirements: In order to assure "that sufficient health care items and services are available to meet the needs of individuals in ... (an emergency, and) ... that health care providers ... that furnish such items and services in good faith, but that are unable to comply with one or more requirements ... may be reimbursed for such items and services and exempted from sanctions for such noncompliance, absent any determination of fraud or abuse," the Secretary may modify or waive certain statutory or regulatory requirements following a determination of public health emergency pursuant to 42 U.S.C. 247d and an emergency or disaster declaration by the President pursuant to the National Emergencies Act (50 U.S.C. 1601 et seq .) or the Stafford Act (42 U.S.C. 5121 et seq .). Requirements that may be waived or modified pursuant to this section include (1) conditions of participation and certain other requirements in the Medicare, Medicaid and SCHIP programs; (2) federal requirements for state licensure of health professionals; (3) certain provisions of the Emergency Medical Treatment and Active Labor Act of 1985 (EMTALA); (4) certain sanctions prohibiting physician self-referral (so-called "Stark" provisions); (5) modification, but not waiver, of deadlines and timetables for performance of required activities; (6) limitations on certain payments for health care items and services furnished to individuals enrolled in a Medicare + Choice plan; and (7) sanctions and penalties that arise from noncompliance with certain patient privacy requirements of the Health Insurance Portability and Accountability Act of 1996. Alternate Medicare drug reimbursement method: In situations where a public health emergency has been determined to exist under 42 U.S.C. 247d, and "there is a documented inability to access drugs and biologicals," the Secretary may, under certain circumstances, use an alternative methodology for determining payments of certain drugs under the Medicare program. Deployment of the Public Health Service Commissioned Corps: The Secretary may deploy officers in the Commissioned Corps of the U.S. Public Health Service to respond to an "urgent or emergency public health care need," as determined by the Secretary, arising as the result of (1) a national emergency declared by the President under the National Emergencies Act (50 U.S.C. 1601 et seq. ); (2) an emergency or major disaster declared by the President under the Stafford Act (42 U.S.C. 5121 et seq .); (3) a public health emergency declared by the Secretary pursuant to 42 U.S.C. 247d; or (4) any emergency that, in the judgment of the Secretary, is appropriate for the deployment of members of the Corps. Other Public Health Emergency Authorities of the HHS Secretary The following is a list of statutory authorities or requirements of the Secretary or others within HHS to take certain additional actions during public health emergencies that are not explicitly defined or linked to an emergency determination pursuant to Section 319 authority. In some cases these actions flow from federal emergency or major disaster declarations pursuant to the Stafford Act. In other cases reference is made to a situation of public health emergency, but such emergency is not defined. Assistance to states: Pursuant to Section 311 of the Public Health Service Act, the Secretary of HHS has broad authority to assist state and local governments in their disease control efforts, upon their request, as follows: "The Secretary may, at the request of the appropriate State or local authority, extend temporary (not in excess of six months) assistance to States or localities in meeting health emergencies of such a nature as to warrant Federal assistance. The Secretary may require such reimbursement of the United States for assistance provided under this paragraph as he may determine to be reasonable under the circumstances. Any reimbursement so paid shall be credited to the applicable appropriation for the Service for the year in which such reimbursement is received." The term "health emergencies" is not defined in this context, but this authority underpins a variety of unanticipated activities which are undertaken each year such as CDC's deployment of Epidemic Intelligence Service officers to assist states affected by an ongoing mumps outbreak. National Health Security Strategy: "Preparedness and response regarding public health emergencies: Beginning in 2009 and every four years thereafter, the Secretary shall prepare and submit to the relevant committees of Congress a coordinated strategy (to be known as the National Health Security Strategy) and any revisions thereof, and an accompanying implementation plan for public health emergency preparedness and response. Such National Health Security Strategy shall identify the process for achieving the preparedness goals described in subsection (b) and shall be consistent with the National Preparedness Goal, the National Incident Management System, and the National Response Plan developed pursuant to section 502(6) of the Homeland Security Act of 2002 [6 U.S.C. 314(6)], or any successor plan." HHS exemption from " Select Agent " regulation: The Secretary maintains regulatory control over certain biological agents and toxins which have the potential to pose a severe threat to public health and safety. The Secretary may temporarily exempt a person from the regulatory requirements of this section if "the Secretary determines that such exemption is necessary to provide for the timely participation of the person in a response to a domestic or foreign public health emergency (whether determined under Section 247d(a) of this Title or otherwise )." (Emphasis added). USDA exemption from " Select Agent " regulation: The Secretary, after granting an exemption under 42 U.S.C. 262a(g) (relating to regulation of certain biological agents and toxins) pursuant to "a finding that there is a public health emergency" may request the Secretary of Agriculture to "temporarily exempt a person from the applicability of the requirements of this section with respect to an overlap agent or toxin, in whole or in part, to provide for the timely participation of the person in a response to the public health emergency." Activation of NDMS: The Secretary may activate the National Disaster Medical System (NDMS) to "provide health services, health-related social services, other appropriate human services, and appropriate auxiliary services to respond to the needs of victims of a public health emergency ( whether or not determined to be a public health emergency under Section 247d of this Title)" (emphasis added). Authority for the Strategic National Stockpile: "The Secretary, in coordination with the Secretary of Homeland Security, shall maintain a stockpile or stockpiles of drugs, vaccines and other biological products, medical devices, and other supplies in such numbers, types, and amounts as are determined by the Secretary to be appropriate and practicable, taking into account other available sources, to provide for the emergency health security of the United States, including the emergency health security of children and other vulnerable populations, in the event of a bioterrorist attack or other public health emergency." Authority for the Emergency System for Advance Registration of Volunteer Health Professionals (ESAR-VHP): "Not later than 12 months after the date of enactment of the Pandemic and All-Hazards Preparedness Act, the Secretary shall link existing State verification systems to maintain a single national interoperable network of systems, each system being maintained by a State or group of States, for the purpose of verifying the credentials and licenses of health care professionals who volunteer to provide health services during a public health emergency." "Public health emergency" is not defined. Federal quarantine authority: The Secretary has the authority to "make and enforce such regulations as in his judgment are necessary to prevent the introduction, transmission, or spread of communicable diseases from foreign countries into the States or possessions, or from one State or possession into any other State or possession." These regulations may "provide for the apprehension and examination of any individual reasonably believed to be infected with a communicable disease in a qualifying stage." The term "qualifying stage" means that the disease is "in a communicable stage" or is "in a precommunicable stage, if the disease would be likely to cause a public health emergency if transmitted to other individuals." Authority for the administration of smallpox countermeasures: The Secretary may issue a declaration "concluding that an actual or potential bioterrorist incident or other actual or potential public health emergency makes advisable the administration of" certain countermeasures against smallpox for Public Health Service employees. Liability protection for certain countermeasures: If the Secretary "makes a determination that a disease or other health condition or other threat to health constitutes a public health emergency, or that there is a credible risk that the disease, condition, or threat may in the future constitute such an emergency, the Secretary may make a declaration, through publication in the Federal Register, recommending, under conditions as the Secretary may specify, the manufacture, testing, development, distribution, administration, or use of one of more covered countermeasures.... " Liability protection is provided for certain persons with respect to claims resulting from the administration of covered countermeasures following a declaration of a public health emergency under this authority. Disaster relief for aging services organizations: The Assistant Secretary for Aging, in HHS, "may provide reimbursements to any State (or to any tribal organization receiving a grant under Title VI [42 U.S.C. 3057 et seq .]), upon application for such reimbursement, for funds such State makes available to area agencies on aging in such State (or funds used by such tribal organization) for the delivery of supportive services (and related supplies) during any major disaster declared by the President in accordance with the Robert T. Stafford Disaster Relief and Emergency Assistance Act." Authority to expedite research: If the Secretary "determines, after consultation with the Director of NIH, the Commissioner of the Food and Drug Administration, or the Director of the Centers for Disease Control and Prevention, that a disease or disorder constitutes a public health emergency, the Secretary, acting through the Director of NIH," shall expedite certain review procedures for applications for research grants on diseases relevant to the disease or disorder involved in the emergency and take other specified administrative measures to assist relevant grants or contracts. (NIH is the National Institutes of Health.) Fisheries management: The Secretary of Commerce may take certain measures relating to the national fishery management program in case of an emergency. If the emergency is a public health emergency, then the Secretary of HHS is to "concur" with the "emergency regulation or interim measure promulgated" by the Secretary of Commerce. ATSDR assistance for exposure to toxic substances: The Administrator of the Agency for Toxic Substances and Disease Registry (ATSDR, an agency within HHS) shall, "in cases of public health emergencies caused or believed to be caused by exposure to toxic substances, provide medical care and testing to exposed individuals." Mosquito-borne diseases: The Secretary has enhanced budget authority for the response to public health emergencies related to mosquito-borne diseases as follows: "In the case of any control programs carried out in response to a mosquito-borne disease that constitutes a public health emergency, the authorization of appropriations (in this provision) is in addition to applicable authorizations of appropriations under the Public Health Security and Bioterrorism Preparedness and Response Act of 2002." Additional Public Health Emergency Authorities The following are public health emergency authorities of individuals other than the HHS Secretary. Authority of the Attending Physician to Congress: "The Attending Physician to Congress shall have the authority and responsibility for overseeing and coordinating the use of medical assets in response to a bioterrorism event and other medical contingencies or public health emergencies occurring within the Capitol Buildings or the United States Capitol Grounds. This shall include the authority to enact quarantine and to declare death. These actions will be carried out in close cooperation and communication with the Commissioner of Public Health, Chief Medical Examiner, and other Public Health Officials of the District of Columbia government." Health and medical monitoring following a disaster : The President, acting through the Secretary of HHS, is authorized to carry out a program for the coordination, protection, assessment, monitoring, and study of the health and safety of individuals (including but not limited to responders) who may have had hazardous exposures as a result of a disaster declared pursuant to the Stafford Act (42 U.S.C. 5121 et seq .). If the President carries out such a program, it must be commenced in a timely manner to ensure the highest level of public health protection and effective monitoring. Crisis counseling assistance and training during a disaster: "The President is authorized to provide professional counseling services, including financial assistance to State or local agencies or private mental health organizations to provide such services or training of disaster workers, to victims of major disasters in order to relieve mental health problems caused or aggravated by such major disaster or its aftermath." This provision in the Stafford Act is jointly administered by the Federal Emergency Management Agency (FEMA), and the Substance Abuse and Mental Health Services Administration in HHS. Authority of the Secretary of DHS to deploy the Strategic National Stockpile: "The [DHS] Secretary [Secretary's responsibilities] ... shall include ... coordinating other Federal response resources, including requiring deployment of the Strategic National Stockpile, in the event of a terrorist attack or major disaster.... " Authority of the Secretary of Veterans Affairs to provide care: The Secretary of Veterans Affairs is authorized to furnish hospital care and medical services to individuals, including non-veterans, affected by (1) a major disaster or emergency declared by the President under Stafford Act (42 U.S.C. 5121 et seq. ) or (2) a disaster or emergency in which NDMS is activated. Notification during potential public health emergencies: "In cases involving, or potentially involving, a public health emergency, but in which no determination of an emergency by the Secretary of Health and Human Services under Section 319(a) of the Public Health Service Act (42 U.S.C. 247d(a)), has been made, all relevant agencies, including the Department of Homeland Security, the Department of Justice, and the Federal Bureau of Investigation, shall keep the Secretary of Health and Human Services and the Director of the Centers for Disease Control and Prevention fully and currently informed." Methodology The above listing of federal public health emergency authorities was developed by reviewing the results of a search of the U.S. Code for the terms "public health emergency," "health threat," or "disaster," or for citations to the public health emergency authority at 42 U.S.C. 247d. Not included in the listing are references to the suspension of certain routine activities in the event of a disaster, requirements for disaster planning in health care facilities, or other provisions not directly related to the declaration or determination of a federal public health emergency or the activities authorized or required when such a declaration or determination is made.

When there is a catastrophe in the United States, state and local governments lead response activities, invoking state and local legal authorities to support them. When state and local response capabilities are overwhelmed, the President, acting through the Secretary of Homeland Security, can provide assistance to stricken communities, individuals, governments, and not-for-profit groups to assist in response and recovery. Aid is provided under the authority of the Robert T. Stafford Disaster Relief and Emergency Assistance Act (the Stafford Act) upon a presidential declaration. The Secretary of Health and Human Services (HHS) also has both standing and emergency authorities in the Public Health Service Act, by which he or she can provide assistance in response to public health and medical emergencies. At this time, however, the Secretary of HHS has limited means to finance activities that are ineligible, for whatever reason, for Stafford Act assistance. The flawed response to Hurricane Katrina, and preparedness efforts for an influenza ("flu") pandemic, have each raised concerns about federal response mechanisms for incidents that result in overwhelming public health and medical needs. These concerns include the delegation of responsibilities among different federal departments, and whether critical conflicts or gaps exist in these relationships. In particular, there are some concerns about federal leadership and delegations of responsibility as laid out in the National Response Framework (NRF), published by the Department of Homeland Security. There is no federal assistance program designed purposefully to cover the uninsured or uncompensated costs of individual health care that may be needed as a consequence of a disaster. While there is not consensus that this should be a federal responsibility, Congress has provided such assistance to victims of some specific disasters in the past. For example, following Hurricane Katrina, Congress provided short-term assistance to host states, through the Medicaid program, to cover a portion of the uninsured health care costs of eligible evacuees. Congress has provided funding—and some have proposed establishing statutory authority—to cover certain uninsured health care costs for responders and others who are having health problems related to exposures at the World Trade Center site in New York City after the 2001 terrorist attack. Also, legislation introduced in the 110th Congress proposed to grant the Secretary of HHS the authority to use a special fund to provide temporary emergency health care coverage for uninsured individuals affected by future public health emergencies. This report examines, with respect to public health and medical incidents, (1) the authorities and coordinating mechanisms of the President and the Secretary of HHS in providing routine assistance, and assistance pursuant to the Stafford Act and/or the Public Health Service Act; (2) mechanisms to assure a coordinated federal response to these incidents, and overlaps or gaps in agency responsibilities; and (3) existing mechanisms, potential gaps, and proposals to fund the costs of a response to public health and medical incidents. A listing of federal public health emergency authorities is provided in the Appendix. This report will be updated as needed.

As Congress continues the debate on an appropriate response to the climate change issue, multiple bills have been introduced to begin reducing greenhouse gas (GHG) emissions. Of these, S. 2191 (the Lieberman-Warner Climate Security Act of 2008 ) has received particular attention. Introduced by Senator Lieberman, S. 2191 was ordered reported by the Senate Committee on Environment and Public Works on December 5, 2007. Numerous analyses have been done on its impacts, and as of April 2008, six studies had been released. The most comprehensive analysis has been conducted by the U.S. Environmental Protection Agency (EPA). The report is entitled: EPA Analysis of the Lieberman-Warner Climate Security Act of 2008: S. 2191 in 110 th Congress (March 14, 2008). The analysis employs a suite of models and basecases, along with some useful sensitivity analyses. This report will focus on three of the models, two basecases, and sensitivity analysis as appropriate. The first model is ADAGE: a computable general equilibrium (CGE) model developed by RTI International. The case employing the reference basecase is designated EPA/ADAGE-REF in this report, while the case employing the high technology basecase is designated EPA/ADAGE-TECH. The second model is IGEM: a CGE model developed by Dale Jorgenson Associates. The case employing the reference basecase is designated EPA/IGEM-REF in this report, while the case employing the high technology basecase is designated EPA/IGEM-TECH. The third model is IPM: a dynamic, deterministic linear programming model of the U.S. electric power sector developed by ICF Resources. The case employing the IPM model is designated EPA/IPM in this report. A second analysis has been conducted by the Energy Information Administration (EIA). The report is entitled Energy Market and Economic Impacts of S. 2191 , the Lieberman-Warner Climate Security Act of 2007 (April 2008). The analysis employs EIA's NEMS model: a macroeconomic forecasting model with extensive energy technology detail. In addition to conducting a "core" analysis of S. 2191 using its preliminary 2008 Annual Energy Outlook (AEO) Baseline , EIA also conducts some useful sensitivity analyses that focus on the upside risk of increased energy prices under S. 2191 which are discussed as appropriate. The core S. 2191 analysis is designated EIA/NEMS in this report. A third analysis has been conducted by the Massachusetts Institute of Technology (MIT) Joint Program on the Science and Policy of Global Change. The report is an appendix to a more comprehensive analysis of cap-and-trade programs released in 2007. The appendix is titled: Appendix D: Analysis of the Cap and Trade Features of the Lieberman-Warner Climate Security Act ( S. 2191 ) . The appendix employs MIT's EPPA CGE model and presents some useful sensitivity analyses of S. 2191 's offset and carbon capture and storage (CCS) bonus allowance provisions. The case that includes S. 2191 's 15% international offset and CCS subsidies provisions is designated MIT/EPPA in this report. A fourth analysis has been conducted for the Clean Air Task Force (CATF) by OnLocation. The report is titled The Lieberman-Warner Climate Security Act S. 2191 : A Summary of Modeling Results from the National Energy Modeling System (February 2008). Employing EIA's NEMS model, the CATF analysis is designated CATF/NEMS in this report. A fifth analysis has been conducted for the American Council for Capital Formation (ACCF) and National Association of Manufacturers (NAM) by Science Applications International Corporation. The report is entitled Analysis of The Lieberman-Warner Climate Sec urity Act ( S. 2191 ) Using The National Energy Modeling System (NEMS) . Employing NEMS, ACCF/NAM employs two basic cases: (1) a high cost case using the most constrained and high cost assumptions of any of the analyses presented here (designated as ACCF/NAM/NEMS-HIGH) and (2) a low cost case using the second most constrained and high cost assumptions of any of the analyses presented here (designated as ACCF/NAM/NEMS-LOW). A sixth analysis has been conducted for the National Mining Association (NMA) by CRA International. The report is entitled Economic Analysis of the Lieberman-Warner Climate Security Act of 2007 Using CRA ' s MRN-NEEM Model (April 8, 2008). The analysis employs CRA's MRN-NEEM macroeconomic model with extensive electric power sector detail. The case employing the NMA analysis is designated NMA/CRA. It should be noted that several of the studies examined in this report are published as presentations with limited documentation, making comparative analysis difficult. Each presentation has selected features or impacts it is particularly interested in highlighting. The more comprehensive analyses are the work by EPA, EIA, and MIT. In order to increase the comparability of the various cases examined here, CRS has converted all publicly available data presented by the cases to 2005 dollars (where appropriate) and interpolated missing data where possible. Likewise, where studies have stated they used specific projections as a base case (such as EIA ' s Annual Energy Outlook 2007 or preliminary 2008 projections), CRS has assumed those assumptions have not been altered except as specifically stated by the study. This analysis considers the bill as ordered reported by the Senate Committee on Environment and Public Works, incorporating the proposed deficit reduction amendment S. 3036 is identical to that version, including the deficit amendment. Other proposed amendments are likely if the bill moves to the floor, and these amendments, if adopted, could affect the costs and benefits of the overall bill. <1. Overview of the Major Provisions of S. 2191 (S. 3036)> S. 2191 , The Lieberman-Warner Climate Security Act of 2008, was introduced October 18, 2007, by Senator Lieberman. On December 5, 2007, the Senate Committee on Environment and Public Works ordered reported an amended version of the bill that would establish a mandatory cap-and-trade system to reduce greenhouse gas emissions from most sectors of the economy. As ordered reported, S. 2191 's emissions cap is estimated by its sponsors to require a 71% reduction from 2005 levels by 2050 from covered entities (estimated by the sponsors to account for 87% of total U.S. greenhouse gas emissions). Overall, the sponsors estimate that S. 2191 would reduce total U.S. greenhouse gas emissions by up to 66% from 2005 levels by 2050. S. 2191 would establish an absolute cap on the emissions from covered sectors and would allow trading of emissions permits (" allowances ") among covered and non-covered entities. The bill achieves its broad coverage through an upstream compliance mandate on petroleum, natural gas, and fluorinated gas producers and importers, and a downstream mandate on coal consumers, such as electric generators. Specifically, the bill would limit greenhouse gas emissions from all petroleum producers/importers, all natural gas processors, all facilities that use more than 5,000 tons of coal per year, and entities that produce or import more than 10,000 tons annually (carbon dioxide equivalent) of fluorinated gases and other greenhouse gases. S. 2191 does not have a "safety valve" an alternative compliance option that permits covered entities to pay an excess emissions fee instead of reducing emissions. Instead, the bill creates a Carbon Market Efficiency Board with authority to temporarily adjust the availability of allowances through borrowing and other techniques; however, it is a zero-sum game. Allowances borrowed must be repaid, so the emissions cap is maintained. The bill limits the availability of domestic offsets to 15% of the allowance requirement, with allowances bought in an eligible international allowance market also limited to 15%. Both percentages may be increased by the Carbon Market Efficiency Board if market conditions suggest such action. The bill would permit banking of allowances. For each year 2012 through 2050, the bill specifies the total number of allowances available, then explicitly states the percentage of those allowances that will go to covered and non-covered sectors, as well as the share that will be auctioned . (See Table 1 .) Over time, an increasing share of the allowances are auctioned, while the allowances to covered sectors decrease to zero. Auction proceeds are allocated for various purposes, including technology development and deployment, transition assistance, adaptation, and program administration. (See Table 2 .) Under a proposed amendment to make the bill revenue neutral, a percentage of allowances (starting at 6.1%, increasing to 15.99%) would be auctioned off-the-top for deficit reduction ("Deficit Reduction Fund"). After the Deficit Reduction allowances are allocated, the rest of the allowances ("remainder allowances") are allocated according to the bill as reported. For example, in 2012, 6.1% of the total number of allowances are auctioned for deficit reduction, and an additional 21.5% of the "remainder allowances" are auctioned for program management, technology deployment, adaptation, and other purposes. In addition to the cap-and-trade program, S. 2191 has other key provisions to reduce greenhouse gas emissions. Title VI imposes an "international reserve allowance" requirement on certain "covered" imported goods as a prerequisite for entry into the country. Unlike importers of covered fuels that create greenhouse gases when used (which are directly controlled as covered facilities under S. 2191 ), Title VI would affect certain bulk goods manufactured in processes that generate greenhouse gases (e.g. iron, paper, etc.) that would not be allowed into the country if the allowance requirement were not met. The amount and allocation of international reserve allowances would be determined by EPA, and a separate allowance trading system could be established (international reserve allowances could not be used for domestic compliance). Title VIII on carbon sequestration requires: (1) EPA to amend regulations under the Safe Drinking Water Act to allow commercial-scale underground injection of carbon dioxide for sequestration, and to monitor such activity to reduce adverse impacts from such injection; (2) the Department of the Interior to assess U.S. capacity for geological sequestration; (3) the Department of Energy to assess the feasibility of CO 2 pipelines; and (4) EPA to establish a task force to study the issues related to federal assumption of liability for sequestration sites. Title IX permits the President to temporarily adjust or waive any regulations promulgated under the bill if a "national security emergency exists," and it is in the "paramount interest of the United States" to modify the requirements in response to that emergency. In addition to the limits under the cap-and-trade program, Title X requires EPA to establish a program limiting U.S. consumption of hydrofluorocarbons under a separate HFC allowance program. Title XI amends the Clean Air Act in three ways: (1) it requires EPA to establish a program to limit emissions of greenhouse gases not covered under the program; (2) it limits the sale and use of certain motor vehicle air conditioning fluids; and (3) it establishes a low carbon fuel standard (LCFS) requiring per-unit-energy reductions in greenhouse gas emissions from transportation fuels. <1.1. Earlier Versions of the Bill> <1.1.1. Bill as Introduced> S. 2191 (originally titled America's Climate Security Act of 2007), as introduced October 18, 2007, by Senator Lieberman, would cap greenhouse gas emissions from the electric generation, industrial, and transportation sectors (for facilities that emit more than 10,000 metric tons of carbon dioxide equivalent). As introduced, the cap was estimated by the sponsors to reduce emissions to 15% below 2005 levels in 2020, declining steadily to 63% below 2005 levels in 2050. The program would be implemented through an expansive allowance trading program to maximize opportunities for cost-effective reductions. Credits obtained from increases in carbon sequestration and acquisition of allowances from foreign sources could be used to comply with 30% of reduction requirements. The bill also establishes a Carbon Market Efficiency Board to observe the allowance market and implement cost-relief measures if necessary. <1.1.2. Bill as Reported by Subcommittee> On November 1, 2007, the Senate Committee on Environment and Public Works' Subcommittee on Private Sector and Consumer Solutions to Global Warming and Wildlife Protection reported out a revised version of S. 2191 . As reported from subcommittee, S. 2191 was estimated to reduce greenhouse gas emissions 19% below 2005 levels by 2020 (up from 15% as introduced) and 63% below 2005 levels by 2050. The increase in the estimated reductions in 2020 is the result of amended text that includes greenhouse gases from all natural gas uses under the overall emissions cap. Other amendments approved included modifications to eligibility requirements for the advanced technology vehicles manufacturing incentive program and the advanced coal generation technology demonstration program. Modifications were also made to the proposed allocation of allowances to help tribal communities respond to climate change and to encourage international forest carbon activities, along with 1% of allowances reserved for rural cooperatives and a corresponding reduction in allowances allocated to the rest of the electric power industry. The revised bill also added two new recipients of auction revenues: a Bureau of Land Management Emergency Firefighting Fund ($300 million) and a Forest Service Emergency Firefighting Fund ($800 million). <1.1.3. As Ordered Reported by Committee> On December 5, 2007, the full committee ordered reported a revised version of S. 2191 by an 11 to 8 vote. The revised bill expands the greenhouse gas reduction program coverage by replacing the previous definition of covered facility based on the electric power, transportation, and industrial sectors with an upstream definition for oil refineries and natural gas processing plants, and a downstream definition for coal consumers. Among the amendments agreed to by the full committee were a new Low Carbon Fuel Standard (LCFS) that would require the carbon intensity of transportation fuel to be frozen in 2011 and then reduced by 5% in 2015 and 10% in 2020. Other amendments agreed to would increase incentives for states to modify their utility regulatory structures to encourage energy efficiency, and would broaden the ability of states to use their allowance allocations to mitigate adverse economic impacts resulting from the bill's implementation. <1.1.4. Deficit Reduction Amendment> Finally, in April 2008, a proposed amendment to S. 2191 was submitted by the committee to the Congressional Budget Office (CBO) to be included in the scoring of the bill. The amendment would provide for some of the auctioned revenues to be put aside for deficit reduction purposes. <2. Introduction: Models Cannot Predict the Future Costs of a Climate Change Program> <2.1. Lessons from SO2 Cap and Trade Program> During the Clean Air Act debate in 1990 on the Title IV sulfur dioxide (SO 2 ) cap-and trade program, CRS found it difficult to analyze the cost of the bill beyond the first 10 years (1990-2000), and considered any breakdown of even 2000 data on a state-by-state basis as "not useful for any more than illustrative purposes." As stated in 1990: It is difficult (and some would consider it unwise) to project costs up to the year 2000, much less beyond. The already tenuous assumption that current regulatory standards will remain constant becomes more unrealistic, and other unforeseen events (such as electric utility deregulation) loom as critical issues which can not be modeled. Hence, cost projections beyond the year 2000 are at best speculative, and are more a function of each model ' s assumptions and structure than they are of the details of proposed legislation . Projections this far into the future are based more on philosophy than analysis. [emphasis in original] The history of resulting SO 2 cap-and-trade program costs has proven illuminating. As indicated in Table 3 , the 2010 cost estimates for the SO 2 cap-and-trade program made in 1990 proved to be substantially higher than what is now estimated to be the program's actual costs. Indeed, the EPA-ICF low estimate the estimate closest to the projected actual number is both 50% higher than the actual number, and the estimate least focused-on in the original ICF report. It is interesting that none of the analyses were willing to "speculate" with assumptions that would have created a 2010 cost estimate lower than EPA's current projection. Equally interesting is that the "best" 2000 estimate was off by almost the same 50% that the 2010 estimate was. Like the 2010 estimates, the assumptions either underestimated the ingenuity and creativity of companies in responding to the SO 2 requirements, or mis-read the economics of the cap-and-trade process. As explained below by Chestnut and Mills in 2005, the gross over-estimates are essentially the product of the models' failure both to fully incorporate the flexibility that the cap-and-trade program provided participants and to employ sufficient imagination to explore the potential for technological breakthroughs and enhancements: Costs are lower than originally predicted primarily because flexibility occurred in areas that were thought to be inflexible and technical improvements were made that were not anticipated. Factors contributing to the lower costs included lower transportation costs for low-sulfur coal (attributed to railroad deregulation), productivity increases in coal production leading to favorable prices for low-sulfur and mid-sulfur coal, cheaper than expected installation and operation costs for smokestack scrubbers, and new boiler adaptations to allow use of different types of coal. It appears that Title IV has worked as expected to provide the flexibility and incentives for producers to find low-cost compliance options. [footnote omitted] Banking opportunities also induced early reductions in emissions for some facilities. Harrington et al (2000) compared estimates of actual costs of many large regulatory programs to predictions of those costs made while the regulatory programs were being developed and found a tendency for predicted costs to overstate the actual implementation costs, especially for market-based programs such as the SO 2 trading program. They cite technological innovation and unanticipated efficiency gains as key factors leading to lower than predicted costs. They noted that unit costs are often more accurately predicted than total costs because predicted emission reductions are sometimes overstated, but they report that predicted unit costs and total costs were both overstated for Title IV. <2.2. An Illustrative Example from Analyses of S. 2191> There is no reason to believe that cost estimates for greenhouse gas reductions will be any more accurate than the 1990 SO 2 estimates; indeed, they are likely to be more unreliable. This is not to say that they will be too high; they may be too low. To illustrate, CRS examines some results of the modeling efforts with respect to the costs of S. 2191 . To frame this illustration, we focus on the three primary drivers of greenhouse gas emissions: (1) population growth, (2) incomes (measured as per capita gross domestic product [GDP]), and (3) intensity of greenhouse gas emissions relative to economic activities (measured as metric tons of greenhouse gas emissions per million dollars of GDP). As shown in the following formula, a country's annual greenhouse gas emissions are the product of these three drivers: ( Population ) x ( Per Capita GDP ) x ( Intensity ghg ) = Emissions ghg This is the relationship for a given point in time; over time, any effort to change emissions alters the exponential rates of change of these variables. This means that the rates of change of the three left-hand variables, measured in percentage of annual change, sum to the rate of change of the right-hand variable, emissions. Using the three drivers, Table 4 provides the essential assumptions from three analyses of S. 2191 for the year 2050. Examining the "business-as-usual" reference cases, a range of assumptions are employed by the models. As suggested by the formula above, the differing assumptions result in very different 2050 baseline GHG emissions: 10.3 billion metric tons for EPA/ADAGE-REF, 11.1 billion metric tons for EPA/IGEM-REF, and 13.3 billion metric tons for MIT/EPPA a 29% difference from the lowest to the highest. Interestingly, major sources of disagreement in the reference cases include per capita GDP and population projections two variables that are generally not the focus of greenhouse gas reduction strategies. Moving to the S. 2191 scenario as modeled, the variability in the results widens for two of the three drivers (the 2050 reference case population remains constant in the three models). Not surprisingly, the range widens for the projected 2050 greenhouse gas emissions estimates: 5.3 billion metric tons for EPA/ADAGE-REF, 4.1 billion metric tons EPA/IGEM-REF, and 3.8 billion metric tons for MIT/EPPA a 40% difference. In particular, the models' assumptions about the flexibility and responsiveness of the U.S. economy resulted in some interesting reversals: (1) The MIT/EPPA model, which has the closest relationship between GHGs and GDP in the reference case, has the most responsive assumptions resulting in the greatest reduction in GHG and GHG intensity under S. 2191 ; (2) In contrast, the EPA/ADAGE-REF model, which has the lowest GHG intensity assumption in its reference cases, has the highest GHG intensity result under S. 2191 . The MIT/EPPA model assumes more economic growth per capita and more responsiveness by the economy to GHG constraints; the EPA/ADAGE model assumes the most GHG-efficient economy, but the least amount of flexibility to respond to GHG constraints; and the EPA/IGEM model assumes the fastest growth in population. The result of these different views of the economy is that the economic impact is less than the differences in the models' reference case assumptions. As indicated in Table 4 , the MIT/EPPA model projection of the country's 2050 GDP per capita under S. 2191 is greater than the basecase projections of either of the other models. According to the MIT/EPPA model, the 2050 GDP per capita of the country is reduced by only 0.75% under S. 2191 . The reduction under the other two models is 6.9% for EPA/IGEM-REF and 2.4% for EPA/ADAGE-REF well within the variability of the reference cases. The result is not significantly more consistent for projections for 2030, particularly with the addition of the EIA baselines. The CATF/NEMS analysis uses the EIA baseline published in its Annual Energy Outlook 2007 for its analysis. The EIA/NEMS analysis uses a preliminary version of EIA's upcoming 2008 AEO baseline. As indicated in Table 5 , the basecase assumptions for per capita GDP vary by a greater percentage for 2030 than they do for 2050. The introduction of the EIA 2008 baseline is responsible for much of the increase in GDP per capita variability (it would be 7% without it). Similarly, the inclusion of the 2007 and 2008 EIA baseline increases the variability of the greenhouse gas intensity driver (it would be 9% without it). Likewise, the GDP per capita impact of S. 2191 is within the noise of the reference cases as the estimated GDP per capita reduction under S. 2191 is only 0.3% for EIA/NEMS, 0.37% for EPPA, 0.90% for ADAGE, and 3.8% for IGEM. The situation is more constant in the 2020 reference cases, although the impact of S. 2191 is still within the noise of the per capita GDP assumptions, with S. 2191 GDP per capita impact estimated at 0.3% for EIA/NEMS, 0.69% for EPA/ADAGE-REF, 0.78% for MIT/EPPA, and 2.6% for EPA/IGEM-REF. The uncertainty about the future direction of the basic drivers of greenhouse gas emissions and the economy ' s responsiveness (economically, technologically, and behaviorally) illustrate the inability of models to predict the ultimate macroeconomic costs of reducing greenhouse gases. Policy relevant analysis is analysis that provides insight into the features and design of proposals that increase or reduce compliance cost and under what economic, technological, and behavior conditions, and that identify potential intended and unintended consequences on the economy. Models cannot predict the future, but they can indicate the sensitivity of a program ' s provisions to varying economic, technological, and behavioral assumptions that may assist policymakers in designing a greenhouse gas reduction strategy. <3. Likelihood for More Noise in Greenhouse Gas Reduction Cost Estimates> The potential for noise is greater in estimating the costs of a GHG program than the simple three driver illustration presented above. In its analysis of S. 2191 , EPA presents eight pages of bullets identifying various limitations on its modeling exercise and four pages of additional "qualitative" considerations. This is a good indicator of the modeling complexity in attempting to estimate the impact of a greenhouse gas reduction bill. These modeling limitations reflect the inherent complexity of such strategies that cannot be quantified or predicted. <3.1. Complexity of the Problem> Compared with the complexity of implementing a greenhouse gas cap-and trade scheme, the SO 2 program was trivial. Conceptually, a CO 2 tradeable permit program could work similarly to the SO 2 program. However, significant differences exist between acid rain and possible global warming that affect current abilities to model responses. For example, the acid rain program involves up to 3,000 new and existing electric generating units that contribute two-thirds of the country's SO 2 . This concentration of sources makes the logistics of allowance trading administratively manageable and enforceable. The imposition of the allowance requirement is straightforward. The acid rain program is a "downstream" program focused on the electric utility industry. The allowance requirement is imposed at the point of SO 2 emissions so the participant has a clear price signal to respond to. The basic dynamic of the program is simple, although not necessarily predictable. A comprehensive greenhouse gas cap-and-trade program would not be as straightforward to implement. Greenhouse gas emissions sources are not concentrated. Although over 80% of the greenhouse gases generated comes from fossil fuel combustion, only about 33% comes from electricity generation. Transportation accounts for about 26%, direct residential and commercial use about 8%, agriculture about 6%, and direct industrial use about 16%. Thus, small dispersed sources in transportation, residential/commercial, agriculture, and the industrial sectors are far more important in controlling greenhouse gas emissions than they are in controlling SO 2 emissions. This greatly increases the economic sectors and individual entities that may be required to reduce emissions. It also affects the operation of a cap-and-trade program, as the diversity of sources creates significant administrative and enforcement problems for a tradeable permit program if it is meant to be comprehensive. A downstream approach is impractical for a comprehensive greenhouse gas program where the transportation sector and dispersed residential, commercial, and agricultural sources emit almost half the total emissions. One alternative is to move the imposition point more "upstream" in those sectors, as is done by S. 2191 . This complicates the economics of the program as the price signal has to work its way through multiple paths to the particular entities utilities, consumers, industry that are the ultimate sources of the greenhouse gases. Arguably, the primary purpose of an economic mechanism, such as a cap-and-trade program, is to put a price on greenhouse gas emissions. In the case of a comprehensive cap-and-trade program, the impact of that price signal will not be simple or straightforward, with unintended consequences likely. In addition, attempts by analysts to capture the general equilibrium effects of the program's interaction with the overall economy add a layer of assumptions and opaqueness to the analysis that can hide insights the analysis may have on program design and implementation. <3.2. Flexibility of Cap-and-Trade Program> The flexibility envisioned by most cap-and-trade programs exceeds that of the SO 2 program. Acid rain is a regional problem that resulted in independent responses by the United States and Canada. The United States chose a cap-and-trade program that included important flexibility mechanisms like banking; Canada chose a variety of approaches and the entire process was later codified by treaty. Offsets (emission reductions made by entities not directly covered by the program) are not a major component of the SO 2 program. Uncovered industrial entities that want to participate in the program must become covered entities with their own baselines and monitoring equipment. The bill also sets up a small reserve of allowances to reward reductions through conservation and renewable energy efforts. With the sulfur dioxide cap-and-trade system being limited to the United States, there is no international trading in the acid rain program. In contrast, most GHG cap-and-trade proposals expand the supply of available allowances by permitting offsets from a wide variety of sources, including agricultural practices, forestry projects, sequestration activities, and alternative energy projects. These diverse sources multiply as the trading extends globally and as other non-CO 2 greenhouse gases are included in the supply mix. Finally, the interaction of these various supply sources and the demand of other countries also reducing emissions (or who may decide to reduce in the future) provide for an almost infinite number of possible scenarios. Crucially, the availability of offsets may have a significant impact on compliance costs, particularly in the short-term. <3.3. Importance of Technology to Future Results> The three driver analysis illustrated the importance of reducing the greenhouse intensity of the economy to reducing overall greenhouse gas emissions. The other two drivers, population and economic growth, are generally not elements targeted for reduction under greenhouse gas reduction programs (indeed, by any federal program). The key factor in reducing the intensity driver over the long run is technology development. This is recognized in most greenhouse gas reduction bills, including S. 2191 , with substantial funding, incentives, and price signals to encourage both accelerated deployment and the initiation of efforts to develop new generations of technology. The effectiveness of these initiatives and price signals would be pivotal to the ultimate cost of any reduction strategy, particularly in the long term. As stated by Houghton: Technology change is a particularly critical component of the climate change debate. For example, the cost of meeting stabilization levels is very sensitive to assumptions about future technologies. If assumed technology improvements lead to relatively low emissions, then it is relatively inexpensive to meet stabilization levels, and vice versa. Furthermore, technology research and development is a very significant policy instrument in the portfolio of options. <3.4. Increasing Problems with Ceteris Paribus Analysis31> As was the case with analyses of the SO 2 cap-and-trade program, current studies of greenhouse gas reduction proposals assume that in the absence of new legislation EPA would take no action in this area between now and the year 2050, and no future initiatives would be enacted in related areas, such as energy policy. This seems unlikely. Indeed, the potential for a future requirement to reduce greenhouse gas emission may already be having an effect on decisions by industry and consumers. As noted by EIA: While forecasting policy change is beyond EIA's mandate, an argument can be made that, all else being equal, public and industry awareness of climate change as a major policy issue can potentially impact energy investment decisions even if no specific policy change actually occurs. Any adjustment to reflect the influence of climate change as an unresolved policy issue, while raising costs in the Reference Case, would generally reduce the estimated incremental impact resulting from the full implementation of a given policy response. <3.4.1. Changing Baselines By Changing Laws> That the policy baseline for greenhouse gas emissions can be shifted significantly through new initiatives has already been illustrated by enactment of the 2007 Energy Independence and Security Act (EISA). On December 19, 2007, President Bush signed EISA ( P.L. 110-140 ). EISA contains many energy provisions that could lead to reductions in greenhouse gas emissions, including more stringent fuel economy (CAFE) standards for passenger cars and light trucks; higher efficiency standards for appliances and lighting; higher efficiency requirements for government buildings; and research and development on renewable energy. The American Council for an Energy-Efficient Economy estimates that the efficiency provisions in EISA will save roughly 700 million metric tons of carbon dioxide annually by 2030. Most of this savings would come from tighter CAFE standards. In addition to these indirect reductions, EISA also directly addresses climate change issues in several ways. First, EISA expands the renewable fuel standard (RFS) established in P.L. 109-58 . The EISA amendments to the RFS significantly expand the mandated level. Further, the new law requires that an increasing share of the RFS be met with "advanced biofuels," defined as having 50% lower lifecycle greenhouse gas emissions than petroleum fuels. Further, conventional biofuels from new refineries must have at least 20% lower lifecycle emissions. This is the first time that Congress has enacted national policy addressing the carbon content of motor fuels. Second, Title VII of the new law focuses on research, development, and demonstration of technologies to capture and store carbon dioxide. DOE carbon storage R&D is expanded and is to include large-scale demonstration projects. The Department of the Interior must develop a methodology to assess the national potential for geologic and ecosystem storage of carbon dioxide, and must recommend a regulatory framework for managing geologic carbon sequestration on public lands. In addition to the above programs, EISA also requires the establishment of an Office of Climate Change and Environment in the Department of Transportation (DOT). This office is to plan, coordinate, and implement research at DOT on reducing transportation-related energy use, mitigating the causes of climate change, and addressing the impacts of climate change on transportation. The practical result of this is the necessary re-working of EIA's AEO 2008 baseline to reflect the energy and environmental impact of the new laws. More changes are likely over the 40-year time frame of S. 2191 . <3.4.2. Changing Baselines By Changing Regulation35> The stringency of the SO 2 cap-and-trade is being changed by EPA's Clean Air Interstate Rule (CAIR). The baseline may also be influenced by future EPA initiatives not requiring new authority. The Clean Air Act is a powerful tool that could be used to regulate emissions of greenhouse gases from mobile sources of all kinds, their fuels (with the exception of jet fuel), and both large and small stationary sources. The possibility for regulation through existing Clean Air Act authority was recently outlined by EPA in congressional testimony. The key to such regulation is that the EPA Administrator issue appropriate findings on whether greenhouse gases "contribute to air pollution that is reasonably anticipated to endanger public health or welfare." It is difficult, bordering on impossible, to determine where such a finding would lead. The Administrator has substantial discretion in defining what emission limits should be set once he or she makes such a finding, and what sections of the act he or she might use. Greenhouse gases could be defined as criteria air pollutants, or not. They could be controlled in mobile sources of all kinds. They could be subject to New Source Performance Standards (NSPS), Prevention of Significant Deterioration (PSD), or Maximum Available Control Technology (MACT) requirements. Each of these has its own standard-setting process and criteria. To some extent, the important question may be how an Administrator would define the source categories. If all power plants were considered in the same category, then the act's authority could be used to require the use of natural gas or cleaner fuels (or at least to set emission standards based on the emissions from plants using such fuels). If coal-fired plants were their own category or a technological approach were taken, the best technology could be carbon capture and storage (CCS). How the sources would be categorized would be at the discretion of the Administrator. The Administrator would also get to make technical judgments concerning whether technologies were "available" or "achievable." These judgments could be crucial in determining how much technology-forcing the regulations would do. <4. Measuring the Noise: A Web of Cost Measures> Because of the economic complexities and interactions noted above, analysts have generally chosen to focus on estimating the macro-economic effects of proposals, such as GDP impacts. There are two components of macro-economic cost measures: (1) the direct abatement (or compliance) cost of a greenhouse gas reduction program, and (2) the general equilibrium effects of a greenhouse gas reduction program (i.e., the interactions of the direct abatement costs with the rest of the economy). The most common measure presented is Gross Domestic Product (GDP). GDP measures the total value of goods and services produced within a nation's borders. Although it is commonly used as a measure of quality of life, this application is problematic. Generally, it includes only those items for which there is a value defined in a market, and does not take into account some activities that have economic value, but no market valuation (e.g., leisure time, environmental quality, etc.). GDP is intended to be a measure of economic activity, not quality of life. A second measure sometimes presented is consumption effects (sometimes called welfare effects). Unfortunately, the models do not measure consumption or welfare effects in a consistent fashion (the primary advantage of measuring GDP). For example, the MIT/EPPA analysis presents "welfare effects" in terms of changes in aggregate market consumption plus leisure. Measured as "equivalent variation," the change in welfare represents the amount of income needed to compensate for the change. In contrast, the EIA/NEMS model presents "real consumption impacts" in terms of consumer expenditures. This makes comparisons difficult and lessens the utility of the measure. For example, when analyzing proposed legislation, the "welfare effects" of legislation under the MIT/EPPA are usually less than the GDP effects, while the "real consumption impacts" under EIA/NEMS are usually greater than the GDP effects on a percentage basis. In addition, like GDP, none of the definitions of consumption or welfare currently employed quantify any environmental effects. A third measure generally presented is allowance prices. These generally reflect to some degree the aggregate marginal cost of the program as estimated by the models. Marginal cost is the cost of reducing the last ton (and, therefore, the most expensive) of greenhouse gases required by the program at a specific point in time. Marginal costs are very useful to affected entities in choosing what reduction strategy would be the most cost-effective in achieving their assigned reduction requirement. They are not an average cost and therefore cannot be simply multiplied by the greenhouse gases reduced to estimate total compliance cost. They also need to be put into the context of the overall reduction achieved at the given point and time being examined. However, allowance prices in most analyses are actually different from marginal costs because of program provisions, such as banking. Banking activity reflects the assumed foresight of affected entities to the likelihood of increasing allowance prices (in real terms) as the cap tightens. As indicated by the experience with the SO 2 program, entities will bank substantial allowances early and use them later as the program's requirements tighten. This results in allowance prices being higher than marginal costs in the early years of the program, and lower in later years. For example, the NMA/CRA International analysis of S. 2191 has a 2050 allowance price of about $352 under "no banking" assumptions, but an allowance price of about $195 with banking. In contrast, 2015 allowance prices are estimated at $51 for the "banking" scenario, but only $38 under the no banking scenario. This ability to time-shift reduction requirements and compliance costs means that allowance price projections reflect the assumed foresight of affected entities as much as they do actual marginal costs. In presenting cost measures, most analyses over-emphasize aggregate welfare indicators, such as GDP. As illustrated above, aggregate, macroeconomic cost results for S. 2191 fall into the noise of uncertainty about future conditions. In addition, aggregate macroeconomic measures reduce the transparency of the analyses' compliance strategies, and as a result, make them easier to dismiss. For example, Figure 1 below shows a 1997 scatter-plot by World Resources Institute (WRI) of 162 predicted impacts estimates from 16 different economic models of the U.S. economy as a result of a CO 2 abatement program. As indicated, the vast majority of estimates fall with a range of 0%-4% of GDP, regardless of the reduction requirement. Over-emphasis on GDP or other aggregate cost measures can obscure fundamental technological, economic, or behavioral insights the analyses may have in helping policymakers craft legislation. Instead, the analysis becomes a " black box " exercise with little enlightenment function. This "fog" is inherent when analysts choose to include the general equilibrium effects of a program in their cost measure a fog that can limit the explanatory value of the analysis. While supporting use of aggregate welfare cost measures, MIT notes: GE [general equilibrium] effects can stem from interactions with pre-existing distortions (e.g., taxes), from externally induced terms-of-trade effects, from the fact that the domestic policy itself creates terms-of-trade effects, and from other rigidities in the economy. Many aspects of model structure produce GE effects that are not easy to separately measure because of the inherent interactions in the economy. Generally, the cases examined here have not chosen to separate the two components of macro-economic cost measures: (1) the direct abatement (or compliance) cost of a greenhouse gas reduction program, and (2) the general equilibrium effects of a greenhouse gas reduction program (i.e., the interactions of the direct abatement costs with the rest of the economy). The availability of compliance cost estimates would allow policymakers to put current greenhouse gas reduction proposals in the context of other environmental initiatives be they acid rain or toxic air pollutants and, indeed, to the overall environmental agenda, and greatly increase the transparency of the analyses' insights. It would also help relieve confusion between compliance costs, average costs (per ton reduced), and the other commonly presented costs, such as allowance prices. It is argued that an aggregate macroeconomic cost measure provides a more complete view of the economic impact of proposed legislation, and helps identity potential unintended economic effects of compliance strategies. This may be true, particularly if, for example, auction revenues are being recycled via a reformed tax code. However, as indicated here, aggregated macroeconomic cost measures, such as GDP, can also be interpreted to merely show that the United States has a massive economy that can absorb substantial shocks with limited long-term effect. <4.1. Three Perspectives: Getting Out of the Noise> Breaking through the fog of analyses and cost indicators, cost estimates to reduce CO 2 emissions vary greatly and focus attention on an estimator's basic beliefs about the problem and the future, in addition to simple, technical differences in economic assumptions. In a previous report, CRS identified three "lenses" through which people can view the global climate change issues, and their influence on cost analysis. These are summarized in Table 6 . None of these perspectives is inherently more "right" or "correct" than another; rather, they overlap and to varying degrees complement and conflict with one another. People generally hold to each of the lenses to some degree. However, different combinations of these perspectives lead to very different cost estimates. A classic example of this is the contrast between the S. 2191 results obtained by the Clean Air Task Force (CATF) and the American Council for Capital Formation/National Association of Manufacturers (ACCF/NAM) using the same model: EIA's NEMS model. Table 7 summarizes the general approach of the two analyses according to the three perspectives identified above. In its analysis, CATF expresses confidence in S. 2191 's various technology and efficiency provisions and models the bill assuming EIA's Best Available Technology (BAT) case, banking, and offsets. In contrast, ACCF/NAM states that it is "unlikely" that technology, new energy sources, and market mechanisms (e.g., carbon offsets, banking) will be sufficiently available to achieve S. 2191 's emission targets. Accordingly, ACCF/NAM's assumptions differ substantially from CATF's and other studies by excluding banking, significantly capping the availability of various technologies, and assuming higher construction costs. As indicated by Table 8 , the widely different cost assumptions provided the expected results, although all three analyses remained in the 0-4% GDP range common for greenhouse gas reduction analysis. Allowance price estimates are widely different, but this cost measure tends to exaggerate differences between results and should not be confused with average costs or program costs. This is particularly true in this case, as ACCF/NAM did not publish its environmental results in terms of greenhouse gases reduced; thus, one can not compare the allowance price with what is being reduced over time. Unfortunately, the analyses do not present sufficient sensitivity analysis and other information to determine whether it is the economic assumptions (e.g., banking and offset availability), the behavioral assumptions (e.g., BAT), the technology assumptions (e.g., availability), or just the higher cost assumptions of the ACCF/NAM analysis that explains the difference in allowance prices. Some attempts have been made to sort out the importance of various assumptions in analyzing the costs of greenhouse gas reduction proposals, beginning with Repetto and Austin's effort for the World Resources Institute (WRI) in 1997, with more recent efforts by Barker, Qureshi and Kohler in 2006 and Barker and Jenkins in 2007. Indeed, Dr. Repetto has set up a website where people may answer seven key questions about the cost and benefit assumptions they feel are most reasonable and find out how their choices would affect GDP. Through meta-analysis of the results from multiple independent studies, the role of various assumptions and methodologies are quantified. In general, these studies found seven underlying assumptions affecting results: (1) the efficiency of the economic response; (2) availability of non-carbon technology; (3) availability of the Kyoto mechanisms; (4) method of revenue recycling; (5) method of incorporating technological advancements; (6) inclusion of non-climate-related environmental benefits; and (7) inclusion of climate-related benefits. As none of the models reviewed in this report quantify any environmental benefits in their analyses, all models ' results can be considered " worst-case " scenarios. <5. Results for S. 2191> <5.1. Impact on Greenhouse Gas Emissions> Figure 2 and Figure 3 present greenhouse gas emissions under S. 2191 as estimated by the ten cases, relative to their baseline assumptions. The range might seem surprising, given the emission cap defined in the bill. The cause of the range is largely two-fold: (1) estimated emissions growth in the 10%-15% of the economy not covered under the bill, (2) estimated use of international credits to meet emission reduction requirements that do not reduce domestic emissions. The most stringent interpretation of S. 2191 's emissions cap is by NMA/CRA. The resulting emissions estimates could be attributed to three factors: (1) NMA/CRA does not allow any international credits to be used to achieve reductions, (2) NMA/CRA uses the preliminary AEO 2008 baseline, which may project lower emissions growth by non-covered sectors because of EISA or other factors; and (3) NMA/CRA also analyzes the effect of the bill's proposed Low Carbon Fuel Standard, which reduces emissions further, as discussed later. The highest emissions permitted under the bill are estimated by the two EPA/ADAGE cases. This higher emissions level is probably the result of the substantial use of international credits and percentage of uncovered entities assumed by ADAGE. Interestingly, the two ACCF/NAM/NEMS cases do not present any estimates of their total greenhouse gas emissions baseline, or the reduction calculated by their analysis. The closest they come to presenting emissions reductions is a chart with assumed increases in energy-related CO 2 emissions and their interpretation of the reductions S. 2191 would require on the energy sector. <5.2. Impact on Non-Greenhouse Gas Emissions> The only estimates of non-greenhouse gas emission reductions under S. 2191 are provided by EPA/IPM. Those projections are for the electric power sector only, assume implementation of the Clean Air Interstate Rule (CAIR) rule (currently in litigation), and only go to 2025. The projections also reflect the interaction of CO 2 reductions with the banking provisions of the Acid Rain and CAIR rules. This interaction results in the short-term changes (to 2015) in emissions being overstated. As indicated in Table 9 below, one-third of the SO 2 reductions and one-sixth of the NO x reductions are achieved in the last year of the projection. EPA/IPM also projected mercury emissions reductions; however, they were done in the context of the now-vacated mercury rule. This eliminated their utility for this analysis. <5.3. Impact on GDP Per Capita> Figure 4 and Figure 5 present the estimated GDP per capita in the baseline and S. 2191 scenarios for the various cases. As suggested by the discussion of "noise" earlier, uncertainty about the basecase assumptions absorbs the impact of S. 2191 . Indeed, they are so intertwined as to make the results nearly meaningless in one sense. In another sense, the figures indicate the models' expectations that the economy continues to growth under S. 2191 , albeit at a slower rate than under their respective reference cases. To sort the situation out a little further, Figure 6 and Figure 7 show percentage reductions in GDP per capita from S. 2191 (relative to the models' respective reference cases) according to the ten cases presented here. With the exception of the IGEM model, all projections for all years between 2020 and 2050 fell into a range between 0.3% (EIA/NEMS for 2020 and 2030) and 2.7% (ACCF/NAM-HIGH for 2030). As indicated in Figure 6 and Figure 7 , the EPA/IGEM cases produced 2050 estimates that were more than twice those of the other models. The high estimates for GDP per capita reduction by the EPA-IGEM cases result from its structure and assumptions contained in the model. For example, the assumption about the relationship between leisure and consumption in IGEM is quite different from the other models. Essentially, as prices for goods and services increase, IGEM assumes a highly responsive relationship, with people deciding to work less and buy less. As a result, a small increase in prices will produce a relatively large loss of consumption, resulting in a larger impact on GDP and other cost measures. In contrast, other models are less responsive, assuming people will absorb higher prices without changing their work or consumption habits very much. Other factors influencing IGEM's results include (1) a somewhat higher emissions baseline, (2) the lack of some less carbon-emitting technological alternatives, such as carbon capture and storage, (3) a U.S.-only context that affects the model's estimates of exports, and (4) elasticities that are calibrated based on historical data. The only year for which GDP per capita estimates were presented for all cases is 2030. Once again, the estimates from the IGEM model are substantially higher (3.6% and 3.8%) than the seven other cases for reasons noted above. The other cases fall into two categories. The largest category is six cases that estimate 2030 GDP effect at about 1% or less. These cases are: EPA/ADAGE-REF, EPA/ADAGE-TECH, CATF/NEMS, EIA/NEMS, MIT/EPPA, and NMA/CRA. The other category is the two ACCF/NAM/NEMS cases where the GDP effect is 2.6% and 2.7% in 2030. Thus, despite their restrictive assumptions, the ACCF/NAM/NEMS cases do not exceed the 0-4% range of GDP effects common to reduction programs. <5.4. Allowance Price Estimates> Figure 8 and Figure 9 present the estimated allowance prices for each of the ten cases examined here. In addition, we have included the Congressional Budget Office's estimates used in scoring S. 2191 . It is clear from the figures that the banking assumption of the different cases has a fundamental influence on projected prices. For example, as noted earlier, the ACCF/NAM/NEMS cases do not include banking an expressed decision by ACCF/NAM and not an inherent part of the NEMS model as evident by the CATF/NEMS and EIA/NEMS cases. This assumption has a clear effect on the trajectory of their allowance prices. In contrast, the ADAGE, IGEM, MRN-NEEM, and EPPA models assume discount rates that tend to encourage banking. As noted earlier, banking tends to increase allowance prices in the early years of the program and lower them in the out-years. This flattening effect results in the gentler slope of the allowance price curves evident in Figure 8 and Figure 9 below for these cases. Of the 2030 estimates for the eight cases that include S. 2191 's banking provision, four cases project allowance prices in the range of $45-$61 (CATF/NEMS, EIA/NEMS, and the two EPA/ADAGE cases) while the other four cases project allowance prices in the $73-$86 range (MIT/EPPA, NMA/CRA, and the two EPA/IGEM cases). The spread of allowance price estimates expands after 2030, as evident in the figures. <5.5. Auction Revenue Estimates> None of the analyses examined were conducted after the proposed deficit reduction amendment was announced April 10, 2008. Therefore, CRS has provided the following estimates based on two cases: a "high" revenue case based on the MIT/EPPA study, and a "low" revenue case based on the EPA/ADAGE-TECH case ( Figure 10 ). In each case, the auction revenue estimates are calculated by multiplying the estimated allowance price in a given year by the number of allowances auctioned by the program for deficit reduction ("Deficit Reduction Fund") and the number of "remainder allowances" allocated for auction ("General Auction"). As the number of allowances for auction in a given year is set by the bill, the total auction revenue for that year becomes a function of the allowance price. A higher allowance price will lead to higher auction revenue. As shown in Figure 10 , using the lower allowance prices in the EPA/ADAGE-TECH case, total auction revenues start in the tens of billions of dollars (2005$) and increase to over $100 billion before 2030. Using higher allowances prices, such as the MIT/EPPA case, total auction revenues exceed $100 billion before 2020. In comparison, currently the federal government spends roughly $5 billion annually for the Climate Change Science Program, the Climate Change Technology Program, and International Climate Change Assistance, combined. As indicated in Table 10 , after the firefighting, deficit reduction, administration expenses, and other funds have been allocated, a substantial amount of auction revenue would remain available annually for technology deployment even in the low revenue EPA/ADAGE-TECH case. For example, the Advanced Technology Vehicles Manufacturing Incentive Program (Sec. 4405) would provide grants to automakers and parts manufacturers to develop the capacity to build plug-in hybrid and other advanced vehicles (and parts). Funds could be used for engineering integration of vehicles and retooling old plants to produce advanced vehicles. Using the lower allowance prices in the EPA/ADAGE-TECH case, this program would provide over $1 billion (2005$) annually in 2012, increasing to more than $7 billion by 2040. In comparison, DOE currently spends between $200 million and $400 million for advanced vehicle and hydrogen fuel R&D. As noted in the next section, the effectiveness of these funds in accelerating technology development and commercialization as well as agencies' and firms' capacity to absorb (in some cases) very large funding increases could have a significant effect on the overall costs of S. 2191 and the ultimate success of the program. CRS estimates of firefighting fund requirements are based on historic data. The estimate of administration cost ("CSA Management Fund") is based on EPA's estimate of 1% of total allowance value. <6. Issues Raised by the Models> <6.1. Technology Issues> A frontier area in model development is creating fuller representations of technology advancement. A substantial amount of technological change occurs within the economy without direct policy intervention the free enterprise system provides significant rewards for those who develop cost-effective alternatives and introduce them into the market. However, technological change is a very complex subject and can also be induced through a variety of policy levers, including prices (such as allowance prices), subsidies, and technology mandates or standards, along with both publicly and privately funded research and development. This "induced technological change" (ITC) is not fully represented in the models used here, although it is a critical part of S. 2191 . Observing that no single source dominates the process of technology change a process that includes roles for research and development, learning-by-doing, and spillovers from other industries engaged in these activities, L. Clarke, et al. states: The lesson from these observations is to be cautious in interpreting the policy conclusions of models that assume only a single source of technological progress or that neglect critical factors such as spillovers. This includes virtually all formal models in use today, implying a need both for more comprehensive treatments of technological change and more research to understand the nature and magnitude of any distortions of policy conclusions from models with limited representations of technological change. That models used to project GHG reductions costs are deficient in treating technology change is a likely major source of error that will only become cognizable as the future unfolds. S. 2191 includes numerous incentives for technology development incentives for which no model has (or could be expected to have) estimated the collective effect. <6.1.1. Electric Power Sector> Most of the analyses examined here focus on technological alternatives in the electric power sector. <6.1.1.1. Availability of Technology> When and how quickly technology will be available is a difficult but critical issue. Indeed, the models examined here do not agree on the availability of current electric generating technology, such as nuclear or wind power, much less emerging technologies such as carbon capture and storage (CCS), or the potential for breakthroughs over the next 40 years. The general lack of detailed technology descriptions in the CGE models does not help in this regard. For example, the EPA/IGEM's presentation of the energy sector and technology options is too aggregated to be analyzed in terms of technology development under S. 2191 . Current Technologies . Several currently available technologies emit less greenhouse gases (or none) compared to a conventional coal-fired facility. Those technologies include electric generation from wind, biomass, landfill gas, nuclear, geothermal, and natural gas. Some of these sources, such as biomass and natural gas, have some repowering potential with respect to coal-fired generation. The models do not provide much insight on the likely mix of these technologies under S. 2191 . Some cases, like the ACCF/NAM/NEMS cases, strictly define the availability of these technologies; while others, like the CATF-NEMS and EIA/NEMS cases, allow the model to meet the requirements without any additional constraints. Table 11 identifies some of the technology-availability limits assumed in the different model runs, along with the resulting capacity built to meet electricity demand from 2010 to 2030. Because the ACCF/NAM/NEMS cases heavily constrain the availability of most alternatives to natural-gas generation, it is not surprising that a substantial amount of natural gas capacity is assumed to be built under these cases during this time period. This result is confirmed by sensitivity analysis conducted by EIA that shows a movement to natural gas if the availability of nuclear power, renewable power, and coal with CCS are constrained. In contrast, the EPA/IPM, CATF/NEMS, and two EPA/ADAGE cases indicate little or no new construction of natural gas. Instead, these models allow a mix of renewable power (including wind and biomass), nuclear power, and coal-fired capacity with CCS to meet future demand and to begin replacing coal-fired capacity without CCS. In these cases, each model included the CCS subsidy contained in S. 2191 . Finally, MIT/EPPA, EIA/NEMS, and NMA/CRA cases show a moderate role for natural gas during this time frame. In some ways, the interplay between nuclear power, renewables, and coal-fired capacity with CCS is a proxy for the need for a low-carbon source of electric generating capacity in the mid- to long-term. As indicated, a considerable amount of low-carbon generation will have to be built under S. 2191 to meet the reduction requirement. The amount of capacity constructed depends on the models' basecase assumptions about future supply and demand and need for capacity replacement/retirement under S. 2191 , along with the degree of consumer response to rising prices and incentives contained in S. 2191 . To put these numbers into historical context, from 1963 to 1985, 78 GW of nuclear power were ordered, constructed and began operation. For the 19-year period of 1966 through 1984, the country added 464 GW of total generating capacity, including 210 GW of coal-fired capacity, 38 GW of hydropower, 27 GW of natural gas capacity (steam technology), 46 GW of oil-fired capacity, and 54 GW of peaking capacity to improve system reliability after the 1965 blackout. In addition to new additions, between 1965 and 1972, about 400 coal-fired generating units were converted to oil to meet environmental requirements. After the 1973 oil embargo, this trend was reversed with 11GW of capacity converted back to coal by 1983. For a more recent time period, from 2001 through 2005, the United States added about 180 GW of new capacity almost all natural gas-fired. Beyond construction of new facilities and repowering of existing ones, conservation is likely to play an important role in reducing the need for new construction under S. 2191 . In general, the models estimate a 10%-30% reduction in projected demand for electricity from the 2030 basecase level due to S. 2191 . Emerging Technologies . The emerging technology receiving the most attention in the models is carbon capture and storage (CCS). This is not surprising. The models generally agree that the long-term viability of coal-fired electric generation is dependent on developing a CCS system. Indeed, the models' various projections of coal consumption are a direct result of the models' assumptions about the introduction and commercialization of CCS. Of the numerous provisions in S. 2191 designed to promote emerging technologies, the CCS bonus allowance provision is the only one that received substantial attention by the models. Table 12 indicates the various assumptions and limits the models placed on CCS deployment under S. 2191 . As indicated, the cases that included the CCS subsidies contained in S. 2191 generally assumed that the technology would be available earlier and in increasing amounts over the cases that did not include the subsidies. For example, the EPA/IPM sensitivity analysis on S. 2191 's CCS bonus allowance subsidy indicates that the subsidy (along with sufficiently high allowance prices) results in the technology emerging in the commercial market in 2015 with full production (as limited by the models) being achieved in 2025. The MIT/EPPA subsidy case agrees with a 2015 commercialization date while the EPA/ADAGE cases delay availability until 2020. EIA/NEMS states only that the subsidy makes the technology economical. While the models agree that the CCS bonus allowance provisions are effective, they disagree on whether they are sufficient. For example, EIA/NEMS noted that the subsidy improves CCS's relative economics; however, nuclear and renewable fuels are projected to still play a larger role. In contrast, EPA/IPM states that by 2025, coal with CCS is economic even without the subsidy. The advantage, according to EPA/IPM, is the earlier start-up resulting from the subsidy that would result in even more CCS being installed if the subsidy weren't capped and eventually ran out. MIT/EPPA agrees that the bonus allowances would be over-subscribed for almost all years. Among the no-subsidy scenarios, only NMA/CRA views CCS as available before 2025. Future Technologies . The above discussion focuses on current perspectives on technological alternatives alternatives that mostly rely on the construction of new facilities, be they nuclear power, biomass power, or coal-fired integrated gasification combined cycle (IGCC) with CCS. Many existing coal facilities are assumed to be retired early because, in the words of EIA/NEMS, retrofitting them with CCS technology "is generally impractical." As suggested by MIT, this points out both a need and a concern: The need to phase out coal without CCS indicates the potential value of a CCS technology that could be used to retrofit existing generation plants, extending the life of existing investment and limiting the number of completely new plants that were needed. The capital intensity of these technologies are a concern as we find that the investment demand needed for such expansions crowds out investment in other areas of the economy, and thus increases the welfare cost of the policy. Such retrofitable post-combustion technologies are in development. For example, an ammonia-based, regenerative process for CO 2 capture from existing coal-fired facilities is being developed by Powerspan. Called ECO 2 , two commercial demonstrations (125 MW and 120 MW) have been announced with projected operations to begin in 2012 and 2011. A second, chilled-ammonia-based post-combustion capture process is being developed by Alstom. In collaboration with American Electric Power (AEP) and RWE AG (largest electricity producer in Germany), Alstom has announced plans to demonstrate the technology on a 20 MW slip stream at AEP's Mountaineer plant with the captured CO 2 injected in deep saline aquifers on site. Once commercial viability is demonstrated at Mountaineer, AEP plans to install the technology at its 450 MW Northeastern Station in Oologah, OK, early in the next decade. Other solvent-based post-combustion processes are in the pilot stage. To the extent these and other future retrofittable technologies become available, the mid- and long-term costs and capital investment projected by the models could be significantly mis-stated. <6.1.1.2. Effectiveness of Research, Development, Demonstration, and Deployment Efforts> One factor that will determine the availability of emerging and future technology is research, development, demonstration, and deployment funding. The potential for such subsidies to accelerate deployment is suggested by the previous discussion of CCS. However, S. 2191 contains numerous provisions with respect to technology. As noted in the previous discussion on auction/allowance revenues, technology development will receive substantial funding under S. 2191 . However, in general, only the bonus allowance incentives for CCS are explicitly modeled in any of the cases. The exceptions to this are some innovative efforts by the CATF/NEMS and EIA/NEMS cases to use various proxies to illustrate the potential of this funding. These are discussed later. In addition, NMA/CRA states that S. 2191 deployment subsidies "would be fully utilized by CRA's projected technology investments." NMA/CRA does not state whether they assumed that the technology subsidies had any effect on deployment schedules or amounts. A basic question about S. 2191 technology development funding is: How much is enough? The amount provided by the bill dwarfs current efforts to develop and deploy reduction and low-carbon technologies. To put S. 2191 's technology funding efforts into context, two proposed research, development, and demonstration strategies are summarized below. Table 13 presents the Electric Power Research Institute's (EPRI's) estimated combined public and private research and development funding needs to obtain a "full portfolio" of electricity technologies to meet greenhouse gas reduction targets. The technology targets for 2030 are (1) 30% reduction in load growth by efficiency improvements; (2) 70 GW of non-hydro renewables; (3) 64 GW of new nuclear power; (4) new coal-plant efficiency of 49%; (5) CCS widely deployed after 2020; (6) plug-in hybrids as 39% of new car sales; and (7) distributed energy resources at 5% of baseload. Table 14 presents the public funding needs for a strategy focused on commercializing various "clean coal" technologies funded over 18 years (2008-2025). The strategy would provide for several carbon capture and storage demonstration projects along with improvements to combustion technology and development of CCS retrofit technology. The "Technology Deployment" funds allocated by S. 2191 , as shown in Table 10 (over $10 billion annually in 2012, nearing $50 billion annually by 2030) exceed the amounts estimated for the strategies identified above in Table 13 and Table 14 (combined, roughly $2 billion annually). Several organizations, including EPRI and the Pew Center for Global Climate Change, have called for at least a doubling of DOE's current funding of advanced coal options (2008 funding: $438 million). This is not to say that S. 2191 's allocations are optimal, only that S. 2191 funding would appear to fill a projected need for public funds to promote technology milestones to encourage the future availability of useful technology at the appropriate time. <6.1.1.3. Effectiveness of Economic and Regulatory Incentives> In addition to the CCS bonus allowance provision, S. 2191 contains funding for zero- or low-carbon energy technology, advanced coal and sequestration technology, fuel from cellulosic biomass, advanced technology vehicles (such as plug-in hybrids), and sustainable energy technology, including distributed energy systems. In addition, the bill calls for new appliance and building efficiency standards some of which were included in EISA, as discussed earlier. As noted earlier, the CATF/NEMS case attempted to model partially the effect of these incentives through proxies. Specifically, CATF/NEMS simulated the incentives for low and no carbon power technologies by using a production tax credit for CCS and extending the wind production tax credit to 2030. CATF/NEMS also used EIA's "Best Available Technology" case as a proxy for the appliance and building standards included in the bill. The results are some of the lowest overall cost estimates of any of the cases, along with substantial development of coal-fired CCS, nuclear power and renewables. Other innovative approaches were taken by EIA/NEMS, to attempt to mimic the impact of energy efficiency incentives by reducing the incremental cost of the most energy-efficient residential appliances by half simulating a rebate for buying more efficient appliances. Likewise EIA/NEMS mimicked the incentives for stronger building codes by tightening the residential codes in the model by 30% in 2015 and 50% in 2025 compared with basecase levels. These proxies come in addition to the EISA provisions that are contained in the preliminary AEO 2008 basecase used by EIA/NEMS. The proxies contribute to some of the lowest cost estimates of any of the cases. The only other model to incorporate these initiatives was MNA/CRA, which incorporated the preliminary AEO 2008 baseline that includes the EISA provisions. However, the NMA/CRA results do not separate out the efficiency standards from the new Corporate Average Fuel Economy (CAFE) or renewable fuel standard (RFS) requirements (see next section on " Transportation Sector "). <6.1.2. Transportation Sector> The transportation sector presents particular problems for a cap-and-trade system. First, the sheer number of motorized and aviation vehicles effectively necessitates an upstream regulation of transportation fuels. It would be impracticable to place emissions monitors on the hundreds of millions of cars, trucks, motorcycles, off-road vehicles, boats, trains, and aircraft in the United States. Likewise, requiring each motorist to submit allowances for his or her fossil fuel use would greatly increase the administrative costs of an emission reduction program. Therefore, any regulation of transportation, especially motor vehicles, would likely occur upstream of the emitting source, as is the case with S. 2191 . Emissions reductions from transportation generally must come in one of three ways: (1) reduce fuel consumption through more efficient vehicles or through reduction in vehicle-miles traveled (e.g., mass transit, carpooling, etc.); (2) reduce the carbon content of transportation fuels through the blending of lower-carbon fuels in conventional fuels; (3) switch from conventional fuels to alternatives with lower lifecycle emissions. Current federal policy attempts to address numbers 1 and 2. The federal Corporate Average Fuel Economy (CAFE) standards, as amended by EISA, require increasing fuel economy for new passenger cars and light trucks. The renewable fuel standard (RFS), also amended by EISA, requires an increasing amount of renewable transportation fuel, and that an increasing share of that fuel have lower greenhouse gas emissions. Both of these programs should help reduce the number of allowances needed by the petroleum industry by reducing the amount of fuel consumed, and the carbon content of the fuel supplied. The cap-and-trade restrictions on petroleum would most likely be felt by transportation users through higher prices. Users would receive the price signal and decide whether to invest in new capital (e.g., purchase a new car), use less fuel (and drive less), or change fuels (if possible). <6.1.2.1. Low Carbon Fuel Standard> One key feature of S. 2191 and its impact on the transportation sector is the Low Carbon Fuel Standard (LCFS) in Section 11003. The LCFS requires a 5% reduction in lifecycle greenhouse gas emissions from transportation fuels from 2008 levels by 2015 and a 10% reduction from 2008 by 2020. This is similar to the proposed low carbon fuel standard established in California by Governor Arnold Schwarzenegger. A major question on the effects of the LCFS is the definition of "transportation fuel." In discussions over the California program, most stakeholders, including California Air Resources Board staff, argued that aviation fuel and bunker fuel should not be included in the standard. Simply put, the more fuels included in the program, and the greater the volume that must be displaced, the more stringent the standard becomes. This is especially true for aviation fuel since there are currently few or no options to reduce jet fuel lifecycle greenhouse gases. Therefore, the more jet fuel included in the program, the greater the reductions necessary from other fuels. For example, EIA projects 15.79 million barrels per day of transportation fuel demand in 2020, or roughly 240 billion gallons annually. To meet a 10% reduction requirement, 24 billion gallons of zero-carbon fuel would be needed, assuming equivalent energy content per gallon. However, many low-carbon fuels have less energy per gallon than petroleum fuels, and all have some associated carbon emissions. If cellulosic ethanol is found to have a 90% reduction in lifecycle emissions, and the fuel has 2/3 the energy content of gasoline, then roughly 40 billion gallons would be required. This is considerably more than the existing RFS mandate of 30 billion gallons of renewable fuels in the same year. If, however, only motor gasoline and diesel fuel are considered, then the total volume is reduced to 13.47 million barrels per day, or 206 billion gallons annually. The equivalent amount of cellulosic ethanol required would be roughly 35 billion gallons, still a significant target. The assumptions for the amount of low-carbon fuel available, the expected emission reductions for that fuel, and the total amount of fuel subject to the requirements would significantly affect the costs and feasibility of the LCFS program. The way the provisions are written in S. 2191 , the LCFS program is separate from the cap-and-trade program, and there is no way to purchase credits or offsets from other sectors. If the necessary amount of low-carbon fuel is not available, then under the program fuel providers must reduce the amount of fuel they sell, or pay civil penalties. In its analysis of S. 2191 , NMA/CRA states that in 2015 the LCFS "can only be met by a decrease in gasoline consumption to allow the limited supplies of low carbon biofuel to meet the averaging requirements of the standard." Further, the model estimates that because of the decrease in supply, motor fuel prices increase 140% in 2015 over the baseline case. The NMA/CRA analysis suggests that if the LCFS is construed to include all ground transportation fuels without exception, then it may be difficult to achieve it without reducing fuel demand. Depending on the design of the program and what fuels are included, the effects on fuel supply and prices could be dramatic. However, if plug-in hybrid vehicles or large amounts of cellulosic biofuel are available earlier than expected, or if certain fuels such as aviation fuel and non-road fuels are excluded from the mandate, the costs could be lower. <6.1.3. Impact on Fuel Prices> Given the divergent projections by the various cases about future electric generating capacity illustrated in Table 11 and Table 12 and, with the exception of NMA/CRA, no detailed modeling of the transport sector, it is not surprising that their estimates of the fuel price impacts of S. 2191 vary widely. Also, perhaps more than any other results, the cases were very selective in terms of the results they chose to highlight in their studies and how they chose to present them. Hence, CRS highlighted general themes coming out of the cases to focus on the insights this wide variety of assumptions and calculations has to offer. A further discussion of the impact of energy costs on households and energy-intensive industries is presented later. <6.1.3.1. Natural Gas Prices> Some of the most confusing results presented by the cases are for natural price prices. Besides different baselines, indices, and target categories (e.g., utility, industrial, residential, "average"), some prices presented include allowance costs, while others do not. Likewise, some cases include the "free" allowance allocations provided under S. 2191 , others do not. In general the CGE models present natural gas prices without the added cost of allowances; NEMS cases present natural gas prices that include allowance costs. In general, the incremental impact of S. 2191 on natural gas prices depends on the degree to which natural gas-fired generation is used to back out existing coal-fired capacity and to meet future demand. As discussed above, the cases fall into three categories with respect to future natural gas-fired generation: (1) little or no increased generation; (2) modest increased generation; or (3) substantial increased generation. Of the three cases included in the first category, the EPA/ADAGE-REF and EPA/ADAGE-TECH cases project declining natural gas prices that do not include any allowance costs. This compares with the CATF/NEMS case that projects natural gas prices increasing only 3% in 2030 over baseline levels with allowance costs included. The potential modest impact on natural gas prices would be consistent with a future generation mix that is not heavily reliant on natural gas. The three cases that project some additional natural gas-fired capacity MIT/EPPA, EIA/NEMS and NMA/CRA vary in their results. For the two cases that do not include allowance costs, the MIT/EPPA case projects a substantial decline in natural gas prices through 2050, while NMA/CRA projects wellhead natural gas prices increasing over basecase levels about 20% by 2020, then declining to no increase by 2035 and declining steadily afterwards to about 25% below baseline projections by 2050. For delivered natural gas, NMA/NEMS projects prices with allowance costs at about 20% above basecase levels around 2025 and accelerating rapidly after 2040. For the EIA/NEMS case that includes allowance costs, prices for natural gas delivered to electric generators are projected to increase about 23% in 2020 and 40% in 2030; the price for natural gas delivered to residential consumers increases about 14% in 2020, increasing to 26% in 2030 (compared with basecase). In contrast to the cases above, the two ACCF/NAM/NEMS cases (which project substantial increases in natural gas-fired capacity) estimate natural gas prices with allowance costs increasing 108% (Low case) and 146% (High case) by 2030 for both residential and industrial consumers. This result is consistent with the assumptions used by ACCF/NAM in its analysis, as identified in Table 7 , Table 8 , and Table 11 . <6.1.3.2. Petroleum Prices> With the exception of NMA/CRA, the cases examined here do not model the transportation sector in a detailed manner. As noted in the "Transportation Sector" discussion, perhaps the most important impact on petroleum prices under S. 2191 may come from the Low Carbon Fuels Standard (LCFS), at least in the short term. For the cases that did not model the LCFS, three cases the two EPA/ADAGE cases and the MIT/EPPA case project either modest increases or declines in petroleum prices compared with basecase projections (a substantial decline in the case of MIT/EPPA). These models are all global in scope, with the petroleum price reflective of what they see as occurring in the international oil market, and do not include the increased cost of carbon allowances. The other four cases the two ACCF/NAM/NEMS cases, EIA/NEMS and CATF/NEMS focus on gasoline prices and the price increases from the allowance requirement. The CATF/NEMS case estimates gasoline price increases reaching about a quarter ($0.25) per gallon by 2030, while EIA/NEMS estimates a 2020 gasoline price increase of about $0.22 per gallon and a 2030 price increase of about $0.40 per gallon. EIA/NEMS also provides estimates for other transportation fuels, including diesel and jet fuel. The two ACCF/NAM/NEMS cases project more dramatic gasoline price increases of about $3.25 (High case) and about $1.70 (Low case) per gallon by 2030 (2005$). <6.1.3.3. Electricity Prices> Electricity price calculations by the various cases include allowance prices. However, like the presentation of natural gas prices, the cases use a confusing array of different baselines, indices values, and target categories (residential, industrial, average, etc.). This can lead to some misleading conclusions when comparing different cases. For example, the MIT/EPPA case estimates 2030 electricity prices under S. 2191 at 57% above 2005 prices, compared with EPA/ADAGE-REF's 2030 estimate under S. 2191 of 29% above 2005 prices. However, reflecting the critical role of basecase assumptions, the MIT/EPPA basecase 2030 electricity price estimate is 39% above 2005 prices thus the incremental difference between the basecase and the S. 2191 estimate is 18 percentage points. In contrast, the EPA/ADAGE-REF basecase 2030 electricity price estimate is an 11% decline below 2005 prices thus the incremental difference between the basecase and the S. 2191 estimate is 40 percentage points. The only metric for which the cases provided sufficient data was percentage increases from basecase levels. For the EPA/ADAGE cases, the basecase assumes a decline in electricity prices from 2005 levels in 2030 (11%-15%). This compares with a 29% increase in basecase prices for MIT/EPPA, a 5.6% increase for the EIA/NEMS, NMA/CRA, and ACCF/NAM/NEMS cases, and a 0.5% decline for CATF/NEMS relative to 2005 prices. It should be noted that several cases do not state precisely what the 2005 electricity prices refers to residential, industrial, all users, or something else. Relative to their respective baselines, three cases estimate electricity price increases under 15%: CATF/NEMS, EIA/NEMS, and MIT/EPPA, and three cases estimate price increases between 35%-45%: the two EPA/ADAGE cases and the NMA/CRA case. In contrast, the two ACCF/NAM/NEMS cases project prices substantially higher: 101% (Low case) and 129% (High case) in 2030. <6.2. Economic Issues> <6.2.1. Availability of Offsets> Along with technology development, the availability and price of offsets is one of the critical factors determining the costs of S. 2191 , particularly in the short- to mid-term. As noted by EIA: "the highest prices in the first 5 years of the cap-and-trade program occur when international offsets are not assumed to be available." As stated more forcefully by EPA: From the various scenarios analyzed, the use or limitation of offsets and international credits has a larger impact on allowance prices than the modeled availability or constraint of key enabling technologies. However, this conclusion is not obvious from a first read of the cases. In its heavily constrained cases, ACCF/NAM/NEMS notes that "the purchase of relatively inexpensive offsets significantly constrains allowance prices until the early 2020s ... " when the available offsets run up against the limits contained in the bill or in the model's assumptions. In contrast, the NMA/CRA finds no such relief, stating that "since the limit on domestic offsets is projected not to be reached until after 2025, allowing greater use of domestic offsets does not reduce near term costs." Obviously, there is significant disagreement on the availability and cost-effectiveness of domestic and international offsets. A critical factor in this uncertain situation is the availability of international credits. The EPA/ADAGE, EPA/IGEM, and EIA/NEMS cases assume the availability of substantial international credits at reasonable prices. Sensitivity analysis by EPA indicates that if domestic and international credit availability were unlimited, 2050 allowance prices would fall by 71%. It should be noted that, subject to changes in the international framework for international commitments and trading, S. 2191 would not allow U.S. companies to obtain credits via mechanisms such as the Clean Development Mechanism (CDM), either directly or through a secondary market as currently written (Section 2502). Instead, participation would be indirect via substitutions of CDM-style credits for eligible allowances (such as those used by the EU-ETS) by other controlled countries and then sold to U.S. companies. The EPA/ADAGE, EPA/IGEM, and EIA/NEMS cases assume this interpretation of Section 2502. Of course, given the long time frame of S. 2191 , projecting the availability and prices of international credits is an uncertain business. For example, the European Commission (EC) has not decided on the status of credits from the Clean Development Mechanism (CDM) for the post-Kyoto period. Given the indirect arrangement necessary for those credits to impact S. 2191 compliance costs, this uncertainty can not be readily resolved. NMA/CRA disagrees that substantial international credits would be available at reasonable prices. NMA/CRA argues that since the countries involved must have programs of "comparable stringency," the allowance prices are likely to be similar to U.S. prices and excludes them from its analysis. As suggested by sensitivity analysis conducted by EPA, EIA, and MIT, restrictions on international credits substantially increase the cost of S. 2191 . EIA estimates that the unavailability of international credits would increase allowance prices 39% in 2030; for 2050, MIT estimates an allowance price increase of 15% while EPA projects that increase at 34%. The impact of domestic offsets in reducing costs is projected to be less dramatic than for international credits, although the incentives available for domestic offsets could alter this. EPA sensitivity analysis indicates that unlimited domestic offsets would reduce allowance prices by 26% (p. 6). <6.2.2. Impact of Banking> Experience with the acid rain program strongly indicates that participants bank allowances in the face of price uncertainty. In the case of greenhouse gas reductions, the availability of offsets and international credits also interacts with the banking provisions. As noted earlier, the ACCF/NAM/NEMS cases do not include banking: this fact helps explain their dramatically increasing allowance prices. All other cases include banking. The models suggest two important results from banking. First, as noted earlier, banking has a flattening effect on allowance prices as participants buy more than they need early, raising prices, and use them later, lowering prices from the levels they would be otherwise. Second, and perhaps more critically, banking allows participants more control over the scheduling of reduction efforts. Given the pivotal nature of technology development to the ultimate success of any greenhouse gas reduction program, the ability to delay making major capital investments is very important. In the EPA/ADAGE and EPA/IGEM cases, entities bank allowances until around 2030 (depending on the scenario). This is possible because of the availability of offsets and international credits. In the EIA/NEMS case, it is modeled in a manner to ensure a 5 billion allowance bank remains at the end of 2030 as a proxy to reflect allowance needs in the post-2030 period (EIA/NEMS does not project beyond 2030). <6.2.3. Impact of Carbon Market Efficiency Board> The models generally do not consider the Carbon Market Efficiency Board (established by Title I, Subtitle F). However, one can infer from the models' results that the most important power that the Board may have is the ability to increase the availability of domestic offsets and international credits. As noted, increasing the availability of domestic offsets and international credits could have a significant effect on overall costs. If the Board chose to "loosen" the limitation on offset and international credit availability, the cost reductions could be substantial as indicated by the EPA cases. In addition, if the Board determined that technology development was not occurring on schedule and causing volatility in the allowance markets, loosening constraints on offsets and international credits could allow covered entities to bank more, allowing more time for technology development, if necessary. However, the Board is primarily designed to deal with short-term volatility due to episodic events in the allowance market and has only short-term powers. Whether it could coordinate a longer term strategy, if necessary, with its proposed authority is not known. <6.2.4. Impact of Revenue Recycling> As indicated in the " Auction Revenue Estimates " section, S. 2191 could redirect hundreds of billions of dollars annually through the economy. Only the NMA/CRA case states it captured the effects of this redirection. The other models generally assume the effect on the economy is similar to a lump-sum adjustment to taxes designed to keep S. 2191 deficit- and revenue-neutral. <6.2.5. International Leakage> International leakage is the shift in GHG emissions from a country subject to regulation (e.g., cap-and-trade program) to an unregulated country, so reduction benefits are not obtained. This would happen, for example, if a GHG emitting industry moved from a country with an emissions cap to a country without a cap. Only the EPA/ADAGE cases looked at the international trade aspect of Title VI of S. 2191 . EPA's sensitivity analysis indicates that if countries without legally binding commitments to reduce greenhouse gases commit to maintaining their 2015 levels beginning in the year 2025, and to returning their emissions to 2000 levels by 2050, no international emission leakage occurs (p. 82). Imports of energy-intensive goods are projected to fall under this scenario, while exports expand as developing countries cope with their new emission limits. In a worst case scenario, EPA's sensitivity analysis looked at a no-international-actions-to-2050 scenario. In this scenario, the International Reserve Allowance provisions of Title VI are assumed to be triggered because of the lack of international action. Emissions from countries without legally binding commitments are estimated to rise by 350 million CO 2 e by 2030 and 385 million by 2050 less than 1% of their basecase levels under ADAGE. It would be equivalent to U.S. emission leakage rates of approximately 11% in 2030 and 8% in 2050. These emissions compare with increases of 361 million and 412 million for 2030 and 2050 respectively if Title VI is not implemented. EPA describes the impact of Title VI on leakage as "minimal." The impact on imports is more significant. Without the International Reserve Allowance Requirement, imports from countries without legally binding commitments are projected to increase 5.4% in 2030, rising to 7% in 2050. In contrast, under Title VI, imports are estimated to increase about 1% in 2030 and decline about 5% in 2050. U.S. exports decline in both cases as countries use more of their domestic manufacturing (p. 85). If the EPA projections are reasonable, the differential effect of Title VI on trade versus emissions leakage could present problems if the title is brought before the World Trade Organization (WTO). <6.3. Ecological Issues> <6.3.1. Climate Change Benefits> None of the cases examined here attempt to quantify or monetize the benefits of reducing greenhouse gases. Indeed, with the exception of MIT's overall study of cap-and-trade proposals, the environmental benefits of reducing greenhouse gases are generally not discussed. This hole in reports designed to discuss the impacts of S. 2191 is not surprising. Like the cost estimates discussed above, benefit estimates are fraught with uncertainty. Thus, this discussion should be considered illustrative more research and resources devoted to benefits analysis are necessary before more comprehensive reports will be available. <6.3.1.1. Monetizing Benefits: Some Illustrations> Monetizing benefits from reducing air pollutants has been attempted for decades. For example, during the debate in the 1980s on controlling sulfur dioxide, EPA conducted an illustrative analysis of the health benefits of promulgating a 1-hour sulfur dioxide National Ambient Air Quality Standard (NAAQS) as part of its Regulatory Impact Analysis (RIA). Based on partial analysis of health impacts, EPA's illustrative exercise put the potential health benefits from stringent sulfur dioxide control at between zero and $385 billion (1984$) annually. These health-based benefits were in addition to a CRS partial estimate of welfare benefits from reducing sulfur dioxide that exceeded $4 billion (1985$) annually. Because climate change is a global problem, monetizing benefits from reducing greenhouse gases is difficult. Indeed, some consider the effort impossible, bordering on the unethical. The complexity of the global response is magnified by the need to value benefits that accumulate over 100 years or more. Discount rates economics' approach to valuing time used in attempts to value long-term damage from climate change range from 0 to 4-5% in the literature. Indeed, the effect of discounting is so great on a long-term marginal damage estimate of climate change that "using standard assumptions about discounting [i.e., 4-5%] and aggregation, the marginal damage costs of carbon dioxide emissions are unlikely to exceed $50 tC [$14 tCO 2 ], and probably much smaller." Indeed, estimates of the Social Cost of Carbon (SCC) the marginal damage resulting from the addition of one more ton of CO 2 span over three orders of magnitude: from zero to over a $500 a ton. However, most current attempts to monetize environmental benefits are incomplete. The matrix presented in Table 15 illustrates the problem. Most studies that attempt to monetize benefits focus on the market impact of predictable, average changes in climate (the "easiest to measure" box of Table 15 ). Only a few attempt to value non-market impacts or extreme events and fewer still consider catastrophes or socially contingent impacts. In reviewing 28 studies the UK Government had analyzed in re-examining its estimate of an appropriate Social Cost of Carbon, Ackerman and Stanton observed: That is, all of the studies that estimate the social cost of carbon base their numbers on an incomplete picture of climate risks often encompassing only the simplest and most predictable corner of the vast, troubling canvas that has been painted by climate science. There is, of course, no way to assign monetary values to the global response to the possibility of widespread droughts across large parts of Asia, or an increase in the probability of a sudden change in ocean currents that would make the UK as cold as Canada, but in the understandable absence of such impossible monetary values, it is important to remember the disclaimer from the DEFRA [Department for Environment, Food & Rural Affairs] review: all estimates of the SCC [Social Cost of Carbon] omit some of the most important unpriced risks of climate change. The same disclaimer applies to virtually any quantitative economic estimate of climate impacts. The matrix also indicates the moral dilemma presented by efforts to monetize benefits a dilemma magnified by the issue of intergenerational discounting. The notion that deaths, extinctions, and other such potential impacts are less important because they occur in some future generation is, for some, morally problematic. Criticizing the UK government attempt to put a price on climate change, the UK House of Commons Select Committee on Environmental Audit stated: Furthermore, given the inherent difficulties in putting a price on climate change, the Government's first priority in deciding on the merits of potential policies and construction projects ought to be deciding how they affect UK carbon budgets, and only secondly on what the monetary value of resulting carbon emissions would be. Besides moral considerations, one's valuation of the social cost of carbon is dependent on one's assumptions about the emissions path the world is on. This is due to the relationship between atmospheric concentrations of GHGs and radiative forcing (i.e., the higher the atmospheric concentration, the less the effect of one more ton on warming), the relationship between climate change and economic impacts (i.e., the higher the damage, the less the effect of one more ton on that damage), and discounting (impacts occurring earlier are valued more than impacts occurring later). This phenomenon is illustrated in The Stern Review on the economics of stabilizing climate change. As shown in Table 16 , the SCC declines as the path of emissions is projected to result in less severe damages. Such estimates would increase over time as the damage got closer and closer. In an attempt to respond to the implications of climate change and The Stern Review , the UK Government has instituted a shadow price for carbon to be used in official cost-benefit analyses. A shadow price is a little different from a Social Cost of Carbon value. The latter is an attempt to determine the marginal damage resulting from the addition of one more ton of CO 2 it indicates what people should be willing to pay now to avoid the future damage caused by more carbon emissions. In contrast, a shadow price represents a cost or benefit from a good when the market price is a poor indicator of economic value or there is no market at all. The UK shadow price of carbon is based on the Social Cost of Carbon of a 550 ppm stabilization goal as determined in The Stern Review , plus consideration of abatement costs and the value of UK leadership in encouraging global participation and from being out front in developing new technology. The result is a shadow price of about $43 a ton in 2012 (2005$), rising 2% annually thereafter in real terms. Using this shadow price of carbon and the UK Green Book discount rates of 3.5% for the first 30 years and 3.0% afterward, the net present value (NPV) of S. 2191 's estimated reductions would range from $4.2 trillion (ADAGE-REF case) to $5.5 trillion (MIT/EPPA case) in 2005 dollars. To complete this illustrative exercise, NMA/CRA case estimates the net present value of the total cost of S. 2191 (presumably not including general equilibrium effects) of about $4.5 trillion (2005$) (p. 18). NMA/CRA did not disclose the discount rate used in making this estimate. Not surprisingly, the estimates illustrated here have been criticized by some (including the UK Parliament) for being too low and incomplete. Likewise, others have criticized the estimates as too large and inflated. For example, in its recent assessment of new average fuel economy standards, the U.S. National Highway Traffic Safety Administration (NHTSA) chose to value carbon reductions at $7 a ton and employ a 7% discount rate. Applied to the reduction estimated under S. 2191 , the resulting NPV would be about one order of magnitude lower than the UK shadow price-based estimates. Thus, reminiscent of EPA's illustrative calculation of the health benefits of a 1-hour sulfur dioxide standard, the illustration here results in a range of climate-related benefits from reducing greenhouse gases under S. 2191 at between zero and $200-$260 billion annually (2005$). As illustrated with the long-term cost estimates presented in this report, attempts to monetize climate-related benefits currently reflect much about the philosophies and assumptions of the people doing the estimating. As stated in The Stern Review : "It is very important ... to stress that such estimates [NPV of climate change policy benefits] reflect a large number of underlying assumptions, many of which are very tentative or specific to the ethical perspectives adopted." <6.3.1.2. Putting Emission Reductions under S. 2191 into Context> It is difficult to put the actions of one country's emissions reduction plan in the context of a fragmented global effort to address climate change. One useful perspective is provided by MIT's general study of cap and trade bills. Using the MIT Integrated Global System Model (IGSM), MIT explored the climate response to different stabilization goals being discussed in the international community. It developed parameterizations of IGSM that represented each of three major atmosphere-ocean general circulation models (AO GCMs) that would help illustrate the uncertainty in translating emission trends into an estimate of climate change: those of the Goddard Institute for Space Studies (CISS-SB), the Geophysical Fluid Dynamics Laboratory (GFDL-2.1), and the National Center for Atmospheric Research (CCSM3). MIT simulated the climate effects of six different policy scenarios through 2100. Four of these are of interest in exploring S. 2191 : (1) a reference scenario that assumes no specific global climate policy ( Reference ); (2) a global participation scenario ( Global Participation, 203 bmt case ), (3) a global participation scenario where abatement efforts in developing countries are delayed until 2050 ( Developing Countries Delayed ); and (4) a partial participation scenario where no abatement efforts occur in developing countries ( Developed Only ). Under scenarios 2, 3, and 4, developed countries (including the United States) are assumed to have reduced emissions by 50% below 1990 levels by 2050 (and held them there through 2100). This assumption is in the ballpark of U.S. reductions anticipated under S. 2191 . For developing countries, scenario 2 assumes their emissions reductions begin in 2025, with emissions returning to their 2015 levels, and with additional reductions beginning in 2035 with emissions returning to their 2000 levels, and are held there; scenario 3 assumes emissions reductions are delayed until 2050, at which point they return to 2000 levels; and scenario 4 assumes developing country emissions are not stabilized at all. The climate effects of these scenarios as simulated by MIT IGSM replication of the three AO GCMs identified above is shown in Figure 11 . As indicated by the red line, the impact of S. 2191 , combined with that of the other developed countries (all of which have ratified the Kyoto Protocol), is to reduce by 0.5 degrees C the projected 3.5 degrees C to 4.5 degrees C increase in global mean temperatures suggested by the simulations. If the United States chose not to reduce, the impact would be to move the red, green, and blue lines closer to the reference case line. With respect to the red line, it should be noted that, in 2000, the United States' greenhouse gas emissions were about 40% of the developed world's total emissions. In terms of the effect of any U.S. reductions on global mean temperatures, that is about all that can be said in isolation. As noted by MIT: ...it is not possible to connect specific U.S. policy targets with a particular global concentration or temperature target, and therefore the avoided damages, because any climate gains depend on efforts in the rest of the world.... If a cooperative solution is at all possible, therefore, a major strategic consideration in setting U.S. policy targets should be their value in leading other major countries to take on similar efforts. Instead, S. 2191 's climate-related environmental benefit must be considered in a global context and the desire to engage the developing world in the reduction effort. It is in this context that the United States and other developed countries agreed both to reduce their own emissions to help stabilize atmospheric concentrations of greenhouse gases and to take the lead in reducing greenhouse gases when they ratified the 1992 United Nations Framework Convention on Climate Change (UNFCCC). This global context raises two issues for S. 2191 : (1) whether S. 2191 ' s greenhouse gas reduction program and other provisions would be considered sufficiently credible by developing countries so that schemes for including them in future international agreements become more likely, and (2) whether S. 2191 ' s reductions meet U.S. commitments to stabilization under the UNFCCC and occur in a timely fashion so that global stabilization may occur at an acceptable level. <6.3.2. Non-Climate Change Air Quality Benefits> As noted earlier, only the EPA/IPM study included any estimates of emission reductions from non-greenhouse gas air pollutants. Only two pollutants were analyzed, and the resulting estimates reflect short-term interactions between S. 2191 and existing cap and trade programs. However, it should be noted that values have been assigned to these pollutants from time to time. For example, in the notice of proposed rulemaking for the new average fuel economy standard, the Department of Transportation assigned emission damage costs of $3,900 a short ton for nitrogen oxides, $16,000 a short ton for sulfur dioxide, and $164,000 a short ton for particulate matter all pollutants that are also emitted from coal-fired generating facilities. This is an incomplete set of pollutants that would be reduced by S. 2191 . Other benefits may occur from reductions of pollutants such as mercury and carbon monoxide. <6.3.3. Impact on Behavior> The impact of any price increases from S. 2191 on households, industries, and businesses would depend on their responsiveness to the price signal, the distribution of safety net funds under S. 2191 , and the impact of various other provisions of the bill that encourage, or could be used to encourage, conservation and new technology development. Simple attempts by some presentations to break down the cost by industrial sector or by state "should be viewed with attentive skepticism" for at least two reasons. First, baseline forecasts are even less accurate at a sector level than they are at an aggregate national level. As noted by Winebrake and Sakva, sector level baseline forecasts have significantly higher errors compared with aggregate estimates, nor have sector estimates improved over the past two decades: We find that low errors for total energy consumption are concealing much larger sectoral errors that cancel each other out when aggregated. For example, 5-year forecasts made between 1982 and 1998 demonstrate a mean percentage error for total energy consumption of 0.1%. Yet, this hides the fact that the industrial sector was overestimated by an average of 5.9%, and the transportation sector was underestimated by an average of 4.5% We also find no evidence that forecasts within each sector have improved over the two decades studied here. Second, particularly with respect to industry, the effect of S. 2191 is likely to be very site-specific, particularly as the primary impact will be indirect in terms of added energy costs, not direct compliance costs. An industry-by-industry approach masks the interplay of companies that would be affected differently by S. 2191 . Most industries face a competitive market (sometimes international in scope) both in terms of producers of the same products and producers of substitute products. Also, in some cases, an industry may face a fairly elastic demand for its product. Thus, most industries are price sensitive, and therefore any increase in manufacturing costs hurts the competitiveness of a firm. This complex situation is further complicated for energy-intensive industries in the case of S. 2191 as competitors within the same industry may experience different energy price increases (particularly for electric power), depending on their individual energy needs and power arrangements. Thus individual facilities within the same industry will be affected differently by S. 2191 and other unforeseen events in the future. For example, an aluminum plant receiving power from a hydro-electric facility may not be affected the same way as a similar plant with a power contract with a coal-fired power supplier. This differential effect on individual companies under S. 2191 could have several potential impacts. First, as noted above, it may affect the competitive balance of specific facilities in the United States. Second, investment decisions by industries could be affected, particularly with respect to technology. New, more efficient technology is emerging for some processes. The combination of current price signals being sent from the energy markets and potential ones from S. 2191 could speed their development. If commercialized, new technology would reduce the impact of S. 2191 and, indeed, improve competitiveness. Not surprisingly, none of the cases presented here have sufficient industry sector detail to examine this possibility, nor did any attempt to develop proxies to explore the possibilities for industrial technology over the next 40 years. S. 2191 attempts to ameliorate these effects somewhat by providing a subsidy for such industries facing international competitiveness issues. The degree to which the subsidy could address the issue was not examined by any of the cases presented here. Likewise, the sufficiency of the funds was not examined. Interestingly, such an approach to exposed industry has some parallels to recommendations that have been made with respect to carbon intensive industries in Europe facing reduction requirements and increased fuel cost from the EU's Kyoto Protocol, and post-Kyoto commitments. For example, one such recommendation by the UK Carbon Trust suggested the following: For a very small number of carbon-intensive, internationally exposed activities headed by steel and cement production, governments should establish a transitional 'compensating rate of free allocation' on an activity-specific basis, based upon the likely degree of cost pass-through given international trade conditions. The scale of free allocation to electricity-intensive activities in the EU-ETS (notably pulp and paper) should also take account of their electricity consumption, whilst manufacturing of fertilisers and basic chemicals might benefit from being brought into the EU-ETS on a similar basis. Together with aluminium smelting these constitute four trade-exposed electricity-intensive activities for which additional measures, linked to redistribution of auction revenues or equivalent 'downstream' allocation of electricity-related allowances, could be considered.... However, focused measures to facilitate direct, long-term investment in low carbon electricity generation may offer the best long-term solution. For households, the interplay of price signals, conservation, and regulations is difficult to separate in the CGE models, such as ADAGE, IGEM, and EPPA. NEMS does break down the residential sector into both residential energy consumption and residential prices by fuel. However, any estimates from such a breakdown can only be considered illustrative at best. For example, the CATF/NEMS analysis illustrates that if S. 2191 results in only a moderate increase in electricity and natural gas prices, then households could, on average, respond with sufficient conservation and efficiency improvements to overcome the projected price increases and reduce their monthly bill compared with business as usual levels. If allowance prices are higher, this become more difficult. An effort by Keohane and Goldmark to estimate the monthly increase in residential electric bills based on MIT/EPPA's higher allowance prices resulted in a 6% increase in those bills in 2030. Impacts on residential monthly natural gas bills would follow a similar pattern. The CATF/NEMS analysis indicates that an aggressive demand response by consumers almost eliminates the projected modest increase in natural gas prices. In contrast, Keohane and Goldmark calculations based on the higher allowance prices of the MIT/EPPA analysis result in a 14% increase in monthly natural gas bills in 2030. As with the energy-intensive industries discussed above, S. 2191 attempts to ameliorate the impact of projected energy price increases for low- and middle-income households by providing funds for states to provide electricity and natural gas impact assistance. The EIA/NEMS analysis breaks out the estimated impact of the electricity impact assistance funds in its calculation of household impacts. Assuming the value of the allowances allocated would be passed on to all consumers not just low-income EIA/NEMS estimates the reduction at one-half cent per kilowatthour (KWH) or about a 5% reduction in rates. If the money were directed toward low-income consumers, the impact would be greater. Including the effects of the impact assistance, EIA/NEMS estimates the average monthly household energy bill (excluding transportation) under S. 2191 would increase about $3 a month in 2020, rising to about $6 a month in 2030. Overall, EIA/NEMS estimates that the Consumer Price Index (CPI) for energy in 2030 would be 18% higher for residential consumers and 29% higher for industrial consumers than basecase levels. To put these potential increased costs into context, EIA/NEMS compared its estimated incremental consumer and industrial energy prices increases under S. 2191 with those of the past 5 years. As indicated in Figure 12 and stated by EIA/NEMS, "if measured from 2008 energy prices, it takes 22 years in the S. 2191 Core Case to reach the same percentage change that current energy prices have increased from 2003 to 2008." <7. Conclusion> This report examines six studies that project the costs of S. 2191 to 2030 or 2050. It is difficult (and some would consider it unwise) to project costs up to the year 2030, much less beyond. The already tenuous assumption that current regulatory standards will remain constant becomes more unrealistic, and other unforeseen events (such as technological breakthroughs) loom as critical issues which cannot be modeled. Hence, long-term cost projections are at best speculative, and should be viewed with attentive skepticism . In the words of the late Dr. Lincoln Moses, the first Administrator of the Energy Information Administration: "There are no facts about the future." Models cannot predict the future, but they can indicate the sensitivity of a program's provisions to varying economic, technological, and behavioral assumptions that may assist policymakers in designing a greenhouse gas reduction strategy. The various cases examined here do provide some important insights on the costs and benefits of S. 2191 and its many provisions. First, if enacted, the ultimate cost of S. 2191 would be determined by the response of the economy to the technological challenges presented by the bill. The bill provides numerous price, research and development, deployment, and regulatory incentives for technology innovation. The potential for new technology to reduce the costs of S. 2191 is not fully analyzed by any of the cases examined, nor can it be. The process of technology development and dissemination is not sufficiently understood at the current time for models to replicate with any long-term confidence. In the same vein, it is difficult to determine whether the various incentives provided by S. 2191 are directed in the most optimal manner. Second, in some ways, the interplay between nuclear power, renewables, natural gas, and coal-fired capacity with CCS among the cases is a proxy for the need for a low-carbon source of electric generating capacity in the mid- to long-term. A considerable amount of low-carbon generation will have to be built under S. 2191 in order to meet the reduction requirement. The cases presented here do not agree on the amount of new generating capacity necessary under S. 2191 or the mix of fuels and technologies that would be employed. The estimated amount of capacity constructed depends on the cases' assumptions about the need for new capacity and replacement/retirement of existing capacity under S. 2191 , along with consumer demand response to the rising prices and incentives contained in S. 2191 . Third, the cases suggest that the CCS bonus allowance allocation under S. 2191 is effective in encouraging deployment of CCS, accelerating development by 5-10 years. However, the cases disagree on whether the bonus amount provided by S. 2191 is sufficient, or needs to be extended additional years. Fourth, the cases generally indicate that offsets could be a valuable tool for covered entities not only to potentially reduce costs, but perhaps more importantly, to buy time to further develop new, more efficient technologies. The availability of offsets could be complemented by the bill's provisions permitting banking, allowing companies more time to develop long-term investment and strategic plans, and to pursue technology development. Cost could be lowered further by allowing greater availability of offsets and international credits and with a broader definition of eligible international credits. A more direct path for permitting international credits from mechanisms such as the CDM would also reduce one of the more important cost uncertainties revealed by the cases' varying interpretations of international credit eligibility requirements and their projected price. Fifth, the Carbon Market Efficiency Board could have an important effect on the cost of the program through its power to increase the availability of offsets and international credits. The cases generally do not consider the Board in their analyses, however, one can infer from the cases' results that the most important power that the Board may have is the ability to increase the availability of domestic offsets and international credits (although not the authority to change the eligibility requirements for domestic offsets and international credits). In this sense, the Board's powers could mesh with the previous insight about the importance of offsets and banking to the cost-effectiveness of S. 2191 . However, the Board is primarily designed to deal with short-term volatility due to episodic events in the allowance market and has only short-term powers. Whether it could coordinate a longer term strategy, if necessary, with its proposed authority is not known. Sixth, the Low Carbon Fuel Standard could significantly raise fuel prices and limit supply. The effects will depend on what fuels are included in the LCFS, the level of emissions reductions achieved by alternatives, and the ability of suppliers to produce those alternatives. If plug-in hybrid vehicles or large amounts of cellulosic biofuel are available early, or if certain fuels such as aviation fuel are excluded from the mandate, the costs could be lower. Only one case provided any analysis of the LCFS. Seventh, S. 2191 ' s climate-related environmental benefit is best considered in a global context and the desire to engage the developing world in the reduction effort. It is in this context that the United States and other developed countries agreed both to reduce their own emissions to help stabilize atmospheric concentrations of greenhouse gases and to take the lead in reducing greenhouse gases when they ratified the 1992 United Nations Framework Convention on Climate Change (UNFCCC). This global scope raises two issues for S. 2191 : (1) whether S. 2191 ' s greenhouse gas reduction program and other provisions would be considered sufficiently credible by developing countries so that schemes for including them in future international agreements become more likely, and (2) whether S. 2191 ' s reductions meet U.S. commitments to stabilization under the UNFCCC and occur in a timely fashion so that global stabilization may occur at an acceptable level.

This report examines six studies that project the costs of S. 2191 (S. 3036) to 2030 or 2050. It is difficult to project costs up to the year 2030, much less beyond. The already tenuous assumption that regulatory standards will remain constant becomes more unrealistic, and other unforeseen events loom as critical issues which cannot be modeled. Long-term cost projections are at best speculative, and should be viewed with attentive skepticism. Despite models' inability to predict the future, cases examined here do provide insights on the costs and benefits of S. 2191. First, the ultimate cost of S. 2191 would be determined by the response of the economy to the technological challenges presented by the bill. The potential for technology to reduce S. 2191's costs is not fully analyzed by any of the cases, nor can it be. Technology development is not sufficiently understood currently for models to replicate with confidence. Likewise, it is difficult to determine if available incentives are directed in an optimal manner. The cases suggest that S. 2191's Carbon Capture and Storage (CCS) bonus allowances would encourage deployment of CCS, accelerating development by 5-10 years. Second, a considerable amount of low-carbon generating capacity will have to be built under S. 2191 in order to meet the reduction requirement. How much capacity will be necessary depends on new and replacement capacity needs, along with consumer demand response to rising prices and incentives contained in S. 2191. Third, offsets could be a valuable tool not only to potentially reduce costs, but also to buy time to permit further development of new, more efficient technologies. Cost could be lowered further by greater availability of offsets and international credits and with a broader definition of eligible international credits. Fourth, the Carbon Market Efficiency Board could have an important effect on the cost of S. 2191 through its power to extend the availability of offsets and international credits. In this sense, the Board's powers could mesh with the previous insight about the potential effect of offsets on the bill's overall costs. Fifth, the Low Carbon Fuel Standard could significantly raise fuel prices and limit supply. The effects will depend on what fuels are included, the emissions reductions achieved by alternatives, and the ability to produce those alternatives. Finally, S. 2191's climate-related benefit is best considered in a global context and the desire to engage the developing world in the reduction effort. The United States and other developed countries agreed both to reduce their own emissions to help stabilize atmospheric concentrations of greenhouse gases (GHGs) and to take the lead in reducing GHGs when they ratified the United Nations Framework Convention on Climate Change (UNFCCC). This context raises two issues for S. 2191: (1) whether S. 2191's GHG program would be considered sufficiently credible by developing countries so that schemes for including them in future international agreements become more likely, and (2) whether S. 2191's reductions meet U.S. commitments under the UNFCCC.

<1. Most Recent Developments> On November 7, 2003, the House passed the conference report on H.R. 1588 ,the FY2004 DOD authorization, by a vote of 362 to 40, after the conference report was filed earlyThursday morning. The Senate passed the bill by 95 to 3 on November 12. On November 24, thePresident signed the bill ( P.L. 108-136 ). Compromises were reached on the main issues that had heldup the conference for several months: Buy American provisions, the Air Force lease of BoeingKC767 aircraft, a new National Security Personnel System, concurrent receipt, and TRICARE fornon-deployed reservists. The conference version ( H.Rept. 108-283 ) of H.R. 2658 , the FY2004Department of Defense (DOD) appropriations bill, provided $368.7 billion in funding. It passed theHouse on September 23, 2003, and the Senate on the following day, in both cases quickly and withlittle debate. On September 30, 2003, the President signed the bill into law ( P.L. 108-87 ). The FY2004 DOD Authorization Act included several contentious issues, which were settledonly after long negotiations. On domestic preference restrictions in the Buy American Act and theBerry Amendment, the DOD authorization added provisions to assess the U.S. defense industrialbase and the extent of U.S. reliance on foreign suppliers but dropped proposals to require DOD topurchase certain items only from American suppliers. In the case of the tanker lease, DOD agreedto a proposal by Senator Warner to lease 20 and buy 80 Boeing KC767 tankers rather than lease 100aircraft, a proposal less costly than the original lease but more costly than a straight multiyear buy. The fate of the deal remains uncertain in light of Boeing's recent firing of high-level officials forimproprieties and an ongoing investigation by the DOD Inspector General. Compromises were also brokered on other contentious issues on which the Administrationhad threatened a veto. The Administration agreed to a new benefit that provides concurrent receiptof military retirement and disability payments to all military retirees with disability ratings of 50%or higher as well as an expansion of those eligible under the "Purple Hearts Plus" program enactedlast year that provides benefits to military retirees with combat or combat-related disabilities. TheAdministration also agreed to a 15-month pilot program to offer access to TRICARE tonon-deployed reservists who are unemployed or do not qualify for health benefits offered by theiremployer. H.R. 1588 also authorizes the Secretary of Defense to develop a new NationalSecurity Personnel System for DOD's civilian employees, gives DOD special exemptions to certainenvironmental statutes, and lifts the current ban on development of low-yield nuclear weapons. Both the House and Senate versions of H.R. 1588 , the authorization bill, provide$400.5 billion for national defense programs, about $1.5 billion above the request of $399.7 billionthat the Administration submitted in February. The authorization covers not only defense programsfunded in the defense appropriations bill but also programs funded in the military construction,energy and water, and some other appropriations measures. The FY2004 DOD appropriations bill provides a total of $368.7 billion for the defenseprograms it covers, $500 million less than the $369.2 billion that was included in both the House andSenate versions. The total in the conference agreement is slightly below the amounts provided fordefense by the budget committees under Section 302(b) allocations of the Congressional Budget Actand $3.1 billion below the request. This decrease freed up the same amount for other appropriationsbills while staying within the cap on discretionary spending established by the FY2004 budgetresolution ( H.Con.Res. 95 ). Final funding for DOD could also be affected by a $1.8billion rescission included in the conference version of the FY2004 Omnibus Appropriations bill( H.R. 2673 ) that was passed by the House on December 8 but is unlikely to beconsidered by the Senate until January 2004. The final version of DOD's FY2004 appropriations cushioned the programmatic impact ofthe $3.5 billion cut to the request by making an offsetting rescission of $3.6 billion from the $62.6billion in FY2003 supplemental appropriations that Congress approved in April. Under budgetscoring rules, rescissions are counted as a credit in the year when they are enacted, even though prioryear monies -- in this case, FY2003 -- are cut. This allowed the appropriators to meet their FY2004targets without reducing funding for FY2004 programs by $3.5 billion. <2. Major Issues in the FY2004 DOD Authorization Act> After a conference that spanned over five months, the conferees reached agreement and fileda report on November 7, 2003, on H.R. 1588 , the FY2004 DOD Authorization Act( H.Rept. 108-354 ). The bill was passed by the House by a vote of 362 to 40 on that same day andby the Senate by a vote of 95 to 3 on November 12, the following week. The President signed thebill on November 24, 2003 ( P.L. 108-136 ). On May 22, the House and the Senate passed their respective versions of the FY2004 DODAuthorization bills after several days of floor debate. The House version, H.R. 1588 ,passed by 361 to 68. Although the Senate passed its version, S. 1050 , by 98 to 1 on thesame date, the Senate adopted a unanimous consent agreement on the next day providing forconsideration of several specific amendments. On June 4 after the Memorial Day recess, the Senateadopted amendments on concurrent receipt and expedited immigration approval for selectedreservists and their families during wartime and rejected an amendment to cancel the 2005 round ofbase closures before passing the bill again by voice vote and appointing its conferees (see Table1A ). (1) Debate in the Housetook place on May 20 and May 21, and in the Senate on May 19, 20, 21, 22, and June 4, 2003. On May 13, the Senate Armed Services Committee (SASC) reported S. 1050 , after completing markup on May 9 ( S.Rept. 108-46 ). The bill as reported did not include the DODproposal to redesign its civilian personnel system. The House Armed Services Committee (HASC)reported its bill on May 16 after completing markup on May 14 ( H.Rept. 108-106 ). On May 21, theHouse adopted a rule ( H.Res. 245 ) that limited general debate to two hours andamendments to those specified in the rule. The Senate rule required that all amendments beconsidered relevant by the Parliamentarian. The House bill included much of DOD's legislativeproposal for a new civilian personnel system as initially marked up by the House GovernmentReform Committee ( H.R. 1836 ). (2) Table 1A. Status of FY2004 Defense Authorization: H.R.1588 and S. 1050 a. The Senate initially passed S. 1050 by 98 to 1 on May 22, 2003, but then adopteda unanimous consent agreement on May 23, 2003, to continue debate on selectedamendments after the recess; see Congressional Record , p. S7115. Those amendments wereconsidered on June 4, and the bill was then passed by voice vote. The conference report reached compromises on seven major issues that held up the authorization bill for several months: Buy American restrictions proposed by the House and opposed by the Senateand the Administration; proposals to provide costly concurrent receipt of military retirement andVeterans Administration (VA) disability benefits; proposals to allow the Air Force to initiate acquisition of a $29 billion programto lease and buy 100 Boeing KC767 tanker airplanes; fashioning of the new National Security Personnel System requested byDOD; expanding access to DOD's TRICARE health system to non-deployedreservists; exempting DOD from certain environmental statutes;and changing current restrictions on research on low-yield nuclearweapons. The compromises reached are described below. Details on other conference action, includingRDT&E and weapon system funding, will be included in a later update. <2.1. Buy American Restrictions(3)> In its request, the Administration proposed a series of changes to long-standing domesticpreference restrictions codified in the Buy American Act and the Berry Amendment in order to giveDOD additional flexibility to buy from foreign sources. Since 1933, the federal government hasbeen required in the Buy American Act to purchase from American producers unless the head of theagency finds that it is in the "public interest" to waive the restriction and purchase items from foreignsources. (4) For specific types of items -- food, clothing, tents, textiles, specialty metals and measuringtools -- the Berry Amendment requires that DOD buy from U.S. sources unless the purchases are insupport of combat operations outside the United States. (5) In the case of other items such as machine tools and ball bearings,DOD can buy from foreign sources if the foreign country is part of the U.S. national technology andindustrial base (defined as the United States and Canada), if it is in the "national security interestsof the United States," or if DOD would face unreasonable costs or delays. The Secretary of Defensehas waived these various domestic preference restrictions in certain circumstances. (6) This year's debate focused on the extent of DOD's waiver authorities in terms of both thecriteria and the items that could be covered. The Administration sought to widen circumstancespermitting waivers, whereas the House would have either required domestic purchase of additionalitems (such as machine tools) or made it more difficult for the Secretary of Defense to waive currentrestrictions. (7) Forexample, the House bill required DOD to identify and then buy from U.S. sources items consideredto be "critical" to the U.S. defense industrial base as well as assess the extent of U.S. dependence onforeign suppliers. The House version also would have prohibited DOD from purchasing fromforeign countries who had restricted sales of military goods or services because of U.S. operationsin Iraq, a provision that could have affected both France and Germany. The Secretary of Defense had signaled that the Administration would veto the bill if theHouse provisions were included. Concerned about the effects of these provisions on U.S. traderelations, Senator Warner requested the State Department, the U.S. Trade Representative, and OMBto address the potential effects of the legislation on trade relationships and cooperative defenserelationships. (8) Reflecting a compromise between the House's desire to expand protections for the defenseindustrial base and Senate's concerns about potential effects on U.S. trade relations, the conferenceversion dropped the new restrictions on certain items but required DOD to assess potential U.S.vulnerabilities. To meet Senate and Administration concerns about potential effects on U.S. traderelations, the conference bill stated that none of the provisions in this industrial base section wouldapply if the Secretary of Defense and Secretary of State determine that U.S. international agreementswould be violated. (9) To get a better understanding of the extent of DOD dependence on foreign sources or singledomestic sources for critical items or components of military systems, the Defense Department isto develop a "Military System Essential Item Breakout List" and identify where these items orcomponents are produced. DOD is to contract for a study that will define the criteria for "critical"and recommend items to be included on the list. To give additional support to domestic producers of critical items, the conference agreementestablishes a new Defense Industrial Base Capabilities Fund that DOD can use to provide incentivepayments to domestic contractors. No funds are specifically authorized (or appropriated) for thisfund in FY2004, however. Another new industrial base tool for DOD is authority to give preferencein source selection to domestic producers of machine tools or other capital assets used to makedefense goods. The bill also requires a study of the adequacy of U.S. producers in meeting defenseneeds for beryllium industrial base. (10) To protect U.S. trade relationships, the conference agreement also softened the House'sproposed prohibition on buying from countries who opposed U.S. actions in Iraq. Instead, theSecretary of Defense, in coordination with the Secretary of State, is to identify foreign countries whonow restrict military sales to the United States because of U.S. counterterrorism or militaryoperations; that list can be revised periodically. Even for those countries, DOD can purchase goodsif the department has a "compelling and urgent" need for the item. (11) Congress agreed tobroaden waivers to Berry Amendment restrictions on purchases of food, clothing, and similar itemsfrom combat operations only to include contingency operations as well. This issue is likely to resurface in the next year or two. By February 2005, DOD is requiredto complete an interim report that assesses which items are deemed essential and the extent of U.S.dependence on foreign sources for those items. At that point, the debate could revolve aroundwhether additional protections or incentives should be provided to domestic producers of thoseitems. (12) <2.2. Concurrent Receipt Adopted> Until recently, the Administration threatened to veto congressional proposals to provideconcurrent receipt of military retirement and VA disability benefits to military retirees because ofconcerns about the cost and the precedents for other benefit programs. Military retirees now mustreduce their military retirement on a dollar-for-dollar basis if they wish to receive tax-exemptdisability payments, a type of offset that is required in many benefit programs. The conference bill provides new benefits to military retirees with twenty or more years ofservice and disability ratings of 50% or higher. The conference bill also expands those who wouldbe eligible for special compensation under the "Purple Hearts Plus" program enacted last year forthose whose disabilities are due to combat or combat-related activities. The conference version wasreached when the Senate dropped its proposal for full concurrent receipt and the Administrationdropped its veto threat. In response to Administration concerns, the House had not included aconcurrent receipt in its version of the bill even though support among members was widespread. Eligibility Criteria and Phase-In of Benefit. Over200,000 military retirees are likely to qualify for the new concurrent receipt including militaryretirees with 20 years of service if they have disability ratings of 50% or above; have any disability ratings as long as they meet the criteria for a combat-relateddisability, popularly known as "Purple Hearts Plus;" are Guard and Reserve retirees who meet the criteria under "Purple HeartsPlus" if they have 20 or more years of "creditable" service, defined as 50 points for performing theirannual reserve duties; and are disability retirees whose payments exceed their retirement benefits had theyretired under regular retirement. The first phase of the new benefits are slated to go into effect on January 1, 2004, with fullconcurrent receipt for those eligible by December 31, 2013. (13) In the first year, monthly benefits for those eligible will be: $100 for those with a 50% disability rating; $125 for those with a 60% disability rating; $250 for those with a 70% disability rating; $350 for those with an 80% disability rating; $500 for those with a 90% disability rating; and $750 for those with an 100% disability rating. In the following year, those eligible would receive 10% of the difference between the benefit for theprevious year and the lesser of their monthly retirement benefit or their monthly disability payment. In each succeeding year, retirees will receive an additional 10% of that difference until the retireereceives the full amount of both disability payments and retirement benefits. Cost of New Benefit. CBO estimates that the newbenefit would cost $800 million in FY2004 and $22.1 billion over ten years in outlays for currentbeneficiaries. The annual cost would increase steadily to $2 billion by FY2008 and $3.5 billion by2013. (14) Although DOD does not need to include funds in its budget to cover the costs because the legislation createsa new entitlement program, the deficit would increase by annual outlays for current beneficiaries. Unlike current military retirement, H.R. 1588 does not require that DODprovide funds to cover the accrual cost of the new benefit for today's military personnel, a practicedesigned to capture fully the cost of military personnel. This means that general revenues wouldcover this cost rather than the Defense Department because DOD would not need to budget for thiscost. (15) New Commission on VA Benefits. H.R. 1588 also sets up a 13-member Veterans Disability Benefits Commission toevaluate and make recommendations about VA benefits for combat-related disabilities or deaths. The Commission is to report by February 2005, 15 months after enactment. (16) Prospect for Next Year. The concurrent receiptissue could well be revisited next year because of pressures from those not covered by the newbenefit -- i.e. those with disability ratings below 50% whose disability is not due to combat orcombat-related circumstances. Budget impacts would continue to be a concern. Those concernedwith the loss of DOD visibility of the full cost of military personnel that is part of the currentprovision could also press to require DOD to budget for the accrual cost of the benefit for its currentmilitary personnel. <2.3. Tanker Lease Compromise> Another controversial provision included in the FY2004 DOD Authorization conference islanguage that would allow the Air Force to proceed with a plan to lease 20 KC767 Boeing tankeraircraft and subsequently buy an additional 80 aircraft as proposed by the Senate Armed ServicesCommittee Chairman Warner in early September. (17) Signing of the contract has been held up because of questions ofimpropriety by two Boeing officials, Darlene Druyan, formerly in charge of Air Force acquisition,and Michael Sears, the Chief Financial Officer; Ms. Druyan is alleged to have discussed employmentopportunities with Boeing at a time when she was also negotiating the tanker deal. (18) In the past week, DeputySecretary of Defense Wolfowitz asked the DOD Inspector General to review this matter, and SenateArmed Services Committee Chairman Warner called for a broader review. (19) Although the conference bill authorizes the lease 20, buy 80 proposal, there continues to becontroversy between the House and Senate interpretation of what the language requires: a Housecolloquy between members says that the Air Force can use options included in the current contractand a Senate colloquy suggests that the Air Force must negotiate two new contracts, one for the leaseand one for the buy. (20) One contract could be implemented more quickly but could mean that the Air Force would payunnecessary costs associated with the lease. (21) The lease 20, buy 80 alternative differs from the Air Force's original unprecedented proposalto contract with Boeing to lease and then buy100 aircraft for a cost of $29 billion over a 15-yearperiod, including support costs. The Air Force finds leasing attractive because major funding wouldnot be required until 2006, and the bulk of the funding would not be needed until 2010-2017. TheAir Force argues that this approach would cause less disruption to current Air Force programs thanwould a traditional buy. In later years when the program would cost $2 billion to $3.7 billionannually, however, competition with other Air Force programs could be substantial. (22) It is not clear, however, whether the Air Force will be able to delay paying for the planes untildelivery as proposed by Under Secretary Wolfowitz in a letter to Senator Warner on November 5,2003. (23) In hisconfirmation hearing to be Deputy Under Secretary of Defense for Acquisition, Technology andLogistics, Michael Wynne suggested that the conference language may require that the Air Force payfor the aircraft when ordered rather than delaying payment by three years when the aircraft aredelivered. The Air Force has not identified how to fund the tanker within its current budget plans,which did not anticipate the tanker lease. This proposal has been controversial because leases are substantially more expensive thanbuying: the Air Force, CBO, CRS, and GAO all found that the lease would cost $5 billion to morethan $6 billion more than a multiyear buy of the aircraft, because the Air Force planned to rely ona special purpose entity to finance the deal and because congressional agencies and others havesuggested that the proposed lease did not meet the criteria for an operating lease. (24) Under the conference agreement that would allow the Air Force to lease 20 Boeing KC767aircraft and incrementally buy the remaining 80 aircraft, the Air Force still plans to delay the leasefunding until 2006 and the buy funding until 2008. (25) Although leasing 20 rather than 100 aircraft would be less costlythan the original proposal, the extent of the savings depends on how the Air Force implements theproposal. According to press reports, the Air Force now plans to use two contracts -- one for thelease and one for the buy -- costing a total of $18.3 billion in acquisition costs. That total would be$3.2 billion less than the previous $21.5 billion contract to lease and buy 100 aircraft but still $3.5billion more than CBO estimates a straight multiyear contract would cost. (26) In its scoring of the FY2004 DOD Authorization Act, CBO considers the new proposal tolease and then buy 20 aircraft to be a lease/purchase that would require that the Air Force provide$3.6 billion in budgetary authority in FY2004, although none is provided in the Act. Becausemembers did not raise a point of order under budget rules, however, the funding implied by the bill'slanguage was not challenged. (27) Although the conference reports includes language permitting incremental funding of themultiyear contract -- which would allow the Air Force to spread out the payments rather thanproviding the full amount for each year's buy as is required under standard acquisition rules -- it isnot clear whether the new language permits that. The Air Force has voiced concerns that thecompromise could jeopardize ongoing defense programs. <2.4. New Personnel System for DOD Civilians> As part of its April 10, 2003, bill proposal, the Defense Transformation for the 21st Century,the Defense Department requested broad authority to set up a new National Security PersonnelSystem (NSPS) governing its 735,000 civilian employees. DOD requested authority to develop anew personnel system that was "flexible" and "contemporary," allowing the Secretary of Defense todefine positions, set pay scales, establish hiring and firing rules, bargain with employees at thenational level, and set separate scales for rewarding senior level employees. Although DOD'sproposal did not include specifics, Under Secretary of Defense for Personnel and Readiness DavidChu stated that it intended to follow "best practices" for current personnel projects, including paybanding and the use of numerical ratings to link pay with job performance. (28) The chief issues raised about the DOD proposal were the nature of the proposed new system; the difficulties in designing an equitable performance rating system that wouldbe linked to pay; the appeals system for employees in case of disputes;and the level of bargaining between employees and DOD. DOD's proposal was debated within both the armed services and the governmental affairscommittees with concerns raised by both Members of Congress and government employee unionsabout the breadth of authority requested and the potential effects on government workers. Indefending new authority, others cited long-standing calls for reform of the civil service, the broadpersonnel management authorities granted to new Department of Homeland Security, and DOD'stwenty years of experience with alternative "pay for performance" systems for the 30,000 employeesin the national labs. The conference version of the FY2004 DOD authorization modified many of theAdministration provisions that were included in the House version of H.R. 1588 . TheSenate version of the FY2004 DOD Authorization bill did not include any provisions dealing with a new personnel system, but many of the provisions proposed by the Senate Governmental AffairsCommittee in S. 1166 , a bill to establish a National Security Personnel System, wereultimately adopted in the final version (see CRS Report RL31954 , Civil Service Reform: Analysisof the National Defense Authorization Act for FY2004 coordinated by Barbara Schwemle). (29) Phase-In Period, Collaboration, and Criteria for the New PersonnelSystem. Although H.R 1588 gives the Secretary of Defense broad discretion to setup the new system, DOD is required to develop its regulations jointly with the Director of the Officeof Personnel Management and to conform those regulations with criteria included in the law. Inaddition, any disputed parts of the new system could not go into effect until 90 days after theproposed system is presented for comment to labor organizations representing DOD's civilianemployees. During that period, labor organizations would have 30 days to review the proposal, DODwould have 30 days to resolve disputes, and Congress would be notified of remaining disputes 30days before implementation. (30) After this 90-day period, the new system could be put into placefor up to 300,000 DOD civilian employees but could not be expanded to the remaining employeesuntil DOD has a performance management system in place that meets criteria in the law. (31) In addition to being consistent with merit system principles and anti-discrimination laws,this new system to hire, assign, transfer, evaluate, and fire employees is required meet the followingcriteria: to be "fair, credible, and transparent;" to link employee performance to agency plans and include safeguards toensure fairness; to involve employees, supervisors and managers in the design, evaluation,and training for the new system; to include an "equitable method for appraising and compensatingemployees" in the pay-for-performance evaluation system. (32) In report language, the conferees calls on DOD to set up a pay-for-performance evaluationsystem that: groups employees into pay bands with upper and lower bounds based onposition responsibilities and types of work; sets up a performance rating system with rating periods and a feedbackprocess; includes a scoring system that is tied to salary changes and a review processthat addresses those failing to meet performance goals; and links individual performance factors to agency's goals and ensures scoringcomparability. Although this conference report language is not binding, it signals legislative intent. (33) In hearings, DOD policymakers stated that it intended to design a system like the pay banding system used by DOD'slaboratories for the past twenty years; the labs are, however, exempt from the new system until 2008and beyond that unless the new system gives them greater flexibility. (34) Details about the newpersonnel system are likely to emerge in the next year. (35) New Appeals Process and Labor Management RelationsSystems. As long as it complies with employment anti-discrimination laws, meritprinciples, and due process, DOD can set up a new, internal appeals process for handling disputesabout personnel actions. In designing this system, DOD is to consult with the Merit SystemProtection Board, the current government-wide appeals board. Although employees may appeal thedecisions of DOD's new internal board to the Merit System Protection Board (MSPB), thegovernment-wide board would only hear cases involving "arbitrary or capricious" actions, violationof due process, or those not supported by evidence. Decisions by that Board can be reviewed by acourt. (36) Jointly with the Director of the Office of Personnel Management and in collaboration withthe unions, DOD will also be able to develop its own labor management system under the newlaw. (37) This"collaborative issue-based approach to labor management relations" would go into effect 90 daysafter DOD provides a written description to unions. During that period, unions have 30 days toreview the proposed system, 30 days to discuss recommended changes, and 30 days of notificationto Congress of disputed areas. To resolve differences, either DOD or employee representatives canrequest help from the Federal Mediation and Conciliation Service. The new law provides for review of the proposed new system by an unspecified independentthird party. The authority of this new labor-management process appears to be broad because itsdecisions can " supercede all other collective bargaining agreements " in the department if theSecretary of Defense desires [italics added]. (38) Unless renewed, however, this new process would only be ineffect for a six-year period. This new system would also not be subject to the collective bargainingprocedures and deadlines that apply to other federal agencies. (39) DOD could also continue to bargain with employee unions and follow the statutoryprocedures and deadlines for collective bargaining affecting all other government agencies. (40) In another major change, H.R. 1588 gives DOD new authority to bargain at the national rather than the local leveland makes those decisions binding on all levels. Some critics have raised concerns about how localcircumstances will be taken into account in national decisions. These decisions could also bereviewed by an unspecified third party. H.R. 1588 appears to endorse two parallel systems of labor-managementrelations: one, a new "collaborative" system, and the other, a traditional collective bargaining systemas defined in current statute. The legislation does not specify what types of issues would be coveredor how responsibilities will be divided between these two systems. To the extent that the twosystems overlap, the law gives precedence to the new system. The new law appears to adopt asimilar approach in the case of appeals process for employee grievances, allowing DOD to set up itsown board but also permitting a review of those decisions by the Merit System Protection Board incertain circumstances. Funding Levels and Separation IncentiveAuthorities. Although increases for individual employees would be likely to varyfrom the current system, the new law calls on DOD to "the maximum extent practicable" to budgetthe same amount for civilian employees under the National Security Personnel System as would bethe case under the current system so that overall, employees are not "disadvantaged." (41) At the same time, the lawcalls on DOD to give civilian employees the same pay raises as are received by military personnel. As an additional workforce management tool, the law allows DOD to give separation incentives of$25,000 to up to 25,000 civilian employees annually for early retirement. (42) The budgetary implications of the new system are not obvious. It is also not clear whetherthese provisions would significantly limit DOD's current plans to transfer substantial numbers ofmilitary jobs to civilian personnel or contract employees. Other Civilian Personnel Changes. The new lawalso provides several new authorities that would be available to all federal agencies includingauthorizing pay for performance pilot projects; higher pay caps for Senior Executive Service employees;and $500 million for a new Human Capital Fund to reward exceptionalperformance. (43) The appropriators have only provided $1 million for this new fund in the final version of the FY2004Omnibus Appropriations Act currently awaiting final congressional action. <2.5. Environmental Exemptions for DOD> As it did last year, DOD requested that military readiness-related activities be exempted fromcertain provisions of five federal environmental laws, including the Clean Air Act, the EndangeredSpecies Act, the Marine Mammal Protection Act, the Solid Waste Disposal Act, and the "Superfund"law that governs cleanup of hazardous waste. This year, Congress proved to be receptive toproposals to modify DOD's responsibilities to protect endangered species and marine mammals, bothvery controversial provisions. H.R. 1588 also gives DOD new authority to usewetlands mitigation banks and modifies regulations governing Restoration Advisory Boards thatinform citizens about environmental cleanup. DOD has argued that compliance with environmental requirements significantly affectmilitary training, and hence readiness, while critics have questioned the extent of the impact andDOD's limited use of current waiver authorities. A recent GAO report found that environmentalrestrictions are only one of several factors, including urban growth and pollution, that affect DOD'sability to carry out training activities and that DOD continues to be unable to measure the impact ofenvironmental laws. (44) The debate centers on whether or to what extent DOD should be exempt from current environmentalstatutes. (45) Congressional Action on Endangered SpeciesAct. (46) Both the Senate and the House agreed that DOD needed additional authority to consider militarytraining requirements as well as wildlife protection in managing land on DOD installations. For thatreason, the new law permits DOD to substitute an Integrated Natural Resources Management Plan(INRMP), required under the Sikes Act, for a designation of lands as "Critical Habitat" under theEndangered Species Act, as a way to protect endangered species. (47) The authority to substitutea resource management plan for a critical habitat designation has been under dispute. Environmentalgroups are concerned that protection for endangered species may be weakened with this change. Under the Sikes Act, the INRMP, which guides the conservation, protection, andmanagement of fish and wildlife resources, is prepared by the Secretary of the military departmentin cooperation with the U.S. fish and Wildlife Service. The "use of military installations to ensurethe preparedness of the Armed Forces," or military readiness, however, takes precedence. (48) Under the EndangeredSpecies Act, once land has been designated as "critical habitat," federal agencies must "consult"regarding actions that would destroy or adversely affect those habitats or face penalties. The substitution is permitted only if the Secretary of the Interior determines in writing thatDOD's plan provides a "benefit for the species." (49) Critics have questioned, however, whether the criterion of"benefit to the species" is likely to be adequate and whether implementation of the plans can beenforced since the Sikes Act does not provide for suits by individuals or citizen groups. The finalversion also amends the Endangered Species Act rather than Title 10 of the U.S. Code which governsDOD activities, a choice that created concern among environmental groups because of the potentialprecedent for other exemptions. Other environmental interests opposed amending Title 10 becausedoing so may give the Secretary of Defense rather than the Secretary of Interior the primary role indetermining whether integrated management plans provide adequate protection. According to the Senate Armed Services Committee, portions of about 150 DOD bases couldbe designated as critical habitat were this exception not permitted. (50) The conference reportsuggests that the new language will "provide a balance between military training requirements andprotection of endangered or threatened species." (51) Congressional Action on the Marine Mammal ProtectionAct. The conference agreement adopts two of the Administration's proposedchanges to the Marine Mammal Protection Act, including new two-year exemption authority and anew definition of "harassment." Debate about the implications of both of these changes was heated. New Exemption Authority. Under a new provision,the Secretary of Defense, after consulting with the Secretary of Commerce and the Secretary of theInterior, could "exempt any action or category of actions" from compliance with the MarineMammal Protection Act for two years if the Secretary determines "it is necessary for nationaldefense." (52) At hisdiscretion and after consultation with the Commerce and Interior Departments, the Secretary ofDefense could renew such exemptions for additional two-year periods. The conference report suggested that this national security exemption parallels that includedin other environmental laws, while environmental interests argued that a "national defense"exemption is broader than that provided in other statutes. (53) DOD has not, in fact, used existing exemption authorities,arguing that the threshold was too high for most activities. Exemptions under the new law must bereported to the armed services committees. (54) New Definition of Harassment. The conferenceagreement also adopted the Administration proposal to use narrower definitions of harassment ofmarine mammals for DOD's military readiness and scientific activities of federal agencies than areapplied to other agencies. Under current law, the standard requires that activities be prohibited ifthey would have a "potential to injure or disturb" marine mammals. (55) The new language definesDOD's activities as "harassment" only if an act "injures or has the significant potential to injure" ordisturbs the activities of marine mammals by disrupting "natural behavior patterns"to a point wherethose patterns are "abandoned or significantly altered." [italics added] (56) To limit the applicationof the exemption, the Act defines readiness as training, combat operations, and testing, the definitionthat was included in the FY2003 DOD authorization. DOD had asked to broaden the application toinclude support activities. (57) In reaction to a recent court case that limited DOD's deployment of the low-frequencySURTASS sonar because of the potential impact on marine mammals, the FY2004 DODauthorization exempts DOD from complying with current standards for evaluating the impact onmarine mammals based on "specified geographical regions," or the "small numbers." DODcontended that these standards were inappropriate for marine mammals that migrate over broadexpanses of the ocean and that using a "negligible impact" standard would be a more scientific wayto make decisions rather than on the basis of the number of mammals affected. (58) Other Changes and Future Actions. Congressalso made other changes requested by the Administration, including allowing DOD purchase creditsfrom a mitigation bank to offset those lost on DOD installations, and exempting DOD's RestorationAdvisory Boards from issuing financial disclosure statements and from providing notice of theiractivities in the Federal Register. (59) These boards are the primary avenue through which localcommunities learn about cleanup decisions on military lands. The issue of when and where to carve out exemptions from environmental statutes for DODcan be expected to re-surface next year as the Administration continues its efforts to provide specialtreatment for the department to protect DOD's readiness activities. While Congress did not approveDOD's requested exemptions from other environmental laws, it did require DOD to report byJanuary 31, 2004, on how environmental statutes and residential development surrounding militarybases affect readiness activities. (60) <2.6. TRICARE For Non-Deployed Reservists> Because of the large number of reservists who have been in Afghanistan, Iraq, and the UnitedStates, Congress considered a number of ways to expand current benefits and decided to approve ademonstration project to provide access to DOD's TRICARE health care system to certainnon-deployed reservists. Under current law and DOD policy, reservists become eligible forTRICARE once they are on active duty. The FY2004 DOD Authorization Act offers access toTRICARE to non-deployed reservists who receive unemployment compensation or who are noteligible for coverage offered by an employer. Reservists would be required to pay a premium set at28% of the value of the actuarial cost of the plan as is currently required for civilian employees inthe government's Federal Employees Health Benefits (FEHB) insurance plan. (61) The conference versionof the FY2004 DOD authorization bill provides access to this targeted version of the new benefitthrough December 31, 2004, three months longer than is provided in the FY2004 supplemental. (62) According to the report, CBO estimates that this demonstration project would cost about$200 million annually compared to the $2 billion annual cost of providing access to all non-deployedreservists that was proposed in the Senate version of the bill. Dropped in conference, the Senateproposal had triggered a veto threat from the Administration. The conferees set a ceiling of $400million on the cost of the demonstration project. (63) To help Congress assess the health care needs of reservists and their families, the conferencereport requires that GAO conduct an evaluation by May 1, 2004. (64) With significant numbersof reservists likely to be needed in the next few years for the occupation of Afghanistan and Iraq,proposals to expand benefits for reservists are likely to be revisited next year. <2.7. Lifting the Ban on Research on Low-Yield Nuclear Weapons> The conferees adopted the Senate version of this change to a ban on R&D of low-yieldnuclear weapons that was enacted in 1989. Rather than modifying the ban to apply only to R&D atthe engineering and development stage, H.R. 1588 repeals the ban on R&D but requiresspecific congressional authorization for the Department of Energy (which funds this program) toproceed to engineering development of low-yield nuclear weapons or a nuclear earth penetratingweapon (see discussion in section on nuclear weapons for more detail). In the conference version of the Energy and Water appropriations bill, funding for the RobustNuclear Earth Penetrator was reduced from the $15 million request to $7.5 million; funding for theAdvanced Concepts Initiative, which would fund concept studies on low-yield nuclear weapons, wasset at $6 million. (65) <2.8. Maintaining Current Levels of Imminent Danger Pay and Family Separation Allowance> One less controversial provision was included in H.R. 1588 : maintaining thehigher levels of imminent danger pay and family separation allowance adopted in last year'ssupplemental. The DOD Authorization Act adopts the higher levels for all eligible service membersthrough December 31, 2004. The FY2004 Emergency Supplemental continues the higher ratesthrough September 30, 2003. At one point, the Administration had proposed alternative ways tomaintain the higher levels, but these proposals were not adopted. <3. Major Action On FY2004 DOD Appropriations Bills> The FY2004 DOD Appropriations Act was signed into law ( P.L. 108-87 ) on September 30,2003, at the end of the fiscal year. Conferees resolved their issues, and the bill was passed onSeptember 23 by the House and September 24 by the Senate after the two-day hiatus in businesscaused by Hurricane Isabel. Differences in funding levels were resolved. Table 1B. Status of FY2004 Defense Appropriations: H.R.2658 and S. 1382 a. Full committee markup was completed on June 26, 2003; the report was filed on July 2, 2003. b. Full committee markup was completed on July 9, 2003; the report was filed on July 10, 2003. <3.1. Major Funding In FY2004 DOD Appropriations Act> The major changes to the Administration's request are shown in Table 2. Further details onthe appropriation conference will be provided in a later update. Table 2. FY2004 DOD Appropriations: CongressionalAction (in billions of dollars) Sources : H.Rept. 108-187 ; S.Rept. 108-87 , H.Rept. 108-283 . Notes: CRS adjusted title totals for both FY2003 and FY2004 to allocate funding in generalprovisions. [ ] Square brackets indicate the total amount of funding for general provisions that isallocated by title in the table and is not added into the total. For FY2004, see H.R. 2658 and S. 1382 . For FY2003, see P.L. 107-248 . a. Of the $4.0 billion decrease for general provisions in the House version of the FY2004 DODappropriations act, H.R. 2658 allocates $2.0 billion to O&M appropriations, and$2 billion is a rescission to the $15.7 billion provided in the Iraq Freedom Fund for latercosts of the war and occupation in the FY2003 supplemental. According to scoring rules, thatdecrease counts as a reduction to FY2004 appropriations. Of the $3.4 billion in reductionsfrom general provisions in S. 1382 , $3.2 billion is from a rescission to the IraqFreedom Fund. About $1.8 billion of the deceases in FY2003 that were made in generalprovisions affected O&M appropriations. CRS will allocate these general provisions in alater update. b. The Iraq Freedom Fund is a flexible account set up to cover later costs of the war, which couldnot be allocated to specific appropriation accounts. c. Difference is rounding: total funding is $369.193 billion in the House bill and $3.143 billion inthe Senate bill. Funding Prohibition And Restrictions On Total InformationAwareness (Terrorist Information Awareness) R&D Program. In the FY2004 DODAppropriations Act, the conferees dealt with the controversial Total Information Awareness(renamed Terrorism Information Awareness) or TIA program, which was, until recently, run byretired Admiral Poindexter in the Defense Advanced Research Projects Agency (DARPA). Conferees transferred unspecified components of the program's classified venues where research cancontinue but would be subject to safeguards in the National Foreign Intelligence Program that restrictthe sharing of information on U.S. citizens. Less controversial components of the program, such asmachine translation of languages, remain in DARPA. The components that were transferred and theamount of funding remaining cannot be determined because details are in a classified annex. (66) This agreement was a compromise between Senate action that prohibited funding for R&Dfor the controversial Total Information Awareness R&D program and the Administration's objectionsto cutoff of funding. The TIA program is designed to develop a system to collect and analyze a wideassortment of information to detect potential terrorists, and included various restrictions onimplementation or deployment of TIA programs similar to those included in the House version ofthe FY2004 DOD Appropriations Act, H.R. 2658 . The Administration objected to theSenate cutoff of funding. (67) Similar restrictions on deployment were originally included in the ConsolidatedAppropriations Resolution of FY2003 ( P.L. 108-7 ). (68) On May 20, 2003, the Defense Advanced Research ProjectsAgency (DARPA) avoided a cutoff in funding for TIA by submitting the report required by P.L.108-7 . On August 29, 2003, retired Admiral Poindexter, the head of the program, resigned, partlyin response to recent controversy about another TIA component, FutureMAP, which was designedto set up a "market" to collect predictions about potential terrorist or terrorist-related events. (69) That program wascancelled in response to public and congressional concerns. <3.2. Military Construction Appropriations Bills> Several months elapsed between the summer passage of H.R. 2559 , the FY2004military construction appropriations bill, and final conference action on November 22, 2003, anuncharacteristic delay for this bill ( P.L. 108-132 ). The conference bill provides $9.3 billion, about$100 million more than the request. The long hiatus between House and Senate action and the final conference reflectedcontroversy about funding for overseas bases in Europe and Korea, which was opposed by theSenate because of uncertainties about their future. This issue was finally resolved by theestablishment of an eight-member congressional commission to review overseas base structure andreport back to Congress by December 31, 2004. (70) The Administration had signaled earlier that it plans to proposesubstantial changes in overseas bases as part of efforts to "reduce the footprint" of the U.S. militaryoverseas. (71) With initialaction on the domestic base closure process kicking off next year, debate about the future of overseasbases can be expected next year, perhaps even before the new report. <4. Overview of Administration Request and Budget Trends> On February 3, 2003, the Administration submitted its FY2004 budget request to Congress. The Administration proposed $399.7 billion for the national defense budget function, about $7billion above the estimated FY2003 level. (Note: This includes in the FY2003 total $10 billion thatCongress appropriated for DOD in the FY2003 Consolidated Appropriations Act; most OMB andDOD tables prepared for the February budget release do not include these additional funds. (72) This does not include inthe FY2003 level, however, $62.6 billion in supplemental defense appropriations that Congressapproved in April for the Iraq war and other costs. (73) The FY2004 increase is in addition to substantial increases in FY2002 and FY2003. The newrequest is more than $100 billion above the FY1999 level for defense spending, and it represents anincrease over five years of 20% in inflation-adjusted constant FY2004 dollars. The FY2004 defenserequest is almost 25% higher in real terms than the budget in FY1996 when DOD's drawdown inspending and military personnel after the end of the Cold War was completed. The Administration is proposing continued increases of about $20 billion annually in thedefense budget for the next five years, which would increase national defense budget authority to$480 billion by FY2008. Table 3 shows the ten-year FY1999-FY2008 trend in defense spendingunder the Administration's plan both for the national defense budget function and for the Departmentof Defense budget. (74) Of the $399.7 billion requested for national defense in FY2004, $370.6 billion is forprograms covered by the defense appropriations bill, $9.0 billion by the military constructionappropriations bill, $17.3 billion for Department of Energy defense-related activities funded in theenergy and water appropriations bill, and the remaining $2.8 billion in other appropriations bills. Table 3. National Defense Budget Function and DOD Budget, FY1999-FY2008, AdministrationProjections (current and constant FY2004 dollars in billions) Source: Office of Management and Budget, F2004 Historical Tables, and FY2003 Consolidated Appropriations Resolution ( P.L. 108-11 ). a. Includes $10 billion in budget authority appropriated to DOD in the FY2003 Consolidated Appropriations Resolution (see P.L. 108-11 ) but not theoutlay effects of that addition because OMB has not re-estimated outlays. Does not include $62.6 billion in FY2003 supplemental appropriationsfor defense provided in H.R. 1559 , P.L. 108-11 . <4.1. Annual Growth for DOD Slows In Later Years in FY2004 Budget Resolution> The conference agreement on the FY2004 congressional budget resolution( H.Con.Res. 95 , H.Rept. 108-71 ), which was passed by both houses onApril 11, just before the April recess, endorses the Administration's proposed growthof $20 billion annually for defense over the next five years (see Table 4 ). Over thefollowing five years, however, defense would grow by about $10 billion annually;the Administration does not project beyond FY2008. The chief issue in this year'sbudget resolution was the amount to be provided for tax cuts. Table 4. Status of FY2004 Budget Resolution(H.Con.Res. 95, S.Con.Res. 23) Note: Senate substituted S.Con.Res. 23 into H.Con.Res. 95 afterpassage. a. Budget resolutions are only marked up in full committee. b. Budget resolutions guide the action of the authorizing and appropriatingcommittees but are not signed into law by the President. Although there has been considerable congressional support for increases in defense, some observers have questioned whether increases can be sustained in thefuture because of high federal budget deficits and the dramatic increases in costsassociated with the retirement of the baby boom generation. (75) TheFY2004 budget resolution projects a 40% increase spending on entitlement programsby FY2008 and an 80% increase by FY2013. (76) Table 5. FY2004 Budget Resolution: National Defense Request and Congressional Action (billions of dollars) Source: CRS calculations based on OMB, FY2004 Historical Tables, and DOD, Office of the Secretary of Defense, Comptroller, Briefing, FY2004Defense Budget (February 6, 2003); Conference Report on FY2004 Budget Resolution, H.Rept. 108-71 , and House report on H. Con. Res. 95, H.Rept.108-71 , p. 6. a. Administration request does not reflect outlays from the $10 billion enacted in the FY2003 Consolidated Appropriations Resolution. b. OMB does not project budget authority or outlays beyond five years. House and Senate Differences about DefenseSpending. The final version of the FY2004 budget resolutionprojects a five-year total for defense spending of $2.2 trillion, a level comparable tothe Administration projection and matching levels approved in both houses. In lateryears, however, the House projected higher funding for defense than the Senate, andthe conference compromised at $4.758 trillion through FY2013, about the midpointbetween the two houses. (77) The conference version of the budget resolution also deleted two provisionsproposed by the Senate: a measure to set aside $100 billion over the next ten years in areserve fund to pay for costs associated with the war in Iraq;and a measure to include $182 million in FY2004 and $12.8 billionin FY2004-FY2013 to cover the cost of phasing in concurrent receipt benefits formilitary retirees with disability levels of 60% or higher. The Senate bill had included a defense reserve fund that decreased by $100billion the funds set aside for a tax cut in order to provide $10 billion annually tocover continued costs of military action or reconstruction in Iraq. (78) Fundingfor Iraq in FY2003 was provided in the FY2003 supplemental, but there is no fundingfor occupation costs in the FY2004 budget, which was submitted before the initiationof hostilities. Nor is there funding in the FY2004 budget to cover the costs of thecontinued U.S. presence in Afghanistan. The Senate version of the resolution also would have allowed all militaryretirees whose disabilities are 60% or higher to receive both military retired pay andVeterans Administration disability benefits, a proposal considered but rejected in thefinal version of the FY2003 DOD Authorization Act. Instead, last year, Congressprovided special compensation for military retirees whose disabilities are a result ofcombat or combat-related activities in the FY2003 Authorization Act. (79) Theconference version of the resolution deleted both provisions. Without an allocationin the budget resolution, it appears less likely that benefits for military retirees withdisabilities will be expanded. Scoring Differences Between Congress and theAdministration. CBO scored the cost of DOD's request as$400.5 billion, $800 million higher than the Administration's estimate (see Table 4and Table 5 ). The difference between the two estimates reflects primarily CBO'sassessment that a DOD legislative proposal to set up a new account, the RefinedPetroleum Products transfer account, would cost about $675 million compared tozero expenditures assumed by DOD. According to DOD, the rationale for setting upthis new account with an "indefinite appropriation" is to allow DOD to cover thedifference between the amount budgeted for fuel costs and actual market prices. (80) SinceDOD assumes that its estimate is correct, the Administration provided no funds forthe account. CBO, however, believes that fuel prices in FY2004 are likely to beabout $5 higher per barrel than DOD assumes -- $27 a barrel compared to $22 barrel-- and scores the likely cost of the new account at $675 million based on the level ofDOD's annual fuel purchases. Although the FY2004 congressional budget resolution adopted CBO's higherscoring, it appears that Congress is unlikely to agree to set up the new account. Neither the House nor the Senate version of the FY2004 DOD Authorization Actincludes funds for the account. (81) Instead, both houses transfer that $675 millionin the CBO estimate for that account to other programs. The House and Senateappropriators also rejected DOD's proposal for this new fund and eliminated the $675million for the account. DOD's Appropriations Allocation. A sign of potential pressure on DOD's budget top line in the future is the outcome ofdecisions about the distribution of funds to the various appropriations subcommitteesto guide their markup, a process known as setting 302(b) allocations. (82) The annualcongressional budget resolution sets the total amount of discretionary spendingavailable to the appropriations committees and recommends spending allocations foreach budget function. The appropriations committees, however, have discretion toset allocations for each subcommittee. The conference agreement on the budget resolution allocates $784.7 billionin discretionary budget authority to the appropriations committees. For severalweeks after the budget resolution was agreed to, committee leaders debated how toallocate funds among the subcommittees and, especially, how to absorb what theyidentified as a $5 to $7 billion gap in spending requirements and amounts available.Departing from traditional practices where House and Senate Committees workseparately on subcommittee allocations, committee leaders negotiated across bothhouses with their leadership and with the White House to establish a commonframework within which to base their initial allocations. On June 11, House and Senate Appropriations Committee Chairmenannounced an agreed package that would free up sufficient resources to address thefunding gap and remain within the overall FY2004 discretionary budget cap of$784.7 billion. As approved by all parties, including the President, the appropriationscommittees reduced defense spending by $3.1 billion and moved $2.2 billion inFY2004 advance appropriations to FY2003. <4.2. Trends in DOD Spending Plans> Assessing long-term trends in the defense budget is difficult because of theeffect of the large amount of supplemental funding received since September 11,2001, in the Emergency Terrorism Response supplemental of 2001 and the FY2002supplemental. That funding, which is included in figures in Table 6 , makescomparisons difficult, particularly for operation and maintenance spending thatreceived the bulk of supplemental funding (see below). Table 6. Administration Request: NationalDefense Budget Function by Title, FY2001-FY2008 (in billions of dollars) Source: Office of Management and Budget, Budget of the U.S. Government,FY2004: Historical Tables and Budget of the U.S. Government, FY2004: AnalyticalPerspectives (February 2003), and H.Rept. 108-10 , conference report on FY2003Consolidated Appropriations Resolution for final enacted levels, and HouseAppropriations Committee. OMB figures include DOD's supplementalappropriations of $17.3 billion in the FY2001 Emergency Terrorism Responsesupplemental and $14.0 billion in the FY2002 supplemental. *Note: Does not include $62.6 billion received by DOD in FY2003 supplementalappropriations. Figures for FY2003 also include an additional $10 billion provided for DOD in the FY2003 Consolidated Appropriations Resolution for classified intelligenceprograms and for costs associated with the U.S. presence in Afghanistan and theglobal war on terrorism. The $62.6 billion provided to DOD in the FY2003supplemental, however, is not included. DOD's procurement funding shows littleincrease in FY2004. Much of the increase in RDT&E reflects an increase from $7.6billion to $9.1 billion in DOD's missile defense program, reflecting DOD's plan tobegin deployment of 10 land-based interceptors as well as to continue the ramp-upin R&D. By FY2008, however, DOD plans to increase funding for procurement byabout 40% and RDT&E by over 15% compared to FY2003. <4.3. DOD Receives $103.1 Billion in Supplemental Appropriations Since September 11 Attacks> Since the September 11 attacks, DOD has received $103.3 billion insupplemental or regular appropriations for the war in Afghanistan, the war in Iraq,enhanced security at DOD installations, and the global war on terrorism (see Table7 ). The most recent supplemental for the Iraq war provides funding for the U.S.presence in Afghanistan and continued operations in Iraq through FY2003. The Administration did not include any funding for these costs in its FY2004budget, however, which suggests that the Administration will propose either asupplemental or a budget amendment for FY2004. In addition to funding insupplementals, DOD received $10 billion in the FY2003 ConsolidatedAppropriations Resolution to fund the occupation of Afghanistan andclassified/intelligence programs. In its post-September 11 requests for supplemental funding, DOD hasrequested substantial flexibility in its use of funds, citing the uncertainty ofestimating the cost of war and the global war on terrorism. The Administration hasreiterated that theme in its FY2004 request as well, calling for transformation of notonly weapon systems to meet new threats but also transformation of DOD's businesspractices and personnel management systems (see discussion of MajorAdministration Themes below). Although Congress has generally provided the amounts requested by DODin its supplemental requests, it has been reluctant to provide the amount of flexibilityrequested by DOD. In fact, with each supplemental request, Congress has been lesswilling to accept the flexibility proposed by DOD. Congress rejected DOD's requestthat about 95% of the funding be provided in a flexible account, choosing instead toallocate 45% of the funds in flexible accounts (see below). Of the $40 billion appropriated in the Emergency Terrorism Responsesupplemental (ETR) passed on September 14, 2001, DOD received $17.3 billion,almost entirely within the Defense Emergency Response Fund, a flexible account. Of that total, DOD had discretion to allocate funds as long as Congress wasinformed. For the remainder, Congress set levels within ten broad categories forDOD spending. Congress also permitted DOD to move funding into variousappropriation accounts at its discretion in the FY2002 supplemental for the bulk ofthe funding requested. In the most recent supplemental, for FY2003, DOD requested that Congressprovide 95% of the funding in the Defense Emergency Response Fund (DERF) sothat DOD could transfer funds to various accounts as needs arise. Instead Congressset up an new fund, the Iraq Freedom Fund, and allocated 25% of the funds requestedto that fund but required five-day advance notifications. Table 7. Flexibility in DOD's SupplementalFunding Since September 11 Attacks (Dollars in Billions) Source: CRS calculations from CRS Report RL31829 , CRS Report RL31005 , CRS Report RL31406 , and appropriations conference reports and GAO Report, DefenseBudget: Tracking of Emergency Response Funds for the War on Terrorism , April2003. a. In the ETR, DOD funds were appropriated into the Defense Emergency ResponseFund (DERF) except for a small amount of military construction funds,procurement funding, and Pentagon Renovation Revolving Funds. In theFY2002 Supplemental, DOD funds were appropriated to the DERF, whichwas made into a transfer account. In the FY2003 supplemental, funds wereappropriated into a new Iraq Freedom Fund, set up as a transfer account, orinto regular appropriations accounts. <5. Major Themes in the Administration's FY2004 Request> The overarching theme in the Administration's FY2004 request was a call forflexibility to transform not only U.S. military doctrine and technology, but alsomilitary and civilian personnel systems and defense acquisition practices. Accordingto Secretary of Defense Rumsfeld, not only do "our armed forces need to be flexible,light and agile," but also "the same is true of the men and women who support them,"in meeting the "frequent, sudden changes in our security environment," (83) includingthe global war on terrorism. To meet this goal, the Administration delivered a broad ranging legislativeproposal, entitled the "Defense Transformation for the 21st Century Act," to Congresson April 10, 2003, shortly before Congress's two-week April recess. Among otherthings, the legislative proposal would have given the Secretary of Defense authorityto redesign the civil service system governing the 700,000 civilian employees in theDepartment of Defense, provided additional flexibility in managing senior militaryofficers, modify certain acquisition requirements, and exempted DOD from certainenvironmental statutes. Some members of Congress expressed concern that DOD had delivered suchan ambitious proposal at a time when Congress was about to recess and shortlybefore markup of the defense authorization bill was planned. Although DODwitnesses discussed their plans to submit the proposal earlier in the year and met withcongressional staff in the preceding couple of months, the specific proposals were notavailable before April 10 (84) (as noted above, CRS compares all of theproposed new measures with current law in CRS Report RL31916 , DefenseDepartment Transformation Proposal: Side by Side with Current Law , by Robert L.Goldich, [author name scrubbed], [author name scrubbed], and [author name scrubbed]). The Administration characterized its proposals as the logical followup toearlier efforts to transform weapons modernization and operational practices. According to DOD, the FY2004 budget was the first budget to reflect fully PresidentBush's commitment to "challenge the status quo" and balance the need to meetcurrent challenges from the global war on terrorism and near-term threats with theneed to transform DOD in the longer term. (85) DODcontended that transformation is now fully underway with new emphasis placed onunmanned vehicles, precision guided munitions, special operations forces, command,control, and communications, and missile defense (see discussion on modernizationbelow), as well as the establishment of a new command, NORTHCOM, to focus onhomeland security, and changes in training practices to emphasize joint operations. DOD also argued that its proposals for military pay raises and other benefitsand its funding of operational training will ensure that recruitment and retentionremain high and that readiness goals continue to be met. Over the longer term, DODplans to review its current basing strategies in Europe and review the role of reserveforces but these areas are currently under study and not incorporated in the FY2004budget. <6. Investment and Other Issues> The major issues in this year's congressional debate -- for example, DOD'srequest for broad ranging authority to manage its civilian workforce, exemptions forDOD to certain environmental laws -- are discussed above. Other issues raisedinclude whether DOD's investment priorities are transformational, affordable, and consistent with "lessons learned" from the war in Iraq; revising criteria governing the FY2005 base closure round dueto be initiated next year; various organizational and acquisition changes;and DOD's proposed changes for management of militarypersonnel. An update for conference action will be included in a later update. <6.1. Proposed Acquisition and Organizational Changes> In its legislative package, DOD included several provisions designed toincrease its flexibility to contract for major defense weapons systems and informationtechnology programs, receive waivers from Buy America and domestic contentrequirements, and buy standardized items. (86) Two potentially controversial proposals would allow DOD to contract out forfirefighting and security guards at bases and would allow DOD to count workperformed by contractors at federally owned facilities as part of the 50% minimumfor in-house performance of depot work. Congress has consistently opposed allowingDOD to hire private security guards and loosening the definition of work that couldbe counted as "in-house". (87) A later update will provide the details aboutconference action. Other Organizational And Financial Proposals ToIncrease Flexibility. Other DOD proposals would give the Secretaryof Defense broad discretion to reorganize the department, transfer personnel, and beexempt from current personnel caps. To increase financial flexibility, DODrequested that the limit on transfers between appropriation accounts be raised fromthe current level of $2.5 billion to 2.5% of total DOD spending or about $9 billion. (DOD made this same request in the FY2003 supplemental, and received a highertransfer limit but not the 2.5%.) (88) DOD also proposed changing the standard governing awards of contracts togovernment entities versus private companies based on the A-76 competitivesourcing rules. DOD proposed using a "best value" assessment rather than thecurrent lowest cost standard. A less controversial proposal, which has been endorsedby both OPM and DOD, would transfer the DOD civilian personnel currentlyperforming security investigations to OPM. DOD also proposed eliminating 184reports to Congress that are currently required, ranging from reports on specializedtopics to more general reports on readiness levels and operation and maintenancefunding. (89) A later update will summarize conferenceaction. Authority To Spend $200 million To SupportForeign Militaries. In its request, DOD asked Congress to give itpermanent authority to allocate up to $200 million to support "coalition forces," orforeign military forces. Although this request is similar to the request enacted in theFY2003 supplemental for $1.4 billion for coalition forces who help the U.S. tocombat terrorism, DOD's request for permanent authority included no provision forcongressional oversight. In the FY2003 supplemental, Congress required DOD toreport by July 1, 2003 on its plan to allocate funding for coalition forces. (90) Finalaction will be included in a later update. <6.2. Affordability and Mix of DOD's FY2004 Investment Programs> A perennial issue in defense policy has been whether the Defense Departmentwill be able to afford all of the major weapons modernization programs that havebeen on the drawing boards, particularly toward the end of the decade, when anumber of new programs are planned to be in full scale production. The issue hasbeen complicated by the Defense Department's growing commitment to defensetransformation, which implies an effort to accelerate selected programs and perhapsadd some entirely new ones. During the 2000 presidential election campaign,then-Governor Bush promised to "skip a generation" of weapons programs in orderto free up funds for more transformational priorities. A full update for conferenceaction will be in a later update. Last year, and again this year, the Defense Department has tried to calculatethe amount that is being devoted to modernization programs that it regards asparticularly transformational. According to DOD Comptroller Dov Zakheim, theseprograms add up to $24.3 billion in the FY2004 budget and $239 billion over theperiod of the six-year FY2004-FY2009 future years defense plan (FYDP). UnderSecretary Zakheim said that DOD made room for these programs in part by cuttingabout $82 billion from projected service budgets over the course of the FYDP. Thecuts include termination of a number of Army programs to upgrade current weapons,early retirement of 26 Navy ships and 259 aircraft and an attendant reduction of10,000 in the Navy's personnel end-strength, and early retirement of 115 Air Forcefighter aircraft and 115 mobility/tanker aircraft, as well as efficiencies. (91) Finalconference action will be addressed in a later update. In the FY2004 budget, the Defense Department requested $74.4 billion forweapons procurement and $61.8 billion for research, development, test, andevaluation (RDT&E). Major aspects of the Administration request, and some keyissues include the following. Army Transformation. In recentyears, the Army has been pursuing three major initiatives simultaneously: (1)upgrades to the current "legacy" force, including improvements in M1 tanks andBradley Fighting Vehicles; (2) development and deployment of an "interim" forcemade up of six brigades equipped with Stryker wheeled armored vehicles anddesigned to be more rapidly deployable than heavy armored forces; and (3) pursuitof an "Objective Force" include the "Future Combat System," a family of newarmored vehicles and other systems designed to fundamentally change the way theArmy will fight in the future. In addition, the Army has been continuing to developthe Comanche helicopter, though late last year, the Defense Department decided tocut planned total Comanche procurement by about half. In the FY2004 budget request, the Defense Department cut back a number ofplanned upgrades of Army legacy systems, including high-profile M1 and Bradleyupgrades. In the wake of the Army's success in the Iraq war, there was extensivediscussion in Congress about the wisdom of these planned cuts. The House ArmedServices Committee-reported version of the authorization adds $727 million to therequest to continue M1 and Bradley upgrades along with some related Army upgradeprograms. Congressional Action. Table 8A shows action on major Army programs in the House and Senate defenseauthorization bills, and Table 8B shows action in the House and Senate versions ofthe defense appropriations bill. A few issues stand out. Legacy force modernization: The House authorization adds$258.8 million for Bradley Fighting Vehicle upgrades and $424 million for M1 tankupgrades (offset by cuts of $140 million in other M1 projects). These are among theprograms that the Administration wants to terminate as part of the $82 billion in6-year savings that officials announced when the budget was released. The Houseappropriations bill adds the same amount for Bradley upgrades and $155 million forM1 upgrades. The House appropriators also urged DOD to budget for enough M1upgrades in the future to complete equipping the 3rd Armored Cavalry Regiment withmodernized tanks. In effect, the House rejected DOD plans to cut back on Army"legacy force" upgrades, though House appropriators also indicated that they may besatisfied once sufficient upgraded Bradleys and M1s are procured to equip 2 and 1/3divisions of what the Army calls its "counterattack" force of heavy armoredunits. Stryker interim combat brigades: The House appropriationsalso added $35 million for long lead items for Stryker armored vehicle procurementto equip the 5th and 6th Stryker brigades. DOD has, in the past at least, consideredhalting the interim combat brigade program after four brigades are deployed. Houseappropriators sent a strong message that they expect DOD to fill out the plannedsix-brigade force. The Senate Appropriations Committee also added $35 million forlong lead items for Stryker procurement, though its report language did not specifythat it was for the 5th and 6th brigades. In addition, Senate appropriators added $100million in other Army procurement -- for communications and other equipment -- toaccelerate Stryker brigade deployment, a strong vote of support for the Armyprogram. Helicopters: All of the committees add money for UH-60utility helicopters, largely for the National Guard, though there are some differencesin how the money is allocated. This is a perennial congressional addition to proposedbudgets. All of the committees also support continued Comanche helicopterdevelopment despite cost growth and substantial cuts in the plannedprogram. Table 8A. House and Senate Action on Major Army Acquisition Programs: Authorization (amounts in millions of dollars) Sources: H.Rept. 108-106 ; S.Rept. 108-46 . Note: Figures reflect committee-reported versions of the bills and not changes made in subsequent floor action. Table 8B. House and Senate Action on Major Army Acquisition Programs: Appropriations (amounts in millions of dollars) Sources: H.Rept. 108-187 ; S.Rept. 108-87 . Note: Figures reflect committee-reported versions of the bills and not changes made in subsequent floor action. Note: FutureCombat System funding includes PE 0604645A - Armored Systems Modernization (ASM)-Eng. Dev. only. NavyPrograms. (92) Key Navyship-acquisition programs for FY2004 include the Virginia (SSN-774) classsubmarine program, the Littoral Combat Ship (LCS) program, the Arleigh Burke(DDG-51) class Aegis destroyer, the DD(X) next-generation destroyer program, theSan Antonio (LPD-17) class amphibius ship program, the Lewis and Clark (TAKE-1)auxiliary ship program, the Trident cruise-missile submarine (SSGN) conversionprogram, and the Aegis cruiser (CG-47 class) conversion program. The FY2004budget also includes, among other things, continued advanced procurement fundingfor CVN-21, an aircraft carrier to be procured in FY2007. One issue in congressional hearings on the FY2004 Navy program concernsthe planned size and structure of the Navy. The 2001 Quadrennial Defense Review(QDR) revalidated the plan for a 310-ship Navy established by the 1997 QDR, butalso stated that force-structure goals in the 2001 QDR, including the 310-ship goal,were subject to change pending the maturation of DOD's transformation efforts. In February 2003, in submitting its proposed FY2004 defense budget, DODofficials stated that they had launched studies on future requirements for underseawarfare and future options for forcibly entering overseas military theaters. Thesestudies have the potential for changing, among other things, the planned number ofattack submarines and the planned size and structure of the amphibious fleet. Sinceattack submarines and amphibious ships are two of the four major building blocksof the Navy (the others being aircraft carriers and surface combatants), DOD, bylaunching these two studies, appears to have taken steps to back away from the310-ship plan. At the same time, the Secretary of Defense has explicitly declined toendorse a plan for a 375-ship fleet that has been put forward in recent months byNavy leaders. As a result of these events, there is now uncertainty concerning the plannedsize and structure of the Navy: DOD may no longer support the 310-ship plan, butneither has it endorsed the 375-ship plan or any other replacement plan. Thisuncertainty over the planned size and structure of the Navy affects surfacecombatants as well as submarines and amphibious ships, because the biggest singledifference between the 310-ship and 375-ship plans is in the area of surfacecombatants. The 310-ship plan includes 116 surface combatants, all of which arecruisers, destroyers, and frigates, while the 375-ship plan includes 160 surfacecombatants, including not only cruisers, destroyers, and frigates, but as many as 60smaller Littoral Combat Ships as well. Congressional Action: Senate and HouseMarkup. Table 9A shows action on major Navy programsin the House and Senate defense authorization bills, and Table 9B shows Houseaction in the committee-reported version of the defense appropriations bill. In actionon key issues: Carrier replacement program: A major budget decision in theFY2004-FY2009 defense plan was to accelerate the transition to the next generationof carriers by incorporating more advanced technology into the next carrier to befully funded in FY2007 or FY2008. In all, the new carrier is projected to cost almost$12 billion for development and production, of which about $5 billion is for R&D. All of the congressional defense committees supported the Administration's revisedcarrier development program. Virginia-Class Attack Submarines: The House AppropriationsCommittee denied funds requested to sign a multi-year procurement (MYP) contractfor new submarines, saying (1) that the schedule for delivery of the first submarineremains too uncertain and (2) that the requirement to buy two submarines each yearin FY2007 and FY2008 may be unaffordable given the $2.6 billion price of eachboat. The Senate Appropriations Committee approved multi-year procurement ofVirginia-Class submarines, but only for 5 boats over the FY2004-FY2009 planningperiod rather than the 7 boats that the Navy had requested. Subsequently, on August14, the Navy announced an agreement with contractors on a multi-year procurementdeal for 7 boats, but with an option to reduce procurement to 5 or 6 boats with someincrease in costs per ship. Attack Submarine Refueling Overhaul: The Senate ArmedServices Committee added $248 million to refuel one Los Angeles-class attacksubmarine; the Navy did not request funding for any overhauls. The SenateAppropriations Committee added $450 million for two refueling overhauls. NeitherHouse defense committee added any funds. Littoral Combat Ship: All of the defense committees expressedsome concern about the status of the Littoral Combat Ship (LCS) developmentprogram, though none eliminated funding. The Senate Armed Services Committeeissued the most critical report language, though it also added $35 million for moreexperimentation to determine the utility of the concept. The committee said (1) aNavy report on the program that Congress required last year did not adequatelyreview alternatives or establish priorities among Navy combat requirements, (2) thatNavy cost estimates did not include firm figures on the various modules that wouldbe installed in the common sea frame, and (3) that costs of the program couldcompete with higher priority Navy shipbuilding in a constrained budget environmentin the future. The House Armed Services Committee added $35 million for moduledesign, while the House Appropriations Committee added $25 million for moduledesign but cut $10 million from the overall program. The Senate AppropriationsCommittee added funds for module design. LPD-17 Class Amphibious Ship: The House AppropriationsCommittee added $175 million for advance procurement for the next ship of theclass, the LPD-23, and told the Navy to provide full funding for the ship in FY2005,as had been planned, rather than in FY2006, as the Navy projected this year. TheSenate Appropriations Committee added $75 million for theLPD-23. Table 9A. House and Senate Action on Major Navy Acquisition Programs: Authorization (amounts in millions of dollars) Sources: H.Rept. 108-106 ; S.Rept. 108-46 . Note: Figures reflect committee-reported versions of the bills and not changes made in subsequent floor action. Table 9B. House and Senate Action on Major Navy Acquisition Programs:Appropriations (amounts in millions of dollars)

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

<1. Introduction> In recent years, deficit reduction commissions, including the National Commission on Fiscal Responsibility and Reform, have recommended using an alternative measure of consumer price change to make inflation adjustments to federal programs government-wide. The proposal would change, for example, the way the Social Security cost-of-living adjustment (COLA) is computed, as well as COLAs under other federal programs. Rather than using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to compute the Social Security COLA, the proposal calls for basing the Social Security COLA on the Chained Consumer Price Index for All Urban Consumers (Chained CPI-U or C-CPI-U). In April 2013, a modified version of the Chained CPI-U proposal was included in President Obama's FY2014 budget. In general, the goal of the Chained CPI-U is to more accurately reflect how consumers alter their buying habits in response to changes in prices. The Chained CPI-U typically has risen more slowly than either the CPI-W or the traditional CPI-U, the Consumer Price Index for All Urban Consumers. Supporters of the proposal argue that the CPI-W overstates inflation and, therefore, overestimates how much money is needed for Social Security beneficiaries to maintain their standard of living. Opponents of the proposal, however, view using the Chained CPI-U to adjust Social Security benefits for inflation as a backdoor way of reducing benefits. They maintain that the market basket of goods and services purchased by the elderly is different from that of the general population around which the CPI is constructed. It is more heavily weighted with health care expenditures, which rise notably faster than the overall CPI, and thus opponents contend that the cost of living for the elderly is higher than reflected by the overall CPI. For this reason, some policy makers support using the experimental Consumer Price Index for the Elderly (CPI-E) to compute the Social Security COLA. The current discussion of a potential change in the way the Social Security COLA is computed has raised questions about indexing provisions in other federal entitlement programs. The purpose of this report is to identify key indexing provisions in major federal entitlement programs under current law and present the information in a summary table (see Table 1 ). The programs included in the table are based on the major mandatory spending programs and categories shown in The Budget and Economic Outlook: An Update, published by the Congressional Budget Office (CBO) in August 2011, with some modifications. For example, the Congressional Research Service (CRS) identified specific programs within CBO categories (such as "child nutrition") and included additional programs, such as Railroad Retirement, that are closely coordinated with the Social Security program. Although there are other federal entitlement programs with indexing provisions, the programs included in the table represent a majority of federal mandatory spending. Table 1 is not intended to address or fully explain all of the indexing provisions within the laws and regulations governing these programs. Rather, it is an overview and a general guide. The report also provides a description of the measures of consumer price change used to index various elements of these programs under current law and the measure of consumer price change that has been proposed for making inflation adjustments to a range of federal entitlement programs (the Chained CPI-U). It is not intended to evaluate the best measure of consumer price change for inflation adjustments within a particular program or programs. Similarly, broader issues, such as the technical aspects of different measures of consumer price change and the indexing of other items (for example, the federal poverty threshold and parameters of the tax code), are beyond the scope of this report. For information on how the Chained CPI-U is constructed and reported by the U.S. Bureau of Labor Statistics (BLS), see CRS Report RL32293, The Chained Consumer Price Index: What Is It and Would It Be Appropriate for Cost-of-Living Adjustments? , by [author name scrubbed]. For information on how Social Security benefits could be affected by using the Chained CPI-U to compute annual COLAs, see CRS Report R43363, Alternative Inflation Measures for the Social Security Cost-of-Living Adjustment (COLA) , by Noah P. Meyerson. <2. Current and Proposed Measures of Consumer Price Change> BLS publishes the CPI-W and the CPI-U, whose month-to-month fluctuations reflect changes in the prices faced by consumers. More specifically, the change in the indexes is the average change in the retail price of a market basket composed of more than 80,000 items purchased by consumers at outlets (e.g., grocery stores and gasoline stations) in 87 urban areas across the nation. Changes in the prices of items in each area are averaged together using weights that reflect the items' importance in the spending of the CPI-W population and the CPI-U population. The national CPI-W and CPI-U are calculated by combining the local area data for all items in the market basket to obtain a U.S. city average. The rates of change in consumer prices as measured by the national CPI-W for all items and national CPI-U for all items have differed only slightly over time. In addition to their use in calculating constant-dollar estimates of other economic indicators (e.g., earnings), the national CPI-W and CPI-U, as well as indexes for specific goods and services (e.g., medical care), are used for inflation indexing by the federal government. The percentage change in the national CPI-W (all items) is the basis for determining the annual COLA of Social Security benefits, and the national CPI-U (all items) is the basis for determining certain features of the Earned Income Tax Credit, for example. In addition, the percentage change in the CPI-U for specific groups of items is used to inflation-adjust various features of other federal programs. For example, per-meal subsidies paid to schools under child nutrition programs are tied to changes in the CPI-U "food away from home" index (which is a combination of indexes for full-service meals and snacks, limited-service meals and snacks, food at employee sites and schools, food from vending machines and mobile vendors, and other food away from home). As part of its ongoing efforts to develop an index that more accurately measures changes in the cost of living, BLS developed the Chained CPI-U, also called the C-CPI-U. The population of the C-CPI-U and CPI-U are the same. The prices used to calculate the C-CPI-U, CPI-U, and CPI-W are the same. However, the formula for calculating the C-CPI-U better accounts for the ability of consumers to maintain their standard of living in the face of an increase in prices overall by changing their spending pattern toward items whose prices have increased more slowly and away from items whose prices have increased more quickly. Although the C-CPI-U was first published in 2002, the modified measure has not replaced the CPI-U or CPI-W and no federal program has used the C-CPI-U to date. Some members of the public policy community interested in curtailing growth of the U.S. budget deficit have proposed switching inflation-indexed federal programs and income tax provisions to the C-CPI-U, however. Because the C-CPI-U typically has risen more slowly than either the CPI-W and CPI-U, changing the basis for indexation could substantially lower outlays and raise revenues. But the proposal to switch from the CPI-W to the C-CPI-U has prompted concern in some quarters about the ability of Social Security beneficiaries to maintain their standard of living. Some have suggested instead changing to the experimental index for those at least 62 years of age (CPI-E) in the arguable belief that this index better reflects the elderly population's experience with inflation (i.e., this population's above-average spending on health care services whose prices have increased faster than overall prices). <3. Policy Considerations> As shown in Table 1 , inflation adjustments affect many features of federal entitlement programs. The most recognized effect of inflation adjustments is on benefit levels. For example, monthly cash benefits, such as Social Security and Supplemental Security Income benefits, increase when a COLA is paid. Other types of benefits are indexed as well. Non-cash benefits provided under the Supplemental Nutrition Assistance Program (SNAP), for example, are indexed to reflect food-price inflation. Coverage amounts under Medicare's standard outpatient prescription drug benefit (Part D) are adjusted for inflation. Inflation adjustments also affect entitlement programs in ways that are less well known, from federal payments to providers to program eligibility requirements. For example, when a Social Security COLA is paid, the amount of wages subject to the Social Security payroll tax increases. Indexing affects the number of Medicare beneficiaries subject to higher income-related Part B and Part D premiums, as well as the amount of Medicare payments to providers. In another example, indexing affects cost-sharing amounts paid by Medicaid beneficiaries for prescribed drugs and for non-emergency services provided in an emergency room. Per-meal subsidies paid to schools, for example, under the National School Lunch program are indexed. Finally, indexing affects eligibility criteria for some programs, including Medicaid and the child tax credit. Generally, switching to the C-CPI-U to compute COLAs and index other elements of federal entitlement programs is considered as a cost-saving measure in an effort to reduce federal budget deficits. For example, CBO estimates that switching to the C-CPI-U to compute Social Security COLAs would reduce federal outlays by $31.0 billion over five years (FY2014-FY2018) and by $127.2 billion over 10 years (FY2014-FY2023). If applied on a government-wide basis, however, switching to the C-CPI-U could increase program costs in some cases. Under Medicare, for example, cost-sharing amounts for outpatient drugs paid by low-income beneficiaries who receive subsidies under Part D are indexed annually to the CPI-U under current law. Because the Chained CPI-U grows more slowly than the CPI-U when consumer prices increase, indexing cost-sharing amounts to the Chained CPI-U would result in an increase in federal Medicare spending. Similarly, consider the refundable portion of the child tax credit (referred to as the additional child tax credit or ACTC). Taxpayers must have earnings that exceed the refundability threshold to claim the ACTC. The lower the threshold, the greater the number of low-income taxpayers who become eligible for the refundable child tax credit. Indexing the refundability threshold to a lower inflation index would expand the availability of the refundable child tax credit. Additional considerations regarding use of the Chained CPI to index federal programs for inflation are reflected in congressional testimony by CBO on April 18, 2013. CBO stated, for example, Although many analysts consider the chained CPI to be a more accurate measure of the cost of living than the traditional CPI, using it for indexing could have disadvantages. The values of the chained CPI are revised over a period of several years, so affected programs and the tax code would have to be indexed to a preliminary estimate of the chained CPI that is subject to estimation error. Also, the chained CPI may understate growth in the cost of living for some groups. For instance, some evidence indicates that the cost of living grows at a faster rate for the elderly than for younger people, in part because changes in health care prices play a disproportionate role in older people's cost of living. However, determining the impact of rising health care prices on the cost of someone's standard of living is problematic because it is difficult to measure the prices that individuals actually pay and to accurately account for changes in the quality of health care. <4. For Additional Reading> For more information on the programs referenced in the table, see the following CRS reports. Social Security : CRS Report R42035, Social Security Primer , by [author name scrubbed] Medicare : CRS Report R40425, Medicare Primer , coordinated by [author name scrubbed] and [author name scrubbed] Medicaid : CRS Report R43357, Medicaid: An Overview , coordinated by [author name scrubbed] Supplemental Security Income : CRS Report 94-486, Supplemental Security Income (SSI) , by [author name scrubbed] Earned Income Tax Credit : CRS Report R43805, The Earned Income Tax Credit (EITC): An Overview , by [author name scrubbed] and [author name scrubbed] Child Tax Credit : CRS Report R41873, The Child Tax Credit: Current Law and Legislative History , by [author name scrubbed] Unemployment Compensation : CRS Report RL33362, Unemployment Insurance: Programs and Benefits , by [author name scrubbed] and [author name scrubbed] SNAP : CRS Report R42505, Supplemental Nutrition Assistance Program (SNAP): A Primer on Eligibility and Benefits , by [author name scrubbed] Child Nutrition Programs : CRS Report R42353, Domestic Food Assistance: Summary of Programs , by [author name scrubbed] and [author name scrubbed] Civil Service Retirement System / Federal Employees Retirement System : CRS Report 98-810, Federal Employees' Retirement System: Benefits and Financing , by [author name scrubbed] Military Retirement : CRS Report RL34751, Military Retirement: Background and Recent Developments , by [author name scrubbed] and [author name scrubbed] Veterans Disability Compensation : CRS Report RL34626, Veterans' Benefits: Disabled Veterans , by [author name scrubbed] et al. Veterans Pensions : CRS Report RS22804, Veterans' Benefits: Pension Benefit Programs , by [author name scrubbed] and [author name scrubbed] Dependency and Indemnity Compensation : CRS Report R40757, Veterans' Benefits: Dependency and Indemnity Compensation (DIC) for Survivors , by [author name scrubbed] Veterans Educational Assistance : CRS Report R42785, GI Bills Enacted Prior to 2008 and Related Veterans' Educational Assistance Programs: A Primer , by [author name scrubbed] Veterans Educational Assistance : CRS Report R42755, The Post-9/11 Veterans Educational Assistance Act of 2008 (Post-9/11 GI Bill): Primer and Issues , by [author name scrubbed] Veterans Vocational Rehabilitation and Employment Program : CRS Report RL34627, Veterans' Benefits: The Vocational Rehabilitation and Employment Program , by [author name scrubbed] Railroad Retirement Board : CRS Report RS22350, Railroad Retirement Board: Retirement, Survivor, Disability, Unemployment, and Sickness Benefits , by [author name scrubbed]

In recent years, various proposals have been discussed in the context of ways to reduce federal budget deficits. One of these proposals calls for the use of a different measure of consumer price change to index various provisions of federal programs, including cost-of-living adjustments (COLAs). For example, under current law, the Social Security COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Under the proposal, the Social Security COLA would be based instead on the Chained Consumer Price Index for All Urban Consumers (Chained CPI-U or C-CPI-U). Because the goal of the Chained CPI-U is to better reflect how consumers alter their buying habits in response to changes in prices, supporters of the proposal argue that it is a more accurate measure for computing COLAs and making other automatic program adjustments. Opponents, however, view the proposal as a backdoor way of reducing benefits because the Chained CPI-U typically has risen more slowly than either the CPI-W or the traditional CPI-U, the Consumer Price Index for All Urban Consumers. Some observers point out that the Chained CPI-U is published as a preliminary value that is subject to revision over a period of up to two years and that it may not accurately reflect the cost of living for certain groups, such as the elderly population. The current discussion of a potential change in the way the Social Security COLA is computed raises questions about indexing in other federal entitlement programs. The purpose of this report is to identify key indexing elements in major federal entitlement programs under current law and present the information in a summary table. As shown here, indexing affects more than benefit levels paid to individuals through COLAs. It also affects, for example, federal payments to providers and eligibility criteria for some programs. In addition, the report provides a brief description of the measures of consumer price change used to index various elements of these programs under current law, as well as the alternative measure of consumer price change (the Chained CPI-U) that has been proposed for computing Social Security COLAs and making inflation adjustments to other federal programs. This report does not evaluate the best measure of consumer price change for making automatic inflation adjustments in federal entitlement programs. In addition, broader issues, such as the technical aspects of different measures of consumer price change, potential implications of using an alternative measure of price change to index various elements of major federal entitlement programs, and the indexing of other items (for example, the federal poverty threshold and parameters of the tax code) are beyond the scope of this report. For technical information on how the Chained CPI-U is constructed and reported by the U.S. Bureau of Labor Statistics, see CRS Report RL32293, The Chained Consumer Price Index: What Is It and Would It Be Appropriate for Cost-of-Living Adjustments?, by [author name scrubbed]. For information on how Social Security benefits could be affected by using the Chained CPI-U to compute annual COLAs, see CRS Report R43363, Alternative Inflation Measures for the Social Security Cost-of-Living Adjustment (COLA), by Noah P. Meyerson.

<1. Background> Social Security is financed primarily by payroll and self-employment taxes, as well as by a portion of the proceeds from the income taxation of Social Security benefits. The revenues are deposited in the U.S. Treasury. Social Security benefits and administrative expenses are also paid from the U.S. Treasury. By law, if Social Security revenues exceed expenditures, the "surplus" is credited to the Social Security trust funds in the form of U.S. government securities. The money itself, however, is used to pay for whatever other expenses the government may have at the time. There is no separate pool of money set aside for Social Security purposes. That is not to say that the trust funds are ephemeral as long as the trust funds show a positive balance, they represent the authority and an obligation for the U.S. Treasury to issue benefit payments during periods when the program's expenditures exceed revenues. At the end of calendar year 2013, the trust funds were credited with holdings of $2.8 trillion. Section 201 of the Social Security Act provides the following guidelines for trust fund investment. 1. Funds not immediately in demand for benefits or administrative expenses are to be invested in interest-bearing obligations guaranteed as to both principal and interest by the United States. 2. Obligations are to be purchased at issue at the issue price or at the market price for outstanding obligations. 3. The Managing Trustee of the Social Security trust funds (the Secretary of the Treasury) is required to invest in special "nonmarketable" federal public-debt obligations special issues to the trust funds that are not available to the general public except where he or she determines that the purchase of marketable federal securities is "in the public interest." 4. Special issues shall have maturities fixed with due regard for the needs of the trust funds and will pay a rate of interest, calculated at the time of issue, equal to the average market yield on all marketable interest-bearing obligations of the United States that are not due or callable (redeemable) for at least four years. 5. Marketable federal securities purchased by the trust funds may be sold at the market price and special issue obligations may be redeemed at par plus accrued interest (without penalty for redemption before maturity). The Treasury Department has determined that the purchase of marketable federal securities (i.e., public issues) would be in the public interest only when it might serve to stabilize the market for Treasury issues. Because an "unstable market" would be characterized by falling bond prices, purchases of marketable federal securities at these times would appear to be advantageous for the trust funds. In practice, however, open market purchases have been rare. Although the trust funds have held public issues in the past, the trust funds currently hold special issues only. The interest earned on these holdings is credited to the trust funds semiannually (on June 30 and December 31); it is done by issuing additional federal securities to the trust funds. In calendar year 2013, net interest totaled $102.8 billion, representing 12% of total trust fund income. The effective annual rate of interest earned on all obligations held by the trust funds in calendar year 2013 was 3.8%. The interest rate earned on special issues purchased by the trust funds in August 2014 is 2.375%. The maturity dates of newly issued special issues are set by a standardized procedure. Revenues are invested immediately in short-term issues called certificates of indebtedness, which mature on the next June 30. On June 30 of each year, certificates of indebtedness that have not been redeemed are reinvested in longer-term special issue bonds. Generally, the maturities of these bonds range from 1 to 15 years; the goal is to have about one-fifteenth of them mature each year, depending on the needs of the trust funds. <2. Issues> While some critics have questioned whether the current investment policy has constrained the earnings of the trust funds, over the years various advisory councils, congressional committees, and other groups generally have endorsed it. It has been justified as a way to ensure safety of principal and stability of interest, and as a way to avoid intrusion into private markets. It also has been regarded as a way to avoid the political influences that would be inherent in investing outside the U.S. government. Generally, the goal espoused has been to place the trust funds in the same position as any long-term investor seeking a safe rate of return by investing in U.S. securities, and neither advantage nor disadvantage the trust funds relative to these investors or other parts of the government. For most of the program's history, interest income to the trust funds has not been a major factor in program financing. In recent years, however, the increasing role of interest income, as well as interest by some policy makers in preventing any surplus Social Security tax revenues from being used for other government spending purposes, have focused attention on alternative investment practices. For example, there have been proposals to replace the special issues held by the trust funds with marketable federal securities, as well as proposals to allow any surplus Social Security tax revenues or a portion of trust fund reserves to be invested in assets other than U.S. government obligations, including equities.

The Social Security Act has always required surplus Social Security revenues (revenues in excess of program expenditures) to be invested in U.S. government securities (or U.S. government-backed securities). In recent years, attention has been focused on alternative investment practices in an effort to increase the interest earnings of the trust funds, among other goals. This report describes Social Security trust fund investment practices under current law.

<1. Introduction> Financial regulatory relief has been identified as a policy priority by President Donald Trump who has reportedly called for the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ) to be "dismantled" and by some Members of the 115 th Congress. This report does not discuss the content of current financial regulatory policy or proposals to provide relief from those policies. Instead, it provides a framework for understanding how relief might be pursued, which could be useful to proponents and opponents of such relief. It discusses the sources of policy changes following the 2007-2009 financial crisis that have been the focus of recent relief efforts and outlines the different legislative strategies available to Congress. In addition, the report addresses what regulators and the Administration could do to provide relief without statutory change, to clarify where legislative action would or would not be necessary. <2. Sources of Postcrisis Financial Reforms> Many financial reforms were adopted in response to the 2007-2009 financial crisis. Reforms aimed to address problems that emerged during the crisis, such as financial instability and inadequate protection for consumers and investors. Critics argue that these reforms went too far and that the burden of financial regulation now exceeds the benefits. The financial reforms at the center of the current debate primarily stem from legislation enacted since 2008, international agreements, and preexisting authority of the financial regulators. <2.1. Recent Statutory Changes> The largest source of postcrisis reform was the Dodd-Frank Act of 2010, wide-ranging legislation that made regulatory changes across the financial system, including to the regulation of derivatives, banks, consumer and investor protection, systemic risk, and mortgages. Hundreds of regulations promulgated by regulators since the Dodd-Frank Act's passage are pursuant to new authority granted by the act. According to the Government Accountability Office, regulators had issued final rules for about 75% of rulemaking requirements in the act as of the end of 2016. Recent Congresses have debated legislation to amend the Dodd-Frank Act. Several bills have been enacted in past Congresses that make minor changes to the act, but no bills that make more fundamental changes have been enacted to date. Other, more narrowly targeted, postcrisis regulatory changes stem from various acts, including the following: The Housing and Economic Recovery Act (HERA; P.L. 110-289 ), which created the Federal Housing Finance Agency (FHFA) with enhanced powers to regulate the housing government-sponsored enterprises (Fannie Mae, Freddie Mac, and the Federal Home Loan Banks). Fannie Mae and Freddie Mac have remained in FHFA conservatorship since September 2008 under the powers provided by HERA. HERA also set licensing standards for mortgage loan originators. The Credit Card Accountability Responsibility and Disclosure Act ( P.L. 111-24 ), which required new consumer protections for credit card users. <2.2. International Agreements8> Other recent regulatory changes implemented by U.S. regulators stem from principles agreed to multilaterally through international fora. The overall agenda-setting for international financial cooperation and coordination is most associated with the Group of 20 (G-20) and the Financial Stability Board (FSB). The G-20 is an informal grouping of 19 major economies (including the United States) and the European Union; since 2009, the G-20 has been the primary political steering forum for international economic cooperation. The FSB is a technical body, which was established by the G-20 to coordinate the G-20 agenda and set the priorities for the international financial standard-setting process. FSB members include the regulators from the G-20 countries (and others), as well as several international financial institutions and international standard-setting bodies, such as the Basel Committee on Bank Supervision, the International Association of Insurance Supervisors (IAIS), and the International Organization of Securities Commissions (IOSCO). As illustrated in Figure 1 , national financial authorities are the primary actors responsible for devising rules and providing oversight and supervision of financial institutions operating under their jurisdiction. National financial authorities also are responsible for participating in the international standard-setting bodies. The international agenda and standard-setting bodies operate on a consensual basis and have no legally binding authority. Because national regulators (or other authorities) cannot enter into treaties with other countries, agreements made at international fora or by regulators at standard-setting bodies require domestic legislative or regulatory changes before they are implemented. Many of the primary postcrisis reform initiatives of the FSB closely match parts of the Dodd-Frank Act. International financial institutions, primarily the International Monetary Fund, provide overall monitoring of national compliance with the agreed-upon international financial standards, among other functions. For banks, an important source of new and revised prudential regulatory standards is the multilateral Basel III accords, a nonbinding international agreement to harmonize banking regulation, such as capital requirements. U.S. banking regulators promulgated new regulations to comply with the standards set out in Basel III. For globally active financial institutions, the FSB, in coordination with the Basel Committee and IAIS, respectively, designates firms as global systemically important banks (G-SIBs) and global systemically important insurers. U.S. bank regulators have tailored some heightened regulatory standards to apply only to G-SIBs. Some regulatory changes for securities, derivatives, and insurance markets have implemented international attempts to set standards and harmonize policies through IOSCO and IAIS. <2.3. Standing Authority> Financial regulators have broad discretionary standing authority to achieve their mandated objectives, such as ensuring the safety and soundness of regulated financial institutions or providing consumer and investor protection. In some cases, postcrisis reforms stem from this authority rather than from recent statutory changes. For example, the Securities and Exchange Commission (SEC) used its long-standing authority to regulate money market mutual funds to set new regulatory standards for those funds in response to a money market run in 2008. <3. Regulatory Relief12> Regulatory relief in financial services refers to policy changes to reduce or eliminate regulatory requirements or the costs of complying with those requirements. This report does not discuss the content of current financial regulatory policy or proposals to provide relief from those policies. Instead, it discusses different approaches to implementing regulatory relief. Nevertheless, the following framework for evaluating relief proposals may be useful to consider before choosing between different approaches. In determining whether to provide regulatory relief, a central question is whether an appropriate trade-off has been struck between the benefits and costs of regulation. Benefits. Financial regulation has different objectives and potential benefits, including enhancing the safety and soundness of certain institutions; protecting consumers and investors from fraud, manipulation, and discrimination; and promoting financial stability while reducing systemic risk. A financial regulatory system that delivers a baseline level of stability and trust between financial agents is a precondition to a healthy financial system that can generate robust economic growth. Regulators employ different tools to achieve these goals. Regulators issue rules; supervise and examine institutions to verify that the rules are followed; and take enforcement actions, such as imposing fines, when the regulations are not followed. In other cases, regulators require companies or individuals to meet certain standards and receive a license before engaging in a particular business practice. The specific goals regulators attempt to achieve and the tools they use vary by market. For example, risk management is emphasized for banking regulation and disclosure is a priority in securities regulation. Costs. The costs associated with government regulation rulemaking, supervision, and enforcement are frequently referred to as regulatory burden . Regulatory requirements often are imposed on providers of financial services, so financial institutions frequently are the focus of discussions about regulatory burden. But costs associated with regulation can flow through the providers and ultimately be borne, in part, by different entities, including consumers, the government, and the economy at large. For example, a provider may respond to increased regulatory burden by raising the prices it charges to customers. If regulatory burden reduces the long-term availability of credit, it would have a negative effect on business investment and economic growth. Regulatory burden may manifest itself in different forms. Operating costs are the costs the company must bear to adhere to the regulation, such as employee training. Some regulations create one-time operating costs borne up front, whereas other regulations create recurring costs that exist as long as the requirement is in effect. Opportunity costs are the costs associated with foregone business opportunities because of additional regulation. For example, a lender may make fewer mortgages because new regulations make mortgage lending more expensive, and that lender may instead perform a different type of lending that is now more profitable. Trade -O ffs. Regulatory relief may face trade-offs between reducing regulatory burden and potentially reducing the benefits of regulation. The trade-offs are not limited to the effects on the direct recipients of relief usually the providers of financial services but may extend to the effects on consumers, investors, particular markets, and market stability more broadly. The presence of regulatory burden does not necessarily mean that a regulation is undesirable or should be repealed. A regulation can have benefits that could outweigh its costs, but the presence of costs means, tautologically, that the regulation causes regulatory burden. The concept of regulatory burden can be contrasted with the phrase unduly burdensome . Whereas regulatory burden is about the costs associated with a regulation, unduly burdensome refers to the balance between benefits and costs. For example, some would consider a regulation to be unduly burdensome if costs are in excess of benefits or the same benefits could be achieved at a lower cost. However, the presence of regulatory burden does not mean that all regulations are unduly burdensome. Policymakers consider these trade-offs and evaluate the broader effects of regulation that could be either positive or negative, such as how a requirement would impact innovation, the price of credit, and the availability of credit. For example, efforts to protect consumers against potential actions taken by banks may drive up the cost for a bank to provide certain services and may result in that activity migrating to a less regulated part of the financial system or to foreign jurisdictions with lower regulatory standards. However, trade-offs are not always present. If regulation makes an unstable system more stable, it could reduce costs and increase the availability of credit. <4. Approaches for Congress> Through legislation, Congress provides financial regulators with the authority that underpins the regulations they issue. Thus, Congress can amend or repeal that authority through new legislation. Congress can pass legislation that amends or repeals specific rules or parts of the statute that those rules are based on. Congress can also instruct regulators to revisit rules, sometimes by requiring studies, in light of policy goals that Congress specifies. Alternatively, Congress may provide regulators with broad authority to provide relief at their discretion. Congress may provide relief to all financial services providers or target it to specific groups, such as small financial institutions. Regulatory relief could be enacted through the normal legislative process. For example, H.R. 10 , a wide-ranging regulatory relief package, was passed by the House on June 8, 2017. Regulatory relief could also occur through the annual appropriations process. In addition, two special legislative procedures are available that Congress may use in limited circumstances the Congressional Review Act (CRA) and the reconciliation process. These tools have advantages and disadvantages compared to the normal legislative process. The main advantage is that both require only a simple majority for approval in the Senate. The disadvantage is that many of the regulatory relief proposals under consideration would not qualify for either process, for reasons discussed below. <4.1. Congressional Review Act15> The CRA is an oversight tool that Congress can use to invalidate a final rule issued by a federal agency. The CRA provides Congress with a special set of expedited parliamentary procedures, which Congress may use to consider legislation that strikes 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 a 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 CRA 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. Before the 115 th Congress, the CRA mechanism had successfully overturned one agency final rule: a 2000 Occupational Safety and Health Administration rule related to workplace ergonomics standards. Through May 25, 2017, the CRA has been used to successfully overturn 14 rules in the 115 th Congress. Of the 14, one rule was issued by financial regulators the SEC's resource extraction rule, which had a resolution of disapproval signed into law as P.L. 115-4 . The rule, implementing a provision of the Dodd-Frank Act, required companies that are "resource extraction issuers to include in an annual report information relating to any payment made by the issuer, a subsidiary of the issuer, or an entity under the control of the issuer, to a foreign government or the Federal Government for the purpose of the commercial development of oil, natural gas, or minerals." The 115 th Congress initially focused on using CRA to overturn rules issued by the previous Administration, which was possible only until a May 2017 deadline. Some Members of Congress may nevertheless still be interested in using CRA to overturn financial regulations issued in the future, particularly those issued by financial regulators headed by leaders appointed by the previous Administration. The 115 th Congress has considered changes to the CRA to make it easier to overturn rules. On January 4, 2017, the House passed the Midnight Rules Relief Act ( H.R. 21 ), which would make it easier for a new Congress to disapprove multiple rules issued in the final months of an outgoing administration. On January 5, the House passed the Regulations from the Executive in Need of Scrutiny Act (REINS Act; H.R. 26 ), which would require Congress to vote to approve all so-called major rules before they could become effective. <4.2. Reconciliation Process23> Recently, some Members of Congress have suggested using the budget reconciliation process to pass legislation that provides regulatory relief. The budget reconciliation process, however, was designed to allow Congress to use expedited procedures when considering legislation that would achieve the budgetary goals expressed in the annual budget resolution, and is thus generally restricted to changes in laws concerning direct spending, revenues, or the debt limit. If Congress intends to use the reconciliation process, Congress must first agree on an annual budget resolution that includes reconciliation instructions to specific committees. These instructions trigger the second stage of the process by directing individual committees to develop and report legislation that would change laws within their respective jurisdictions concerning direct spending, revenue, or the debt limit. Once a specified committee develops legislation, the reconciliation legislation is eligible to be considered under expedited procedures in both the House and Senate. These expedited procedures are particularly important in the Senate, because reconciliation legislation does not require the support of three-fifths of Senators to invoke cloture in order to reach a final vote. As described below, there are restrictions as to what can be included in reconciliation. If Congress chose to employ the budget reconciliation process, the House Financial Services Committee and the Senate Banking Committee would need to be directed to report legislation within their jurisdiction that would accomplish a specific budgetary goal over a specified time period (e.g., legislation that would reduce the deficit by $1 billion over 10 years). In general, when responding to a reconciliation instruction, committees may report any matter within their jurisdiction that would allow them to achieve their instructed budgetary goal. This leaves the directed committees with the discretion to determine the details of the legislation. The content of reconciliation legislation, however, is restricted by the Congressional Budget Act (2 U.S.C. 644), and in particular by the Byrd rule (Section 313) in the Senate. Under the Byrd rule, "extraneous" material is not permitted to be included in a reconciliation measure or offered as an amendment to it. If such extraneous material is included in reconciliation legislation, or offered as an amendment to it, any Senator may raise a point of order against that material. If a point of order is raised and sustained against a legislative provision for violating the Byrd rule, the provision in question is stricken, but further consideration of the bill may proceed. If the point of order is sustained against an amendment or motion, further consideration of that amendment or motion would not be in order. The Byrd rule may be waived by a vote of three-fifths of all Senators. A provision is prohibited if it falls under one or more of the rule's six definitions of extraneous that is, a provision is considered extraneous if 1. it does not produce a change in outlays or revenues or a change in the terms and conditions under which outlays are made or revenues are collected; 2. it produces an outlay increase or revenue decrease when the instructed committee is not in compliance with its instructions; 3. it is outside of the jurisdiction of the committee that submitted the title or provision for inclusion in the reconciliation measure; 4. it produces a change in outlays or revenues that is merely incidental to the nonbudgetary components of the provision; 5. it would increase the deficit for a fiscal year beyond the "budget window" covered by the reconciliation measure; or 6. it recommends changes in Social Security. CRS does not determine whether specific legislative provisions might violate the Senate's Byrd rule (the Senate Parliamentarian and the Senate Budget Committee may provide authoritative guidance). Nevertheless, it may be useful to first examine whether a provision of interest might be projected to produce a change in outlays or revenues (or a change in the terms and conditions under which outlays are made or revenues are collected). If a provision is not projected to produce such a change, it may be considered extraneous and therefore prohibited. It should be noted, however, that even if a provision does have such a budgetary impact, it still might be considered extraneous if the change in outlays or revenues is considered to be merely incidental to the nonbudgetary components of the provision. The question of what changes to financial regulation might not be projected to have a budgetary impact (and, thus, would be considered extraneous, and therefore prohibited in reconciliation) is not easily answered. This is because such legislation would typically provide regulators with a change to their mandate or authority (e.g., increasing or decreasing a regulator's responsibilities by adding or eliminating the authority to regulate a specific activity), but not include language that makes changes that would directly relate to funding. For example, legislation might make changes that increase or decrease a regulator's responsibilities (e.g., by adding or eliminating the authority to regulate a specific activity); such legislation need not include changes to regulators' budget levels because, among other reasons, all of the regulators in Table 1 except the SEC and the CFTC set their own budgets. For any regulator that sets its own budget, it would be at the discretion of that regulator to decide whether to respond to the change in its responsibilities by increasing or decreasing its budget, respectively, or by handling its changed responsibilities within the same budget levels. If the regulator did subsequently increase or decrease its budget in response, that action might be projected beforehand to affect direct spending. If such actions were projected to have a budgetary effect, it is unclear whether that effect might nevertheless be considered merely incidental to the policy impact of the legislative provision and therefore in violation of the Byrd rule. Another example of proposed regulatory reform that would likely be considered extraneous is related to moving the funding for financial regulators to the annual appropriations process. Such proposals typically include authorizations of appropriations for financial regulators, the funding for which subsequently would be provided by appropriations legislation. Because authorizations of appropriations do not provide budget authority, they typically are not viewed as producing a change in spending (or a change in the terms and conditions under which outlays are made or revenues are collected) and therefore may be prohibited under the Byrd rule. It has been argued, however, that a few financial regulatory proposals might be projected to have a budgetary impact and therefore be more likely to be eligible for inclusion in reconciliation. In attempting to determine what might qualify for inclusion in reconciliation, it may be helpful to examine some of the few provisions of the Dodd-Frank Act that were scored by the Congressional Budget Office (CBO) as having a budgetary impact. As discussed above, many regulatory relief proposals have focused on changing parts of the Dodd-Frank Act. Fees Assessed on Financial Institutions. To finance specific new regulatory duties, the Dodd-Frank Act creates a number of new fees that CBO scored as increasing general revenues. For example, the Dodd-Frank Act assesses fees on certain large financial institutions to finance losses to the Orderly Liquidation Fund, the budget of the Office of Financial Research, and the Federal Reserve's supervisory responsibilities under Title I of the act. CBO also scored the Orderly Liquidation Fund and the Office of Financial Research's budget as increasing direct spending. Changes That Affect B orrow ing from Treasury. The Dodd-Frank Act affects the ability of the Federal Deposit Insurance Corporation (FDIC) and the Securities Investor Protection Corporation to borrow from the Department of the Treasury to temporarily cover certain losses and the likelihood that those agencies would experience losses. Although these agencies must repay any Treasury borrowing, these provisions were scored as having an impact on the level of direct spending within the 10-year scoring window since repayment is not instantaneous. Agency Funding Sources. The Dodd-Frank Act requires the Federal Reserve to transfer a fixed amount of revenues to the CFPB to finance its operations. Spending by the CFPB is recorded in the federal budget as direct spending and is dependent on the transfer under current law. Bills from previous Congresses that eliminated the Fed transfer have been scored by CBO to reduce direct spending. Funds P rovided to A gencies O utside the A ppropriations P rocess. The Dodd-Frank Act allowed the SEC to deposit up to $100 million of fees in a newly created reserve fund that could be spent at the SEC's discretion. CBO scored this as increasing direct spending. Previously, the SEC's budget was provided solely through annual appropriations. Most of these examples involve the resources available to a regulator to carry out some specified regulatory duty; changes to those resources would affect its ability to carry out that duty. Each of these examples, however, represents just one aspect of a broader policy area. Although legislative provisions related to a narrow aspect of that broad policy might be eligible on its own for inclusion in reconciliation, other changes related to that policy area might not. Because the Byrd rule applies to any specific matter within reconciliation legislation, provisions that make broad changes still might be stricken for violating the Byrd rule even if they are coupled with a change that might be eligible for inclusion. For example, in the past, the proposal to eliminate the Fed's transfer to the CFPB has been paired with broader reforms to the CFPB's budgetary status, structure, powers, and mission. If it were determined that these broader reforms had no budgetary impact, they would arguably be considered extraneous even if changes to the Fed transfer provision were considered eligible under the Byrd rule on its own. <4.3. Appropriations> Annual appropriations legislation provides Congress a regular opportunity to consider changes to financial policy. Appropriations legislation can provide funds or prohibit the use of funds to an agency in a specific policy area. More generally, Congress can change the overall level of an agency's funding, which would have implications for its capacity to perform rulemaking, supervision, and enforcement. However, the SEC and the CFTC are the only two financial regulators that are currently funded primarily through the appropriations process. In addition, appropriations bills might include "policy riders" that make policy changes to financial regulators, whether or not those agencies receive appropriations. Congress has recently included legislative language in appropriations bills that would make changes affecting agencies that do not receive appropriations. Using the Dodd-Frank Act as an example, the FY2016 Consolidated Appropriations Act ( P.L. 114-113 ) made minor changes to the CFPB, the Orderly Liquidation Authority, and swaps regulation, and the FY2015 Consolidated and Further Continuing Appropriations Act ( P.L. 113-235 ) made minor changes to the swap pushout rule and rescinded funds from the SEC's reserve fund. Some recent versions of the Financial Services and General Government appropriations (FSGG) bill that have not become public law have included more significant changes to financial regulation. For example, in the 114 th Congress, the FY2017 House FSGG bill ( H.R. 5485 ) included provisions that would have eliminated the CFPB's funding source (a transfer from the Federal Reserve) and authorized appropriations for the CFPB. It also would have changed the leadership structure of the CFPB from a single head to a five-member bipartisan board and delayed implementation of a CFPB regulation on payday loans. In addition, it would have restricted the use of appropriated funds by the SEC to implement rules on conflict minerals and the pay ratio. This bill passed the House but was never taken up by the Senate. In the Senate, a comprehensive regulatory relief bill with dozens of provisions ( S. 1484 ) was added to the FY2016 FSGG bill ( S. 1910 ) in 2015, which was reported to the Senate. <5. Approaches for Financial Regulators34> Financial policy is implemented mainly through regulations issued by the federal financial regulators, shown in Table 1 , not by agencies that are more directly influenced or controlled by the Administration. Although the authority for these regulations derives from statute, regulators often have considerable latitude to determine the practical details of how a regulation is structured and hence the regulatory burden it imposes. The financial regulators have been statutorily structured to be independent from the Administration, in the sense that they have greater autonomy from the President's leadership and insulation from partisan politics than is typical of executive-branch agencies. A number of organizational features found in some of these agencies, including self-funding and "for cause" (as opposed to "at will") removal, support this independence. In theory, a regulator could issue new regulations modifying or repealing any previously issued regulation, assuming in the case of repeal that the rule is not statutorily or judicially required to be in place. The repeal process can be time-consuming and must comply with certain mandated procedures, however. The vast majority of agency rulemakings must comply with the Administrative Procedure Act's (APA's; 5 U.S.C. 551 et seq.) notice and comment process, which requires an agency to provide the public with notice of a proposed rulemaking and a meaningful opportunity to comment on the rule. The APA explicitly defines rulemaking as "the agency process for formulating, amending, or repealing a rule ." Under the APA, the agency must provide a reasoned justification for repealing a rule. Proposed rules can be modified more quickly and easily than final rules. Each financial regulator currently has several proposed rules that have not yet been finalized. If a rule is in the proposed stage, a regulator can more easily modify it by withdrawing the proposed rule or by republishing a modified proposed rule for public comment. Sometimes, agencies decide not to finalize proposed rules, although a key factor in such a decision would be whether the statute requires or gives regulators the discretion to act. This discussion of an agency's ability to modify regulations says nothing about the financial regulators' desire to modify regulations. Until new leadership is appointed, regulators may have little desire to revisit regulations that they have issued recently under current or previous leadership. After a rule has been finalized, ensuring that firms comply with the regulation involves judgment by regulators. Regulators can alter how a regulation is interpreted and enforced using their supervisory and enforcement powers. Regulators can issue nonbinding guidance and supervisory letters to regulated entities providing further explanation of how to adhere to a regulation. Although changes in supervision and enforcement cannot substitute for the rulemaking process, they can subtly influence regulatory burden by changing how rules are complied with or enforced. High-profile examples of how supervision has influenced financial policy in recent years include a joint agency guidance on leveraged lending, a CFPB bulletin on indirect auto lending, and a joint agency statement on commercial real estate. Regulators also have latitude to change firms' behavior through enforcement powers. For example, numerous legal settlements surrounding mortgage lending following the financial crisis included codes of conduct and changes in business practices, which created new industry norms. <6. Approaches for the Administration47> The President's role in financial regulation is limited relative to other policy areas. The President may issue executive orders instructing agencies to undertake rulemaking, reports, or reviews. However, the President's ability to compel agency action likely differs depending on whether the agency is a traditional executive-branch agency or an independent regulatory agency. Financial regulators are independent regulatory agencies that are not required to coordinate their policy priorities with the President's. Although the President's scope of authority over independent regulatory agencies is not completely clear, the President generally is viewed as lacking the direct authority to order an independent regulatory agency to repeal a rule or revoke a discretionary agency directive or guidance document. The following sections highlight major areas where the President can directly influence financial regulation. The President may nominate individuals with similar priorities to fill an agency's leadership positions when those positions become vacant. In addition, the Treasury Secretary plays a role in financial regulation as the chair of the Financial Stability Oversight Council (FSOC). <6.1. Executive Orders48> On February 3, 2017, President Trump signed an executive order entitled "Core Principles for Regulating the United States Financial System." This order directed the Treasury Secretary, in consultation with FSOC, to report to the President within 120 days to "identify any laws, treaties, regulations, guidance, reporting and recordkeeping requirements, and other Government policies that inhibit Federal regulation of the United States financial system in a manner consistent with the Core Principles." The core principles are (a) empower Americans to make independent financial decisions and informed choices in the marketplace, save for retirement, and build individual wealth; (b) prevent taxpayer-funded bailouts; (c) foster economic growth and vibrant financial markets through more rigorous regulatory impact analysis that addresses systemic risk and market failures, such as moral hazard and information asymmetry; (d) enable American companies to be competitive with foreign firms in domestic and foreign markets; (e) advance American interests in international financial regulatory negotiations and meetings; (f) make regulation efficient, effective, and appropriately tailored; and (g) restore public accountability within Federal financial regulatory agencies and rationalize the Federal financial regulatory framework. The order does not revise or repeal any specific regulation, which can be done only through the standard rulemaking process. On January 30, 2017, President Trump issued Executive Order 13371, stating that for FY2017, (a) Unless prohibited by law, whenever an executive department or agency (agency) publicly proposes for notice and comment or otherwise promulgates a new regulation, it shall identify at least two existing regulations to be repealed. (b) For fiscal year 2017, which is in progress, the heads of all agencies are directed that the total incremental cost of all new regulations, including repealed regulations, to be finalized this year shall be no greater than zero, unless otherwise required by law or consistent with advice provided in writing by the Director of the Office of Management and Budget (Director). (c) In furtherance of the requirement of subsection (a) of this section, any new incremental costs associated with new regulations shall, to the extent permitted by law, be offset by the elimination of existing costs associated with at least two prior regulations. Any agency eliminating existing costs associated with prior regulations under this subsection shall do so in accordance with the Administrative Procedure Act and other applicable law. Although the President's ability to use executive orders as a means of implementing presidential power has been established as a matter of law and practice, it is equally well established that the substance of an executive order, including any requirements or prohibitions, may have the force and effect of law only if the presidential action is based on power vested in the President by the U.S. Constitution or delegated to the President by Congress. Because financial regulators are independent regulatory agencies, they cannot be compelled to comply with executive orders such as Executive Order 13371 that direct agencies to provide regulatory relief. Nevertheless, some agencies have indicated that they intend to voluntarily comply with certain executive orders. <6.2. Regulations Issued by the Administration> One notable postcrisis regulation issued by the previous Administration as opposed to an independent regulatory agency was the Department of Labor's (DOL's) 2016 fiduciary rule , which requires a uniform fiduciary standard for registered broker-dealers and investment advisers when giving financial advice on retirement accounts. Previously, broker-dealers were held to a lower "suitability" standard. On February 3, 2017, President Trump issued a presidential memorandum directing the DOL "to examine the Fiduciary Duty Rule to determine whether it may adversely affect the ability of Americans to gain access to retirement information and financial advice." If the DOL finds the fiduciary rule to be inconsistent with the priorities of the presidential memorandum, the memorandum directs the DOL to initiate rulemaking to rescind or revise the rule. <6.3. Treasury Secretary> The Treasury Secretary plays a key role in some of the new authorities that the Dodd-Frank Act created to promote financial stability. The Treasury Secretary has the opportunity to influence regulatory priorities through his position as chair of FSOC. FSOC is a council created by the Dodd-Frank Act and made up predominantly of the federal financial regulators that is tasked with identifying risks to financial stability, promoting market discipline, and responding to emerging threats to financial stability. As FSOC chair, the Treasury Secretary sets the council's agenda. FSOC has limited rulemaking authority, however. It can make recommendations to member agencies, but it cannot compel agencies to follow those recommendations. Potentially, these powers could be used to "name and shame" a member agency that is conducting activities with which the FSOC chair or other members disagree but the agency could choose to ignore that pressure. With the exception of limited authority regarding the CFPB, FSOC cannot override or reverse member agency rulemaking. FSOC's most notable rulemaking authority is its ability to designate nonbank financial institutions as systemically important financial institutions (SIFIs). SIFIs are subject to enhanced prudential regulation by the Federal Reserve. On April 21, 2017, President Trump issued a presidential memorandum calling for the Secretary of the Treasury to conduct a review of the SIFI designation process within 180 days. The memorandum recommended a temporary pause on designations until the review was complete. Currently, two insurers (AIG and Prudential) are designated as SIFIs. FSOC is required to review SIFIs' designations at least once a year. FSOC last designated a SIFI in December 2014. If a SIFI were de-designated, it would automatically cease to be subject to enhanced regulation. In a vote to designate a company as a SIFI, the FSOC chair has veto power. However, de-designating an existing SIFI requires a vote of two-thirds of FSOC, including the chair. In other words, the chair can unilaterally prevent a SIFI from being designated or de-designated but cannot unilaterally de-designate an existing SIFI. Title II of the Dodd-Frank Act created the Orderly Liquidation Authority (OLA) to resolve certain failing financial firms. OLA can only be triggered if the Treasury Secretary makes a determination, subject to a recommendation by the Fed and FDIC and subject to judicial review, that the firm's failure would "have serious adverse effects on financial stability," and no viable private alternative is available to OLA. OLA has never been used since its enactment in 2010. On April 21, 2017, President Trump issued a presidential memorandum calling for the Treasury Secretary to review OLA and refrain from using OLA until the review is complete. <6.4. Leadership Nominations> All the leadership positions at the financial regulators have fixed terms and are appointed by the President following Senate confirmation. Many recent reforms were approved by current agency leadership, who might therefore be reluctant to revisit them. Although not always specified in statute, it appears that the heads of financial regulators, in contrast with Cabinet Secretaries, typically do not serve at the pleasure of the President ("at will"). Instead, most financial regulators may be removed only if a higher "for cause" threshold is met. (An ongoing court case will determine whether the CFPB director's for cause removal status is constitutional given the unique structure of the CFPB.) Thus, opportunities to nominate individuals for these positions generally must wait until the positions become vacant as terms end or individuals step down prematurely. Over time, these positions will become vacant, allowing President Trump to nominate candidates to fill most, if not all, of them. On May 2, 2017, the Senate confirmed President Trump's nominee, Jay Clayton, to be chair of the SEC. At present, several positions are vacant, including the chairs of the OCC and the CFTC. President Trump's nominees for chairs of the OCC and the CFTC await Senate confirmation. Some financial regulators are led by a single director, and some are led by a multimember board or commission. Most, but not all, multimember boards or commissions have statutory political affiliation requirements that give the President's party a majority of seats but limit the number of board members from one party. These requirements might limit the number of like-minded nominees that the President could select.

The 2007-2009 financial crisis led to significant changes in financial regulation, but critics argue that the burden these changes have imposed now exceeds their benefits. Congress and the Administration are considering financial regulatory relief from various postcrisis regulatory changes, including the Dodd-Frank Act (P.L. 111-203). This report provides an overview of the options available to pursue that goal. Approaches for Congress Congress can mandate that regulators provide relief through legislation. Most relief legislation likely would follow the normal legislative process. For example, H.R. 10, a wide-ranging regulatory relief package, was passed by the House on June 8, 2017. Two special legislative procedures may be available in limited circumstances, however. The Congressional Review Act (CRA, 5 U.S.C. §§801-808) provides expedited procedures for Congress to overturn recently promulgated regulations. To date, the 115th Congress has used the CRA to overturn one Dodd-Frank Act rulemaking (disclosure requirements for resource-extraction firms). The reconciliation process provides for expedited consideration in the Senate, but is intended to be limited to provisions intended to change direct spending or revenues. Only a few of the funding provisions affecting financial regulators might meet these criteria. Approaches for Financial Regulators The vast majority of postcrisis regulatory reforms have been issued by independent financial regulators, not the Administration. In theory, the regulators issuing any regulation could issue new regulations modifying or repealing the original, provided they have authority under the authorizing statute to do so. But to overturn a final rule that has already been promulgated, regulators must initiate new rulemaking following the standard process, generally including notice and comment procedures. In addition, applying a regulation involves judgment by regulators. Regulators can alter how a regulation is interpreted and enforced using their supervisory (e.g., regulatory guidance and supervisory letters) and enforcement powers. Until new leadership is appointed, regulators may have little desire to revisit regulations that they have issued recently under current or previous leadership. Approaches for the Administration On February, 3, 2017, President Trump signed an executive order to "identify any laws, treaties, regulations, [and] guidance ... that inhibit Federal regulation of the United States financial system in a manner consistent with the Core Principles." One of the core principles is to "make regulation efficient, effective, and appropriately tailored." The order does not revise or repeal any specific regulation, which can be done administratively only through the standard rulemaking process. Because financial regulators are independent regulatory agencies, they cannot be compelled to comply with executive orders governing certain aspects of the rulemaking process. The Treasury Secretary has the opportunity to influence regulatory priorities through his position as chair of the Financial Stability Oversight Council (FSOC), a council made up predominantly of the federal financial regulators. FSOC has limited rulemaking authority, however. It can make recommendations to member agencies, but it cannot compel agencies to follow those recommendations. FSOC's most notable rulemaking authority is its ability to designate nonbank financial institutions as systemically important (SIFIs). One notable regulation issued by the previous Administration—as opposed to by an independent regulatory agency—was the Department of Labor's (DOL's) fiduciary rule, which requires a uniform fiduciary standard for registered broker-dealers and investment advisers when giving financial advice on retirement accounts. On February 3, 2017, President Trump issued a presidential memorandum directing the DOL to rescind or revise the rule if it "adversely affect(s) the ability of Americans to gain access to retirement information and financial advice." All the leadership positions at the financial regulators have fixed terms and are appointed by the President following Senate confirmation. Although most of these individuals may be removed only "for cause," over time, these positions will become vacant, allowing President Trump to nominate candidates to fill most, if not all, of them. At present, President Trump has filled the chair of the Securities and Exchange Commission (SEC), while several other positions are vacant, including the chairs of the Office of the Comptroller of the Currency (OCC) and the Commodity Futures Trading Commission (CFTC). Most, but not all, multimember boards or commissions have statutory political affiliation requirements that give the President's party a majority of seats but limit the number of seats that one party can hold.

<1. Introduction> When a Senator introduces a bill or joint resolution, the measure is usually referred to committee, pursuant to provisions of Senate Rules XIV, XVII, and XXV. When the House informs the Senate that it has passed a bill or joint resolution that was introduced in the House, and the Senate receives the measure, the measure is also usually referred to a Senate committee. (Senate rules contain procedures for processing concurrent and simple resolutions (Rule XIV, paragraph 6), treaties (Rule XXX), and nominations (Rule XXXI), which are not covered in this report.) Senate Rule XIV, paragraph 2 requires that bills and resolutions have three readings before passage, and that they be read twice before being referred to committee. (The "third reading" occurs before a vote on final passage.) Although a Senator may demand (under paragraph 2) that the readings occur on three different legislative days, bills and joint resolutions may be read twice on the same day "for reference" (referral) if there is no objection (under paragraph 3). Most bills and resolutions are read twice and referred to committee on the same day that they are introduced by a Senator or received from the House. The Senate may, however, use provisions of Senate Rule XIV to bypass referral of a bill or joint resolution to a Senate committee in order to have the measure placed directly on the Senate Calendar of Business. The calendar's General Orders section lists measures eligible for Senate floor consideration. Broadly, the two purposes of preventing the referral of a bill or joint resolution to a committee and placing it directly on the calendar are (1) to facilitate the full Senate's opportunity to consider the measure; or (2) to bypass a committee's potential inaction or, to the measure's sponsor, potential hostile action. Although placing a bill or joint resolution directly on the calendar does not guarantee that the full Senate will ever consider it, the measure is available for floor consideration and certain procedural steps, such as committee reporting or discharging a committee from a bill's consideration, and procedural requirements, such as the two-day availability of a committee report, may be obviated. In this report, the terms bill ( s ) or measure ( s ) refer to bills and joint resolutions. <2. Procedure to Place a Measure Directly on the Calendar> Senate Rule XIV, paragraph 4, states: "... every bill and joint resolution introduced on leave, and every bill and joint resolution of the House of Representatives which shall have received a first and second reading without being referred to a committee, shall, if objection be made to further proceeding thereon, be placed on the Calendar ." ( Emphasis added .) Therefore, through objection, a bill or joint resolution after two readings is prevented from being referred to committee and is placed directly on the calendar. It is usually the majority leader (or another Senator in his stead), acting on his own or at the request of any other Senator, who objects to "further proceeding" committee referral on a measure. For example, this procedure was used to place S. 1035 directly on the calendar. On April 21, 2015, the presiding officer recognized Majority Leader McConnell for this colloquy with the chair: Mr. McCONNELL. Mr. President, I understand that there is a bill at the desk, and I ask for its first reading. The PRESIDING OFFICER. The clerk will read the bill by title for the first time. The senior assistant legislative clerk read as follows: A bill ( S. 1035 ) to extend authority relating to roving surveillance, access to business records, and individual terrorists as agents of foreign powers under the Foreign Intelligence Surveillance Act of 1978 and for other purposes. Mr. McCONNELL. I now ask for a second reading and, in order to place the bill on the calendar under the provisions of rule XIV, I object to my own request. The PRESIDING OFFICER. Objection having been heard, the bill will be read for the second time on the next legislative day. In the next edition of the Senate's Calendar of Business on April 22, this action was recorded in the section Bills and Joint Resolutions Read the First Time. The measure was pending at the desk (of the presiding officer). Since objection had been heard to the second reading, the presiding officer recognized Majority Leader McConnell the next legislative day, April 22: Mr. McCONNELL. Mr. President, I understand there is a bill at the desk due for a second reading. The PRESIDING OFFICER. The clerk will read the bill by title for the second time. The legislative clerk read as follows: A bill ( S. 1035 ) to extend authority relating to roving surveillance, access to business records, and individual terrorists as agents of foreign powers under the Foreign Intelligence Surveillance Act of 1978 and for other purposes. Mr. McCONNELL. In order to place the bill on the calendar under the provisions of rule XIV, I object to further proceedings. The PRESIDENT pro tempore. Objection having been heard, the bill will be placed on the calendar. S. 1035 had received its second reading, but there was objection to further proceeding on referral of the bill to committee. The presiding officer, under Rule XIV, ordered that the bill be placed on the Senate Calendar. In the calendar beginning April 23, S. 1035 appeared as Calendar Order No. 60 in the section General Orders, with other measures eligible for floor consideration. This same procedure is followed to have House-passed bills and joint resolutions placed directly on the Senate Calendar. Bills and joint resolutions are also sometimes placed on the calendar by unanimous consent. (For a fuller examination of the Senate's use of the Rule XIV procedure and other procedures and actions to bypass committees, and also both to bypass committees and pass legislation, see CRS Report RS22299, Bypassing Senate Committees: Rule XIV and Unanimous Consent , by Michael L. Koempel.)

When a Senator introduces a bill or joint resolution, or a House-passed bill or joint resolution is received in the Senate from the House, the measure is often referred to committee, pursuant to provisions of Senate Rules XIV, XVII, and XXV. The Senate may, however, use provisions of Senate Rule XIV to bypass referral of a bill or joint resolution to a Senate committee, and have the measure placed directly on the Senate Calendar of Business. Although placing a bill or joint resolution directly on the calendar does not guarantee that the full Senate will ever consider it, the measure is available for floor consideration and certain procedural steps or requirements may be obviated. Such procedural steps include committee reporting or discharging a committee from a bill's consideration, and such procedural requirements include the two-day availability of a committee report. Senate rules contain procedures for processing concurrent and simple resolutions, treaties, and nominations, which are not covered in this report. A Senator may also offer a germane, relevant, or nongermane amendment to a measure pending on the Senate floor, in addition to or instead of introducing a bill or joint resolution. Amendments are also not covered in this report. This report will not be updated again in the 115th Congress unless Senate procedures change. For a fuller examination of the Senate's use of the Rule XIV procedure and other procedures and actions to bypass committees, and also both to bypass committees and pass legislation, see CRS Report RS22299, Bypassing Senate Committees: Rule XIV and Unanimous Consent, by Michael L. Koempel.

<1. 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. <2. 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. <3. 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. <4. 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. <5. 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. <6. 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. <6.1. 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. <6.2. 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. <7. 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. <7.1. 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. <8. 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. <9. 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. <9.1. 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. <9.2. 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. <9.3. 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. <10. 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. <11. 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. <11.1. 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. <11.2. 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. <11.3. 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. <12. 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.

<1. Introduction> The executive branch of the U.S. federal government has mandated for decades that developers of border crossing energy facilities must first obtain a Presidential Permit. Until recently, this administrative oversight was undertaken with little fanfare. However, controversy over the proposed Keystone XL oil pipeline a project that would transport oil sands crude from Alberta, Canada, into the United States has focused attention on federal permitting of energy infrastructure border crossings. Generally, the construction, operation, and maintenance of facilities that cross the U.S.-Mexico or U.S.-Canada border must be authorized by the federal government through the issuance of a Presidential Permit in accordance with requirements set forth in a series of executive orders. This report discusses these executive orders, including the source of the executive branch authority to issue the orders, the standards set forth in the orders, and the projects approved pursuant to the orders. The report also discusses proposed changes to the Presidential Permitting framework in the Promoting Cross-Border Energy Infrastructure Act ( H.R. 2883 ), which passed in the House on July 19, 2017. <1.1. Oil and Products Pipelines> The executive branch exercises 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 pursuant to a series of executive orders. This authority has been vested in the U.S. State Department 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 its delegation to the Secretary of State. Executive Order 11423 provided that, except with respect to cross-border permits for electric energy facilities, natural gas facilities, and submarine facilities: The Secretary of State is hereby designated and empowered to receive all applications for permits for the construction, connection, operation, or maintenance, at the borders of the United States, of: (i) pipelines, conveyor belts, and similar facilities for the exportation or importation of petroleum, petroleum products, coal, minerals, or other products to or from a foreign country; (ii) facilities for the exportation or importation of water or sewage to or from a foreign country; (iii) monorails, aerial cable cars, aerial tramways and similar facilities for the transportation of persons or things, or both, to or from a foreign country; and (iv) bridges, to the extent that congressional authorization is not required. Executive Order 13337 designates and empowers the Secretary of State to "receive all applications for Presidential Permits, as referred to in Executive Order 11423, as amended, for the construction, connection, operation, or maintenance, at the borders of the United States, of facilities for the exportation or importation of petroleum, petroleum products, coal, or other fuels to or from a foreign country. " Executive Order 13337 further provides that after consideration of the application and comments received: If the Secretary of State finds that issuance of a permit to the applicant would serve the national interest, the Secretary shall prepare a permit, in such form and with such terms and conditions as the national interest may in the Secretary's judgment require, and shall notify the officials required to be consulted ... that a permit be issued. Thus the Secretary of State is directed by the order to authorize those border crossing facilities that the Secretary has determined would "serve the national interest," although the text of the Executive Order provides no further guidance on what is considered to "serve the national interest." Agency documents for a specific permit have discussed the "national interest" determination stating, for example, that "determination of national interest involves consideration of many factors, including: energy security; environmental, cultural, and economic impacts; foreign policy; and compliance with relevant federal regulations." One example of a national interest determination is the one made for Enbridge Energy's Alberta Clipper crude oil pipeline, which was issued a Presidential Permit by the State Department in August 2009. The 36-inch-diameter pipeline provides crude oil transportation from the oil sands region of Alberta, Canada, to oil markets in the Midwestern United States, crossing the international border in North Dakota. The State Department's national interest determination concluded that, for this particular project, the addition of crude oil pipeline capacity between Canada and the United States would advance a number of U.S. "strategic interests." These included increasing the diversity of available supplies among the United States' worldwide crude oil sources in a time of considerable political tension in other major oil producing countries and regions; shortening the transportation pathway for crude oil supplies; and increasing crude oil supplies from a major non-Organization of Petroleum Exporting Countries producer. Canada is a stable and reliable ally and trading partner of the United States, with which we have free trade agreements which augment the security of this energy supply.... Approval of the permit sends a positive economic signal, in a difficult economic period, about the future reliability and availability of a portion of United States' energy imports, and in the immediate term, this shovel-ready project will provide construction jobs for workers in the United States.... The State Department also considered the greenhouse gas emissions associated with the project, concluding that "the reduction of greenhouse gas emissions are best addressed through each country's robust domestic policies and a strong international agreement." The State Department has considerable discretion with respect to making national interest determinations, so its conclusions for one project may not apply to another due to differences in project configuration, energy market conditions, technology, environmental conditions, and other important factors. Thus, Presidential Permit applications even for projects that appear similar are evaluated on a case-by-case basis by the agency and may realize different permit outcomes. <1.2. Natural Gas Pipelines and Electric Transmission> Executive Orders 11423 and 13337 explicitly exclude cross-border natural gas pipelines and electric energy facilities (among others) from their reach. Instead, permitting for these facilities is addressed in the Federal Power Act, the Natural Gas Act, and Executive Order 10485. Executive Order 10485 designates and empowers the now-defunct Federal Power Commission: (1) To receive all applications for permits for the construction, operation, maintenance, or connection, at the borders of the United States, of facilities for the transmission of electric energy between the United States and a foreign country. (2) To receive all applications for permits for the construction, operation, maintenance, or connection, at the borders of the United States, of facilities for the exportation or importation of natural gas to or from a foreign country. (3) Upon finding the issuance of the permit to be consistent with the public interest, and, after obtaining the favorable recommendations of the Secretary of State and the Secretary of Defense thereon, to issue to the applicant, as appropriate, a permit for such construction, operation, maintenance, or connection. The Secretary of Energy shall have the power to attach to the issuance of the permit and to the exercise of the rights granted thereunder such conditions as the public interest may in its judgment require. In many ways this authority resembles the authority granted to the State Department in Executive Orders 11423 and 13337. However, as mentioned above, those orders do not describe the source of the executive branch permitting authority granted by the orders. Judicial opinions have found that this permitting authority is a legitimate exercise of the President's "inherent constitutional authority to conduct foreign affairs." By contrast, Executive Order 10485 cites federal statutes for the permitting authority granted to the Department of Energy. The order states: Section 202(e) of the Federal Power Act, as amended ... requires any person desiring to transmit any electric energy from the United States to a foreign country to obtain an order from the Federal Power Commission authorizing it to do so... Section 3 of the Natural Gas Act ... requires any person desiring to export any natural gas from the United States to a foreign country or to import any natural gas from a foreign country to the United States to obtain an order from the Federal Power Commission authorizing it to do so. Executive Order 10485 empowered the Federal Power Commission (FPC) to receive applications for and to issue Presidential Permits for cross-border electric facilities. The Department of Energy Organization Act of 1977 eliminated the Federal Power Commission, transferring its functions to either the newly created Department of Energy (DOE) or the Federal Energy Regulatory Commission (FERC), an independent federal agency that regulates the interstate transmission of electricity, natural gas, and oil. Section 402(f) of the act specifically reserved import/export permitting functions for DOE rather than FERC. As a result, DOE took over the FPC's Presidential Permit authority for border crossing facilities under Executive Order 10485 pursuant to the act. The authority to issue Presidential Permits for natural gas pipeline border crossings was subsequently transferred to FERC in 2006 via DOE Delegation Order No. 00-004.00A. <1.3. Modifications: When is a New or Amended Permit Needed?> As described above, Presidential Permits authorize specific border crossing facilities. Obviously a new facility requires a new Presidential Permit, and a significant overhaul of existing facilities would similarly require a new or amended Permit to authorize the changed facility. On the other hand, at some point a change to a facility is presumably small enough that no new permit would be required. Because every border crossing facility and proposed modification is different, there is no bright line rule about when a proposed modification is significant enough to require a new or amended Presidential Permit. For example, the Presidential Permit issued by the State Department in 2013 for the NOVA Chemicals natural gas liquids pipeline states "the permittee shall make no substantial change in the United States facilities, the location of the United States facilities, or in the operation authorized by this permit until such changes have been approved by the Secretary of State or the Secretary's delegate." Thus, whether a Presidential Permit must be amended ultimately will depend on both the nature of the modification and on the exact nature of the authorization found in the existing permit language. However, the relevant agencies have provided some helpful guidance on this subject. <1.3.1. FERC Review of Natural Gas Pipeline Modifications> FERC regulations governing authorization of facilities to construct, operate, or modify natural gas import/export facilities are set forth at 18 C.F.R. Part 153. Applications for Presidential Permits are subject to these regulatory requirements. 18 C.F.R. 153.5 articulates "who should apply" for such FERC authorizations. The regulation provides that any person proposing to site, construct, or operate natural gas import or export facilities or to "amend an existing Commission authorization, including the modification of existing authorized facilities," must apply for a permit. <1.3.2. State Department Review of Oil Pipeline Modifications> In February 2007, the State Department's Bureau of Western Hemisphere Affairs Office of Canadian Affairs published Interpretive Guidance on Non-Pipeline Elements of E.O. 13337, A mending E.O. 11423 . As the title indicates, the document is not binding with respect to pipeline facilities, although dialogue with State Department staff indicated that the guidance found in the document would be applied in a similar manner to pipeline facility permitting decisions. It may also be informative as applied to how other agencies may view the need for new or amended Presidential Permits for the facilities under their purview. According to the Interpretive Guidance , any "substantial modifications of existing border crossings" would fall under Executive Order 13337 and thus require a new or amended Presidential Permit. The Interpretive Guidance defines "substantial modifications" as 1. An expansion beyond the existing footprint or land port-of-entry inspection facility, including its grounds, approaches, and appurtenances, at an existing border crossing in such a way that the modification effectively constitutes a new piercing of the border; 2. a change in ownership of a border crossing that is not encompassed within or provided for under an applicable Presidential permit; 3. a permanent change in authorized conveyance (e.g., commercial traffic, passenger vehicles, pedestrians, etc.) not consistent with (a) What is stated in an applicable Presidential permit, or (b) current operations if a Presidential permit or other operating authority has not been established for the facility; or 4. any other modification that would render inaccurate the definition of covered U.S. facilities set forth in an applicable Presidential permit. The Interpretive Guidance also provides that projects should be placed in one of three categories: Red (both notification to the State Department and a new or amended permit is required), Yellow (notification required and a new permit may be required), and Green (neither notification nor a permit required). The "Red" category is described in language similar to that found in the document's definition of a "substantial modification." The "Yellow" category includes capacity changes, temporary changes due to construction projects and changes in responsibility for ownership, operations, or maintenance, among other things. The "Green" category includes regular maintenance and repair work, exterior changes to a facility within its existing footprint, systems changes (e.g., HVAC, electrical), and changes made at the request or direction of the State Department, among other changes. <1.3.3. Department of Energy Review of Electric Transmission Modifications> DOE regulations provide limited express guidance as to when an electric transmission facility modification is significant enough to trigger a requirement that a new or amended Presidential Permit be obtained. For example, DOE regulations note that a new permit application is required when the border crossing facility changes ownership. Recent permitting decisions, however, suggest that any modification that goes beyond regular maintenance and may have reliability impacts would likely require the party to obtain a new or amended Presidential Permit. For example, a new Presidential Permit issued to Energia Sierra Juarez by DOE in August 2012 provided in part that the permit should be amended if/when subsequent phases of a related wind generation project necessitate changes to the facility, including higher capacity transmission lines or other changes that could impact the reliability of the U.S. power grid. Six months earlier, DOE issued a new Presidential Permit to ITC Transmission to account for transformer upgrades at an existing facility. <2. Executive Branch Authority: Constitutional Issues> The source of the executive branch's permitting authorities in the Executive Orders described above is not explicitly stated in all cases. Powers exercised by the executive branch are authorized by legislation or are inherent presidential powers based in the Constitution. Executive Order 11423 does not reference any statute or constitutional provision as the source of its authority, although it does state that "the proper conduct of foreign relations of the United States requires that executive permission be obtained for the construction and maintenance" of border crossing facilities. Executive Order 13337 refers only to the "Constitution and the Laws of the United States of America, including Section 301 of title 3, United States Code. " 27 3 U.S.C. 301 simply provides that the President is empowered to delegate authority to the head of any department or agency of the executive branch. Executive Order 10485 cites Section 202(e) of the Federal Power Act as a source of executive branch authority to permit cross-border electricity transmission facilities and Section 3 of the Natural Gas Act as a source of the executive branch authority to permit cross-border natural gas pipelines. It also states that "the proper conduct of the foreign relations of the United States requires that executive permission be obtained for the construction and maintenance at the borders of the United States of facilities for the exportation or importation of electric energy and natural gas." Federal courts have addressed the legitimacy of cross-border permitting authority not explicitly granted by statute. In Sisseton-Wahpeton Oyate v. U.S. Department of State , the plaintiff tribes asked the court to suspend or revoke a presidential permit issued under Executive Order 13337 for the TransCanada Keystone Pipeline. The plaintiffs claimed that the issuance of the national interest determination and the border crossing permit for the project violated NEPA and the Administrative Procedure Act (APA). The U.S. District Court for the District of South Dakota determined that even if the plaintiffs' 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 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." In Sierra Club v. Clinton , the plaintiff Sierra Club challenged the Secretary of State's 2009 decision to issue a permit authorizing the Alberta Clipper. The plaintiff claimed that issuance of the permit was unconstitutional because the President had no authority to issue the permits referenced in Executive Order 13337. The defendant responded that the authority to issue 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 those permits and Congress's implied approval through inaction, the court found the permit requirement for border facilities constitutional. <2.1. Legislative Proposals for Cross-Border Permits> As the aforementioned cases show, courts have analyzed the President's exercise of cross-border infrastructure permitting authority and have held that it is a legitimate exercise of the President's constitutional authority, and that it does not require legislative authorization. However, they have indicated that congressional inaction plays a role in validating this exercise of executive branch authority, suggesting that these roles could be amended through legislation should Congress choose to do so. During the Obama presidency, Congress considered various bills to amend the presidential permitting process generally, or to authorize construction and operation of the Keystone XL border crossing facility. The January 24, 2017, Executive Memorandum issued by President Trump and the subsequent permitting of the Keystone XL pipeline border crossing facility by the State Department in accordance with that Memorandum appear to have obviated the need for the latter in this case. However, many in Congress still seek to overhaul the existing permitting framework, which was created entirely by the executive branch, in favor of a framework established by statute. Accordingly, on July 19, 2017, the House passed the Promoting Cross-Border Energy Infrastructure Act ( H.R. 2883 ). Among other provisions, the act would eliminate the Presidential Permit requirement for cross-border crude oil, petroleum products, natural gas, and electric transmission infrastructure ( 2(d)). Instead, developers would require "certificates of crossing" from FERC for cross-border oil, petroleum products, and gas pipelines, or from DOE for cross-border electric transmission ( 2(a)(2)). However, the statute does not appear to apply to other hazardous liquids infrastructure notably natural gas liquids (e.g., propane) pipelines so the State Department would retain its traditional Presidential Permit authority for these facilities.

Controversy over the proposed Keystone XL pipeline project has focused attention on U.S. requirements for authorization to construct and operate pipelines and other energy infrastructure at international borders. For the most part, developers are required to obtain a Presidential Permit for border crossing facilities. The agency responsible for reviewing applications and issuing Presidential Permits varies depending on the type of facility. Oil and other hazardous liquids pipelines that cross borders are authorized by the U.S. Department of State. Natural gas pipeline border crossings are authorized by the Federal Energy Regulatory Commission (FERC). Electricity transmission facilities are authorized by the Department of Energy (DOE). CRS has identified over 100 operating or proposed oil, natural gas, and electric transmission facilities crossing the U.S.-Mexico or U.S.-Canada border. The authority for federal agencies to review applications and issue Presidential Permits for oil pipelines comes from a series of executive orders. These executive orders have been upheld by the courts as legitimate exercises of the President's constitutional authority over foreign affairs as well as his authority as Commander in Chief. It is worth noting, however, that Congress has enacted statutes applying to cross-border natural gas and electric transmission facilities that require developers of such projects to apply for authorization from executive branch agencies. In recent years, in the context of the Presidential Permit application for the proposed Keystone XL crude oil pipeline project, Congress has attempted to modify the permitting process for border crossing energy facilities. An Executive Memorandum issued on January 24, 2017, by President Trump inviting TransCanada Corp. to resubmit its Presidential Permit application for the Keystone XL border crossing facility, and the Administration's subsequent issuance of the Presidential Permit, reduced any need for legislative action in order to authorize the border crossing for that particular project. However, Congress remains interested in overhauling the existing permitting framework, which was created exclusively by the executive branch, in favor of a framework which would be established by statute. Accordingly, on July 19, 2017, the House passed the Promoting Cross-Border Energy Infrastructure Act (H.R. 2883), which would eliminate the Presidential Permit requirement for cross-border crude oil, petroleum products, natural gas, and electric transmission infrastructure. Instead, developers would require "certificates of crossing" from FERC for cross-border oil, petroleum products, and gas pipelines, or from DOE for cross-border electric transmission. The statute does not appear to apply to other hazardous liquids infrastructure—notably natural gas liquids (e.g., propane) pipelines—so the State Department would retain its traditional Presidential Permit authority for these facilities.

<1. Most Recent Developments> On January 22, 2004, the Senate passed (65-28) the conference report on H.R. 2673 , the Consolidated Appropriations Act, 2004. Division D ofthe legislation includes a reconciled version of Foreign Operations funding forFY2004 as approved earlier by the House and Senate as H.R. 2800 . TheHouse approved (242-176) the conference agreement on December 8. PresidentBush signed the measure on January 23 ( P.L. 108-199 ). The conference agreement on H.R. 2673 provides $17.48 billion for Foreign Operations, a figure that includes a 0.59% across-the-board rescissionand additional amounts for the Millennium Challenge Account specified in DivisionH of the bill. This represents a $1.4 billion, or a 7.4% reduction from the President'srequest, but $1.3 billion, or 7.9% higher than approved in regular Foreign Operationsspending for FY2003. The actual reduction to the executive's budget FY2004proposal, however, is unlikely to be as significant as this comparison suggests. Byutilizing funds provided in the Iraq reconstruction supplemental ( P.L. 108-106 ) andauthority included in H.R. 2673 to transfer Iraq reconstruction moneyfor requested regular Foreign Operations programs, the President could makeavailable as much as $575 million to fund his original FY2004 proposal withoutdrawing on the $17.48 billion provided in H.R. 2673 . If theAdministration chooses to utilize these resources from the Iraq reconstructionsupplemental, the difference between the FY2004 request and the conferenceagreement would be about $850 million, or a 4.5% cut. Despite the overall reduction, the conference agreement increases spending for international HIV/AIDS, malaria, and tuberculosis programs to $1.646 billion. Whenthis amount is combined with appropriations in the pending Labor/HHS/Educationappropriation (Division E of H.R. 2673 ), the total for global HIV/AIDSand other infectious diseases is $2.4 billion, or roughly $400 million above thePresident's request. Conferees further agreed to a $400 million contribution to theGlobal Fund for AIDS, Malaria, and Tuberculosis that together with an additional$150 million for the Fund in Division E, would bring the total level to $550 million,rather than the Administration's $200 million proposal. The conference agreement further authorizes and appropriates funds for the Millennium Challenge Account (MCA), one of the top Presidential aid initiatives. Division D of H.R. 2673 provides $650 million for the MCA, whileDivision H includes an additional $350 million, for a total MCA appropriation of $1billion. On another major policy matter, the conferees dropped Senate language thatwould have effectively reversed the President's "Mexico City" abortion-relatedrestrictions placed on international family planning programs during the BushAdministration. The conference agreement further appropriates $34 million for theU.N. Population Fund (UNFPA), but under the same conditions ("Kemp-Kasten"amendment) that has led to the withholding of U.S. contributions to the UNFPA thepast two years because of the organization's program in China. <2. Introduction> The annual Foreign Operations appropriations bill is the primary legislativevehicle through which Congress reviews and votes on the U.S. foreign assistancebudget and influences major aspects of executive branch foreign policy makinggenerally. (1) It contains the largest share -- abouttwo-thirds -- of total internationalaffairs spending by the United States (see Figure 1 ). The legislation funds all U.S. bilateral development assistance programs, managed mostly by the U.S. Agency for International Development (USAID),together with several smaller independent foreign aid agencies, such as the PeaceCorps and the Inter-American and African Development Foundations. Mosthumanitarian aid activities are funded within Foreign Operations, including USAID'sdisaster program and the State Department's refugee relief support. ForeignOperations includes separate accounts for aid programs in the former Soviet Union(also referred to as the Independent States account) and Central/Eastern Europe,activities that are jointly managed by USAID and the State Department. Security assistance (economic and military aid) for Israel and Egypt is also part of the Foreign Operations spending measure, as are other security aid programsadministered largely by the State Department, in conjunction with USAID and thePentagon. U.S. contributions to the World Bank and other regional multilateraldevelopment banks, managed by the Treasury Department, and voluntary paymentsto international organizations, handled by the State Department, are also funded inthe Foreign Operations bill. Finally, the legislation includes appropriations for threeexport promotion agencies: the Overseas Private Investment Corporation (OPIC),the Export-Import Bank, and the Trade and Development Agency. For nearly two decades, the Foreign Operations appropriations bill has been theprincipal legislative vehicle for congressional oversight of foreign affairs and forcongressional involvement in foreign policy making. Congress has not enacted acomprehensive foreign aid authorization bill since 1985, leaving most foreignassistance programs without regular authorizations originating from the legislativeoversight committees. As a result, Foreign Operations spending measures developedby the appropriations committees increasingly have expanded their scope beyondspending issues and played a major role in shaping, authorizing, and guiding bothexecutive and congressional foreign aid and broader foreign policy initiatives. It hasbeen largely through Foreign Operations appropriations that the United States hasmodified aid policy and resource allocation priorities since the end of the Cold War. The legislation has also been the channel through which the President has utilizedforeign aid as a tool in the global war on terrorism since the attacks of September 11,2001. The appropriations measure has also been a key instrument used by Congressto apply restrictions and conditions on Administration management of foreignassistance, actions that have frequently resulted in executive-legislative clashes overpresidential prerogatives in foreign policy making. <3. Status> Table 1. Status of Foreign OperationsAppropriations, FY2004 * The House Foreign Operations bill was H.R. 2800 , while the Senate was S. 1426 . Foreign Operations was merged into the conference agreement on H.R. 2673 , the Consolidated Appropriations Act, 2004. President Bush submitted his FY2004 federal budget request to Congress on February 3, 2003, including funding proposals for Foreign Operations Appropriationsprograms. Subsequently, on March 25, the White House requested FY2003emergency supplemental funds for costs of military operations in Iraq, relief andreconstruction of Iraq, ongoing U.S. costs in Afghanistan, additional aid to coalitionpartners and nations cooperating in the global war on terrorism, and homelandsecurity. House and Senate Appropriations Committees held several hearings onboth the FY2004 and FY2003 supplemental requests, and approved the supplemental( P.L. 108-11 ) on April 12. Subsequently, the Administration requested on September17 another Iraq military operations and reconstruction supplemental for FY2004( H.R. 3289 ) which Congress cleared on November 3 ( P.L. 108-106 ). For the regular FY2004 Foreign Operations bill, the House Foreign Operations Subcommittee marked up draft legislation on July 11, while the full House panelapproved the legislation on July 16 and reported the measure on July 21. The Housepassed H.R. 2800 on July 23 (370-50). The Senate Committee reportedits companion bill, S. 1426 , on July 17, and passed the measure as H.R. 2800 on October 30. On November 17, a Foreign Operationsconference committee met and reached agreement on most, but not all issues indisagreement. Conferees adjourned pending the resolution of the outstandingmatters, most of which related to international family planning funding and policyissues. After resolving these remaining issues, however, instead of filing a separate conference report on H.R. 2800 , the House and Senate AppropriationCommittees decided to incorporate the Foreign Operations bill into H.R. 2673 , the Consolidated Appropriations Act, FY2004. H.R. 2673 included seven appropriation bills that had not received final action as separatemeasures. The House approved the conference report on the ConsolidatedAppropriations bill on December 8, followed by the Senate on January 22, 2004. ThePresident signed the bill on January 23. <4. Foreign Operations Funding Trends> As shown in Figure 2 below, Foreign Operations funding levels, expressed inreal terms taking into account the effects of inflation, have fluctuated widely over thepast 27 years. (2) After peaking at over $33 billion in FY1985 (constant FY2004dollars), Foreign Operations appropriations began a period of decline to $13.9 billionin FY1997, with only a brief period of higher amounts in the early 1990s due tospecial supplementals for Panama and Nicaragua (1990), countries affected by theGulf War (1991), and the former Soviet states (1993). Arguing that declining international affairs resources seriously undermined U.S.foreign policy interests and limited the ability of American officials to influenceoverseas events, Clinton Administration officials and other outside groups vigorouslycampaigned to reverse the decade-long decline in the foreign policy budget. Foreignaid spending increased slightly in FY1998, but beginning the following year andcontinuing to the present, Foreign Operations appropriations have trended upwarddue in large part to the approval of resources for special, and in some casesunanticipated foreign policy contingencies and new initiatives. Although funding forregular, continuing foreign aid programs also rose modestly during this period,supplemental spending for special activities, such as Central American hurricanerelief (FY1999), Kosovo emergency assistance (FY1999), Wye River/Middle Eastpeace accord support (FY2000), a counternarcotics initiative in Colombia and theAndean region (FY2000 and FY2002), aid to the front line states in the war onterrorism and Iraq-war related assistance (FY2003), was chiefly responsible for thegrowth in foreign aid appropriations. The average annual funding level during theFY1999-FY2002 period of $17.29 billion represents a level 24% higher than the lowpoint in Foreign Operations appropriation in FY1997. Although Foreign Operations appropriations had been rising for five consecutive years, amounts approved in FY2003 and FY2004 have reached unprecedented levelsover the past 40 years. Regular appropriations approved in these two years haveroughly been on par with amounts of the previous few years. But substantialsupplementals of $7.5 billion and $21.2 billion, respectively, for assistance to thefront line states in the war on terrorism and Afghanistan and Iraq reconstruction, havepushed spending upward. The regular Foreign Operations bill, signed by thePresident on January 23, 2004, combined with an earlier Iraq supplemental approvedin November 2003 ( P.L. 108-106 ), bring current year appropriations to $38.7 billion,the highest level, in real terms, since the early 1960s. Supplemental resources for Foreign Operations programs, which in FY2004 exceed the regular funding amount, have become a significant channel of funding forU.S. international activities. Due to the nature of rapidly changing overseas eventsand the emergence of unanticipated contingencies to which it is in the U.S. nationalinterest to respond, it is not surprising that foreign aid and defense resources fromtime to time are the major reason for considering and approving supplementalspending outside the regular appropriation cycle. Supplementals have providedresources for such major foreign policy events as the Camp David accords (FY1979),Central America conflicts (FY1983), Africa famine and a Middle East economicdownturn (FY1985), Panama and Nicaragua government transitions (FY1990), theGulf War (FY1991), and Bosnia relief and reconstruction (FY1996). Table 2. Foreign Operations Appropriations, FY1995 to FY2004 (discretionary budget authority in billionsof current and constant dollars) Notes: FY1999 excludes $17.861 billion for the IMF; FY2004 includes $19.42 billion for Iraq reconstruction. Without Iraq funds, FY2004 totals $19.27 billion. But after a period of only one significant foreign aid supplemental in eight years,beginning in FY1999 Congress has approved Foreign Operations supplementalappropriations exceeding $1 billion in each of the past six years. Relief for CentralAmerican victims of Hurricane Mitch, Kosovo refugees, and victims of the embassybombings in Kenya and Tanzania in FY1999 totaled $1.6 billion, and was followedin FY2000 by a $1.1 billion supplemental, largely to fund the President's newcounternarcotics initiative in Colombia. As part of a $40 billion emergencysupplemental to fight terrorism enacted in September 2001, President Bush andCongress allocated $1.4 billion for foreign aid activities in FY2001 and FY2002. Another $1.15 billion supplemental cleared Congress in FY2002 to augment Afghanreconstruction efforts and assist other "front-line" states in the war on terrorism. Until FY2003, these additional resources have accounted for between 7% and 11% of total Foreign Operations spending. The $7.5 billion Iraq War supplementalfor FY2003, however, went well beyond these standards, representing nearlyone-third of the FY2003 Foreign Operations budget, and surpassed, as noted above,only by FY2004 supplemental appropriations. As a share of the entire $2.24 trillion U.S. budget for FY2003, Foreign Operations represented a 1.06% share, significantly higher than the traditional levelof around 0.75%. This was due largely to enactment of the $7.5 billionsupplemental for Iraq reconstruction, aid to coalition partners, and assistance to otherfront-line states in the war on terrorism. The total FY2004 Foreign Operationsappropriation level, including the Iraq and Afghanistan reconstruction supplemental,is projected to further increase foreign aid as a percent of U.S. federal spending to1.66%. As a portion of discretionary budget authority -- that part of the budgetprovided in annual appropriation acts (other than appropriated entitlements) -- Foreign Operations consumed 2.8% in FY2003, a level that will rise significantly toabout 4.45% in FY2004. By comparison, at the previous high point of ForeignOperations spending in FY1985, foreign aid funds represented 2% of the total U.S.budget and 4.6% of discretionary budget authority. <4.1. Foreign Operations, the FY2004 Budget Resolution, and Sec. 302(b) Allocations> Usually, Appropriations Committees begin markups of their spending bills only after Congress has adopted a budget resolution and funds have been distributed to theAppropriations panels under what is referred to as the Section 302(a) allocationprocess, a reference to the pertinent authority in the Congressional Budget Act. Following this, House and Senate Appropriations Committees separately decide howto allot the total amount available among their 13 subcommittees, staying within thefunctional guidelines set in the budget resolution. This second step is referred to asthe Section 302(b) allocation. Foreign Operations funds fall within the InternationalAffairs budget function (Function 150), representing in most years about 65% of thefunction total. Smaller amounts of Function 150 are included in four otherappropriation bills. How much International Affairs money to allocate to each of the five subcommittees, and how to distribute the funds among the numerous programs aredecisions exclusively reserved for the Appropriations Committees. Nevertheless,overall ceilings set in the budget resolution can have significant implications for thebudget limitations within which the House and Senate Foreign Operationssubcommittees will operate when they meet to mark up their annual appropriationbills. On April 11, 2003, the House and Senate agreed to a budget framework for FY2004 ( H.Con.Res. 95 ) that included $784.7 billion in discretionarybudget authority. The discretionary budget authority target for the InternationalAffairs function was $28.65 billion, the same as the President's request (asre-estimated by CBO). This means that the House and Senate AppropriationsCommittees received sufficient resources to fully fund the Administration's foreignpolicy budget proposal, including the Foreign Operations request. The Committees, however, could choose to allocate the $28.65 billion among the five subcommittees with jurisdiction over the International Affairs programsdifferently than what the President proposed or to alter the overall amount for foreignpolicy activities. Depending on other competing priorities, the final allocations canbe quite different from those assumed in the budget resolution. For a number of weeks following passage of H.Con.Res. 95 , Appropriation Committee leaders debated how to distribute the discretionary fundsunder their jurisdiction, and especially how to absorb what they identified as aroughly $5 to $7 billion gap in spending requirements and amounts available. Departing from traditional practices where House and Senate Committees workseparately on subcommittee allocations, Committee leaders negotiated across bothhouses with their leadership and with the White House to establish a commonframework within which to base their initial allocations. On June 11, House and Senate Appropriations Committee Chairmen announced an agreed package which would free-up sufficient resources to address the fundinggap and remain within the overall FY2004 discretionary budget cap of $784.7 billion. As approved by all parties, including the President, the Appropriations Committeesreduced Defense spending by $3 billion and moved $2.2 billion in FY2004 advanceappropriations to FY2003. The House Appropriations Committee, which also released its allocation for all 13 subcommittees on June 11, made further alternations beyond the basic framework. The Committee's distribution added funding beyond the President's request forseveral subcommittees, including Homeland Security (up $1 billion), VA/HUD (up$600 million), and Commerce, Justice, and State (up $229 million). In addition tothe $3 billion reduction for Defense, the House Committee further cut ForeignOperations by $1.769 billion to $17.12 billion. This 9.4% cut from the President'srequest was the largest percentage reduction for any of the 13 subcommittees. The Senate Appropriations Committee on June 19 agreed to its allocations, differing from House levels in several areas, including Foreign Operations. TheSenate panel provided $18.09 billion for foreign assistance, an amount that wassubsequently raised to $18.446 billion on October 29 in order to accommodate additional funds for international HIV/AIDS. The Senate amount was about $450million, or 2.3%, below the President's request, but $1.3 billion more than the House. Although Senate levels were easier to accommodate, conferees meeting to resolve funding and other differences between the two bills received a relatively lowrevised allocation of $17.2 billion. The actual reduction to the executive's budgetproposal, however, is unlikely to be as significant as a comparison between therequest -- $18.9 billion -- and the final allocation. Congress included in the Iraqreconstruction supplemental ( P.L. 108-106 ) roughly $700 million in additional fundsfor Pakistan, Jordan, and Afghanistan that will allow the President to fully fund the FY2004 proposals for these countries using resources from both the supplementaland the regular Foreign Operations measure. As such, less money will need to bedrawn for these country aid programs from the Foreign Operations bill than originallyanticipated. Moreover, during final negotiations over the conference agreement of H.R. 2673 , the Consolidated Appropriations Act, 2004, to whichForeign Operations became attached, conferees added $350 million for theMillennium Challenge Account, an amount that is in addition to the $17.2 billionallocation. Consequently, taking into account funding in the supplemental plus theadd-on for the MCA, the cut to the President's overall request may be closer to $1billion, or 5%. Nevertheless, a cut of this size for Foreign Operations required substantial trade-offs among Administration priorities as well as foreign aid programs of highinterest to Congress. With most of the Foreign Operations increases slated for newinitiatives, including the Millennium Challenge Account and the Global AIDSprogram, cuts were necessary for some of these new proposals and for continuingactivities. During several months of debate, the White House repeatedly emphasizedthat the budget package should not reduce funding for his top spending priorities. The White House had been most critical of proposed reductions for the MillenniumChallenge Account and successfully convinced House-Senate conferees to restoresome of the 50% cut initially recommended by the conference agreement on H.R. 2800 . <5. Foreign Operations Appropriations Request for FY2004 and Congressional Consideration> <5.1. Request Overview> On February 3, 2003, President Bush asked Congress to appropriate $18.89 billion for FY2004 Foreign Operations. The budget proposal was $2.7 billion, or16.7% higher than regular Foreign Operations appropriations for FY2003, as enactedin P.L. 108-7 . If enacted, the President's recommendation would have resulted inone of the largest increases of regular (non-supplemental) Foreign Operationsfunding in several decades. Congress subsequently approved in mid-April anadditional $7.5 billion FY2003 supplemental foreign aid spending in P.L. 108-11 , forIraq reconstruction, assistance to coalition partners, and other activities supportingthe global war on terrorism. Including the supplemental brought Foreign Operationsappropriations in FY2003 to $23.67 billion. The FY2004 budget blueprint continued to highlight foreign aid in support of the war on terrorism as the highest priority. But a notable characteristic of thesubmission was the request for funding four new foreign aid initiatives whichtogether accounted for most of the $2.7 billion increase over regular FY2003 levels. Combined, the Millennium Challenge Account (a new structure for delivering foreignaid), the State Department's Global AIDS Initiative, and two new contingency funds(Famine and Complex Crises), totaled $2.05 billion. Other Foreign Operationsprograms were left with a more modest 4% increase. Table 3. Foreign Operations New Initiatives FY2004 * Enacted regular appropriations. Excludes $7.5 billion appropriated for Foreign Operations and food aid in the Iraq War supplemental ( P.L. 108-11 ). Fighting the War on Terrorism. Since the terrorist attacks in September 2001, American foreign aid programs haveshifted focus toward more direct support for key coalition countries and globalcounter-terrorism efforts. In total, Congress appropriated approximately $17.9billion in FY2002 and FY2003 Foreign Operations funding to assist the 26"front-line" states in the war on terrorism, implement anti-terrorism trainingprograms, and address the needs of post-conflict Iraq and other surroundingcountries. Nearly half of all Foreign Operations appropriations the past two years hasgone for terrorism or Iraq war-related purposes. The FY2004 budget continued the priority of fighting terrorism with $4.7 billion, or 25% of Foreign Operations resources assisting the front-line states. Unlikea year ago when the President's FY2003 budget was viewed by many as aninadequate request, especially for Afghanistan, the FY2004 proposal includedsubstantial aid packages for a number of the front-line states. Although the levels formost countries would not increase much beyond what was provided from regular FY2003 foreign aid funding, the request largely sustained amounts that had grownsubstantially during the past two years. Anti-terrorism training and technicalassistance programs also would rise by 45% above FY2003 levels. The FY2004 submission did not, however, include follow-on funding for Iraq relief and reconstruction. Congress approved $2.5 billion in FY2003 supplementalresources, an amount many viewed as a down payment of long-term needs in Iraq. With great uncertainty surrounding the costs of Iraq reconstruction, how much of thefinancial burden the United States will shoulder, and the process by thereconstruction operations will be managed, the Administration did not amend itspending FY2004 request to include additional amounts. Instead, the White Houseproposed in September 2003 a $21.5 billion supplemental spending package for Iraqreconstruction and additional aid for Afghanistan. (See discussion below regardingIraq and Afghanistan reconstruction funding issues.) New Initiative: The Millennium Challenge Account. The largest of the new initiatives was the MillenniumChallenge Account (MCA), a program designed to radically transform the way theUnited States provides economic assistance to a small number of "best performing"developing nations. The request for FY2004 was $1.3 billion with a promise that theMCA will grow to $5 billion by FY2006 and remain at least at that level in thefuture. Some MCA supporters argued that the FY2004 level was too low, saying thatthe President pledged to implement the initiative in equal installments over threeyears and that an appropriation of $1.67 billion was what they had anticipated. TheAdministration said that the added MCA funding would be in addition to and not asubstitute for existing U.S. economic aid, but development advocates were concernedthat given the tight budget environment, trade-offs between regular economicprograms and the MCA might be required. (See separate page under Funding andPolicy Issues for more discussion of the MCA.) New Initiative: The Global AIDS Initiative. In his January 2003 State of the Union address, PresidentBush pledged to substantially increase U.S. financial assistance for preventing andtreating HIV/AIDS, especially in the most heavily inflicted countries in Africa andthe Caribbean. The President promised $15 billion over five years, $10 billion ofwhich would be money above and beyond current funding. The Global AIDSInitiative, which will be housed in the State Department, represented a portion of thatpledge -- $450 million in FY2004 -- that when combined with other resourcesmanaged by USAID and the Department of Health and Human Services (HHS),would raise total international HIV/AIDS resources in FY2004 to about $1.9 billion. Some observers noted, however, that this fell well short of the anticipated $3 billionper year implied in the President's speech and would represent only $500 million innew money to fight AIDS above the FY2003 level. Some further questioned whetherthe State Department should be coordinator of international HIV/AIDS programs, asenvisioned in the Initiative, rather than USAID or HHS. (See separate page underFunding and Policy Issues for more discussion of the Global AIDS Initiative.) New Initiative: The Famine Fund. This new contingency fund, with $200 million requested for FY2004, would allowthe Administration to provide, under more flexible authorities, emergency food andother disaster relief support as needs arise. Executive officials argued that greaterflexibility would permit them to respond rapidly to the human consequences ofnatural disasters and conflict without having to divert resources from other economicaid accounts. Critics noted, however, that the existing international disasterassistance account and P.L. 480 food aid program, plus legislative authorities thatallow for temporary borrowing of funds from other aid accounts, perform the samefunctions as the proposed Famine Fund and questioned whether it is necessary. New Initiative: The U.S. Emergency Fund for Complex Crises. The Administration proposed to establish withinthe Executive Office of the President a $100 million contingency fund allowing theUnited States to respond quickly to unforseen complex foreign crises. The resourceswould not be used to address victims of natural disasters, but rather would supportpeace and humanitarian intervention in conflict situations, including acts of ethniccleansing, mass killing, or genocide. In the past, Congress has been reluctant toapprove this type of contingency fund over which it can apply little oversight. TheAdministration had asked lawmakers to launch the Complex Crisis Fund with $150million as part of the FY2003 Iraq War supplemental. Congress, however, chose todefer consideration of establishing such a Fund until the FY2004 appropriation cycle,and instead allocated the requested resources among various accounts for Iraqreconstruction and aid to regional states affected by the war. Other Key Elements of the FY2003 Request. Beyond these specific and prominent issues, the ForeignOperations proposal for FY2004 sought to substantially increase aid activities in afew areas while cutting resources for several programs. Significant appropriationincreases when compared with regular FY2003 appropriations (excluding the IraqWar supplemental) included: Security assistance -- Economic Support Fund and Foreign Military Financing. These two core security aid accounts that aim to supportcountries strategically important to the U.S., would have grown by a combined $648million, or 10% above regular FY2003 levels. Much of the add-on was targeted fora $250 million security aid package for Turkey and a $145 million new Middle EastPartnership Initiative. Peace Corps funding would have risen by $64 million, or 22% in an effort to place 10,000 volunteers by the end of FY2004 and to keep on track thePresident's longer term plan of having 14,000 Americans serving in the Peace Corpsby FY2007. Contributions to the World Bank and other international financial institutions would have grown by $259 million, or 17%, covering allscheduled U.S. payments to the multilateral development banks, plus clearing $196million of U.S. arrears owed to these institutions. The request further included an18% increase for the World Bank's International Development Association and theAfrican Development Fund as a "results-based Incentive Contribution" that had beenpromised last year if the banks implemented certain reforms. Debt reduction , which received no funding in FY2003 except by a transfer of $40 million from another aid account, would have grown to $395million under the Administration's budget submission. There were three componentsto the request: $300 million to cancel bilateral debt owed by the Democratic Republicof the Congo under the Heavily Indebted Poor Country (HIPC) initiative; $75 millionas a contribution to the HIPC Trust Fund to make up for unanticipated shortfalls inimplementing the program; and $20 million for the Tropical Forestry Conservationdebt relief activity. International narcotics control would have grown by $89 million, or 45%, largely to expand significantly programs in Pakistan and Mexico. The Administration further sought $731 million for the Andean CounterdrugInitiative (ACI), an increase from the $700 million regular appropriation for FY2003. The ACI proposal would have generally restored amounts that were cut from theFY2003 request for Colombia, Ecuador, Brazil, Venezuela, and Panama. The largest reduction proposed in the President's Foreign Operations budget targeted assistance to Former Soviet states and Eastern Europe . Collectively, aidto these countries would have declined by $179 million, or 24% from FY2003 levels. The request reflected a reorientation in the former Soviet aid account to focus moreon Central Asian states, linked to the war on terrorism, and to begin the process ofgraduation for Russia and Ukraine. Aid to these two nations would have fallen by40% from FY2003 allocations. The request further would have cut Armenia's aidby nearly half, from $89 million to $49 million. For Eastern Europe, aid levelswould have fallen for nearly every recipient, with some of the largest reductionsscheduled for Serbia, Montenegro, and Macedonia. Funding for the Export-Import Bank would also have declined under the President's budget -- from $565 million to $43 million in FY2004 (as re-estimatedby CBO). But because of substantial "carry-forward" resources that were not spentin prior years, Eximbank officials said that Bank lending could total $14.6 billion inFY2004, which was at least $2 billion higher than the anticipated level for FY2003. Assessing the Administration's request for bilateral development and health assistance was more complicated and led to varying interpretations. Withimplementation of the President's new Global AIDS Initiative in FY2004,development and health resources, including funds from USAID's "core" accountsfor development assistance and child survival/health, and the State Department'sGlobal AIDS Initiative, would have increased by $205 million, or 6.4% over regularFY2003 levels. Depending on the purposes for which Millennium ChallengeAccount funds are spent, further additions to development and health programs would also be expected from MCA allocations. But excluding the new Global AIDS Initiative and MCA from the equation, overall funding for USAID's two "core" accounts would have declined in FY2004by a combined $245 million, or 7.6%. The implication of this reduction was thatwith the exception of HIV/AIDS, nearly all other development programs, includingthose for agriculture, basic education, family planning, malaria and tuberculosis, anddemocracy programs would have been at or slightly below amounts allocated forFY2003. Some critics charged that this violated the executive's pledge that MCAfunding would be in addition to and not in place of continuing economic aidprograms. Others expressed concern that the growth in HIV/AIDS resources cameat the expense of other key health activities for which resources would decline. Table 4. Summary of Foreign OperationsAppropriations (Discretionary funds -- in millions of dollars) Source: House Appropriations Committee and CRS calculations. * FY2002 levels include $15.346 billion in regular Foreign Operations appropriations enacted in P.L. 107-115 plus $1.1 billion (net $50 million inrescissions), provided in P.L. 107-206 , the FY2002 emergency supplementalappropriation. FY2003 regular includes amounts provided in P.L. 108-7 and areadjusted for a 0.65% across-the-board rescission required by the Act. FY2003supplemental includes amounts provided in P.L. 108-11 . <5.2. Leading Foreign Aid Recipients Proposed for FY2004> Israel and Egypt remain the largest U.S. aid recipients, as they have been for many years. However, in the aftermath of the September 11 terrorist attacks, foreignaid allocations have changed in several significant ways. The request, andsubsequently the allocations for FY2004 largely continued the patterns of aiddistribution of the past two years. Since September 11, the Administration has used economic and military assistance increasingly as a tool in efforts to maintain a cohesive internationalcoalition to conduct the war on terrorism and to assist nations which have bothsupported U.S. forces and face serious terrorism threats themselves. Pakistan, forexample, a key coalition partner on the border with Afghanistan, had been ineligiblefor U.S. aid, other than humanitarian assistance, due to sanctions imposed after Indiaand Pakistan conducted nuclear tests in May 1998 and Pakistan experienced amilitary coup in 1999. Since lifting aid sanctions in October 2001, the United Stateshas transferred over $1.9 billion to Pakistan. Jordan, Turkey, Indonesia, thePhilippines, and India also are among the top aid recipients as part of the network of"front-line" states in the war on terrorism. The other major cluster of top recipients are those in the Andean region where the Administration maintains a large counternarcotics initiative that combinesassistance to interdict and disrupt drug production, together with alternativedevelopment programs for areas that rely economically on the narcotics trade. Several countries in the Balkans and the former Soviet Union -- Serbia andMontenegro, Kosovo, Russia, Ukraine, Armenia, and Georgia -- would continue tobe among the top recipients, although at somewhat lower funding levels. Table 5. Leading Recipients of U.S. Foreign Aid Source: U.S. Department of State. Note : FY2002 includes funds allocated from the regular Foreign Operations appropriation, plusfunds drawn from the Emergency Response Fund appropriated in P.L. 107-38 and allocatedfrom the FY2002 Supplemental Appropriation ( P.L. 107-206 ). FY2003 regular appropriationincludes amounts allocated from the Foreign Operations Appropriation, FY2003 ( P.L. 108-7 ). FY2003 supplemental includes funds allocated from the Iraq War Supplemental ( P.L. 108-11 ). FY2004 regular appropriation includes amounts allocated from the ConsolidatedAppropriations, FY2004 ( P.L. 108-199 ). FY2004 supplemental includes funds allocated fromthe P.L. 108-106 . <5.3. House Consideration> On July 23, the House passed (370-50) a $17.12 billion spending bill -- H.R. 2800 -- for FY2004 foreign aid programs. The amount was $1.8billion, or 9.4% below the President's request, but $900 million, or 5.6% higher thanregular (excluding supplemental) Foreign Operations spending approved for FY2003. As one of its top priority, the House Committee approved $1.27 billion forinternational HIV/AIDS, $30 million above the President's request and $390 millionhigher than FY2003 levels. The HIV/AIDS total included $400 million for theGlobal Fund, compared with the President's request of $100 million. Combined withparallel funding approved in the House Labor-HHS spending measure, the House billprovided in both bills $1.9 billion for HIV/AIDS, $20 million less than theAdministration's proposal. Out of this, $500 million would be available as a U.S.contribution to the Global Fund for which the President proposes $200 million. Thebill also restored cuts to bilateral tuberculosis and malaria proposed by the President,increasing spending for non-HIV/AIDS infectious diseases from $104 million to$156 million. For overall "core" bilateral development programs, including HIV/AIDS and other non-health activities, the House measure was about $140 million higher thanthe President's request and $350 million above regular FY2003 amounts. The House bill, however, reduced non-health programs by nearly $30 million from theAdministration's request and $63 million from FY2003 amounts. This would haveresulted in small cuts for activities such as agriculture, economic growth,environment, and democracy promotion. The House measure, however, placed highpriority on trade capacity building activities, increasing funding to $195 million, $35million higher than in FY2003. Spending on basic education would have also risenunder the House measure, with $259 million specified out of the bilateraldevelopment aid funds. In FY2003, USAID allocated $217 million for basiceducation and requested $212 million for FY2004. Across all Foreign Operationsaccounts, the House bill directed a total of $350 million for basic education. On other major issues, the House measure: reduced the President's $1.3 billion request for the new Millennium Challenge Account to $800 million. set family planning resources at $425 million asrequested provided $25 million for the U.N. Population Fund (UNFPA) ,but with conditions that could reduce or eliminate thecontribution. fully funded at the requested levels amounts for Israel, Egypt,and Jordan . provided $731 million for the Andean CounterdrugInitiative , as proposed, but reduced by $43 million funding for regularcounternarcotics programs. set Peace Corps funding at $314 million, $19 million higherthan FY2003 levels but $45 million under the Administration's budget. provided $576 million for the former Soviet Union , asrequested, but $179 million less than FY2003. increased the President's request for East European assistanceby $17 million, with the additional funds set for Bosnia, Serbia, andMontenegro. included current contributions for several multilateraldevelopment banks, including the World Bank's International DevelopmentAssociation (IDA) and the Global Environment Fund , but excluded arrearagepayments and "incentive" contributions for IDA and the African Development Banksought by the Administration. excluded funds for two new Presidential contingency fundsfor Famine and emergency complex crises . The House bill, however, increasedinternational disaster assistance to $315.5 million, directing that $80 million be usedfor famine relief, prevention, and mitigation. deleted $300 million sought for extending debt relief to theDemocratic Republic of Congo. The legislation, however, fully funds the requestsfor HIPC debt relief and for tropical forest conservation. During House floor debate on July 16, lawmakers adopted several amendments to H.R. 2800 , including: a proposal by Congressman Kolbe to clarify the role of the new State Department HIV/AIDS Coordinator, with the intent to grant the Coordinatoradequate authority to "coordinate" U.S. government efforts to combat AIDS globallywhile allowing the traditional agencies that have managed such programs for manyyears -- USAID and the Centers for Disease Control and Prevention -- to continuetheir work without excessive micromanagement by theCoordinator. an amendment by Congressman Hefley that reduced funding for the International Military Education and Training (IMET) program by $600,000. The intent of the proposal was to cut IMET assistance to Indonesia because of lackof progress in the investigation of an August 2002 ambush that left two Americansand an Indonesian from an international school dead. Some believe the Indonesianmilitary may have been involved. While cutting the IMET account by the amountrequested for Indonesia, the amendment itself did not limit the State Department'sability to fund an IMET program for Indonesia in FY2004. a proposal by Congresswoman Bigger to authorize U.S. participation in the 13th replenishment of the International Development Association(IDA), the World Bank's concessional lending facility. Congress approved fundingfor IDA-13, including $850 million in H.R. 2800 , but the money couldnot be transferred without a congressional authorization. an amendment by Congressman Alcee Hastings stating a sense of Congress that the President should use all diplomatic tools available to ensure thatNorth Korea does not engage in the proliferation of nuclearweapons. A central theme of House debate -- both on the floor and in Committee -- were efforts to increase assistance proposed in the bill for Africa, especially to increasefunding for HIV/AIDS, malaria, and tuberculosis from the roughly $2 billion levelcontained in Foreign Operations and Labor, HHS, and Education appropriation billsto something closer to the $3 billion amount Congress previously authorized in P.L.108-25 . Although numerous amendments were offered and debated, none wereadopted. Among specific proposals considered to increase aid to Africa andprograms combating HIV/AIDS were: a Congresswomen Lowey amendment at full Committee markup to add $1 billion in "emergency" funds (an amount that would not countagainst the bill's spending cap) for additional HIV/AIDS programs, much of whichwould be delivered in Africa, failed 28-33; a Committee amendment proposed by Congresswomen Kilpatrick to transfer $500 million from the Millennium Challenge Account toHIV/AIDS lost 27-28. Amendment supporters argued that the MCA could not utilizeall funds appropriated in H.R. 2800 in the first year, and that Africawould benefit more from HIV/AIDS programs than from MCA resources for whicha few African countries might qualify. A similar amendment to transfer $300 millionfrom the MCA to HIV/AIDS lost during House floor debate(192-228). an amendment by Congressman Jackson in Committee markup to shift $200 million from the MCA to HIV/AIDS and provide $588 million in"emergency" funding for more African economic assistance, Congo debt relief, anda higher amount for the African Development Fund failed on a voice vote. A similarproposal by Congressman Jackson was ruled out of order during Housedebate. a House floor amendment by Congressman McGovern to shift $75 million from the Andean Regional Initiative to HIV/AIDS programs lost on avote of 195-226. <5.4. Senate Consideration> On October 30, the Senate approved an $18.38 billion spending bill for FY2004 foreign aid programs. (The Senate Appropriations Committee had approved anoriginal bill, S. 1426 , on July 17 but passed the House bill, H.R. 2800 , with numerous amendments.) The amount was $500million, or 2.7%, below the President's request, but $2.2 billion higher than regular(excluding supplemental) Foreign Operations spending approved for FY2003. Because of a higher "302(b) allocation," S. 1426 was nearly $1.3 billionmore than the House bill. As one of its top priorities, the Senate provided $1.47 billion for international HIV/AIDS, about $230 million above the President's request and $590 million higherthan FY2003 levels. The HIV/AIDS total included as much as $250 million for theGlobal Fund, compared with the President's request of $100 million. (The Presidentalso requested $100 million for the Global Fund in the Labor/HHS appropriationmeasure.) Unlike the House bill, the Senate included HIV/AIDS funds in both theChild Survival/Health (CS/H) and Global AIDS Initiative accounts. The GlobalAIDS Initiative account was a new request for FY2004, funding programs managedby a new State Department Coordinator. The House bill kept nearly all HIV/AIDSfunds in the CS/H account, consistent with past practice. The Senate-passed bill alsorestored cuts to bilateral tuberculosis and malaria proposed by the President,increasing spending for non-HIV/AIDS infectious diseases from $104 million to$185 million. The issue of funding for HIV/AIDS became one of the primary issues of debate during Senate floor consideration. The Senate approved an amendment by SenatorDewine, increasing total resources by $287 million. The Senate, however, rejected proposals by Senator Durbin to add $200 million more for HIV/AIDS, and bySenator Bingaman to boost spending by $200 million, with a corresponding reductionof $200 million for the Millennium Challenge Account. For overall "core" bilateral development programs, including HIV/AIDS, other non-health activities, and UNICEF contributions, the Senate measure was about $550million higher than the President's request and $415 million above the House bill.Besides increasing health programs, the Senate bill also added to the request for otherdevelopment activities, providing about $80 million more than requested and over$100 million more than the House. Basic education programs received $220 millionunder H.R. 2800 , as approved in the Senate, while environmentalactivities ($485 million) and microenterprise ($180 million) were other areasemphasized in the Senate bill that are above the President's request. On other major issues, the Senate bill: reduced the President's $1.3 billion request for the new Millennium Challenge Account to $1 billion. The Senate further attachedlegislation authorizing the MCA, drawing text from S. 925 , which hadbeen debated, amended, but not passed by the Senate inmid-July. set family planning resources at $445 million, $20 millionhigher than the request. included text that would effectively overturn the President's "Mexico City" abortion-related restrictions . provided $35 million for the U.N. Population Fund (UNFPA) ,but with conditions that could reduce or eliminate thecontribution. fully funded at the requested levels amounts for Israel, Egypt,and Jordan . reduced to $660 million funding for the Andean CounterdrugInitiative , but provided full funding for regular counternarcoticsprograms. set Peace Corps funding at $310 million, $15 million higherthan FY2003 levels but $49 million under the Administration'sbudget. provided $596 million for the former Soviet Union , $20million above the request and roughly the same as for FY2003. The additional fundswould off-set proposed reductions for Russia and Armenia. increased the President's request for East European assistanceby $10 million. provided the total request, including arrears payments and an"incentive" contribution for the World Bank's International DevelopmentAssociation (IDA). Most other multilateral development bank contributions wereset at or near the President's request. appropriated $100 million for one of the two new Presidentialcontingency accounts -- the Famine Fund -- but deletes funding for theemergency complex crises fund . provided $100 million of $300 million sought for extending debt relief to the Democratic Republic of Congo. S. 1426 allocatedfunds sought for Congo debt relief for other pressing needs in Africa. Thelegislation, however, fully funded the requests for HIPC debt relief and for tropicalforest conservation. <5.5. Conference Agreement> On November 17, a conference committee on the Foreign Operations bill met and reached agreement on most, but not all issues in disputes. Conferees adjournedpending the resolution of the outstanding matters, most of which related tointernational family planning funding and policy issues. Subsequently,Appropriation Committee leaders merged the Foreign Operations measure into theconference agreement on H.R. 2673 , the Consolidated AppropriationsAct, 2004. The text of the Foreign Operations bill can be found in Division D of H.R. 2673 , while an additional appropriation for one Foreign Operationsaccount -- the Millennium Challenge Corporation -- can be found as Section 134of Division H. On December 8, the House passed H.R. 2673 , with theSenate following on January 22, 2004. The President signed the consolidatedappropriation on January 23 ( P.L. 108-199 ). The conference agreement on H.R. 2673 provides $17.48 billion for Foreign Operations, a figure that includes a 0.59% across-the-board rescissionand additional amounts for the Millennium Challenge Account specified in DivisionH of the bill. This represents a $1.4 billion, or an 7.5% reduction from thePresident's request, but $1.3 billion, or 7.9% higher than approved in regular ForeignOperations spending for FY2003. The actual reduction to the executive's budget FY2004 proposal, however, is unlikely to be as significant as this comparison suggests. Congress included in theIraq reconstruction supplemental ( P.L. 108-106 ) $300 million for Pakistan andJordan, amounts that were not requested, plus higher funding than proposed forAfghanistan. Further, the conference agreement on H.R. 2673 includesauthority for the President to transfer $130 million from Iraq reconstruction funds in P.L. 108-106 for economic aid for Turkey ($100 million) and the Middle EastPartnership Initiative ($30 million). Consequently, by utilizing these additional fundsand transfer authorities for requested regular Foreign Operations programs, thePresident could use about $550 million to fund his original FY2004 proposal withoutdrawing on the $17.48 billion provided in H.R. 2673 . If theAdministration chooses to utilize these resources, the difference between the FY2004request and the conference agreement would be about $850 million, or a 4.5% cut. (Note that figures mentioned below for specific programs are the actual amountappropriated in H.R. 2673 , and do not reflect the 0.59% rescission thatwill be applied to each item.) Despite the overall reduction, the conference agreement increases spending for international HIV/AIDS, malaria, and tuberculosis programs to $1.646 billion. Whenthis amount is combined with appropriations in the pending Labor/HHS/Educationappropriation (Division E of H.R. 2673 ), the total for global HIV/AIDS,malaria, and tuberculosis is $2.4 billion, or roughly $400 million above thePresident's request. Conferees further agreed to a $400 million contribution to theGlobal Fund for AIDS, Malaria, and Tuberculosis that together with $150 million inDivision E would bring the total level to $550 million, rather than theAdministration's $200 million proposal. The conference agreement further authorizes and appropriate funds for the Millennium Challenge Account (MCA), one of the top Presidential aid initiatives. Division D of H.R. 2673 provides $650 million for the MCA, whileDivision H includes an additional $350 million, for a total MCA appropriation of $1billion. The President had proposed $1.3 billion for the MCA, a program that isplanned to grow to $5 billion by FY2006. On another major policy matter, the conferees dropped Senate language that would have effectively reversed the President's "Mexico City" abortion-relatedrestrictions placed on international family planning programs during the BushAdministration. The conference agreement further appropriates $34 million for theU.N. Population Fund (UNFPA), but under the same conditions ("Kemp-Kasten"amendment) that has led to the withholding of U.S. contributions to the UNFPA thepast two years because of the organization's program in China. The Senate bill hadrecommended changes in the Kemp-Kasten conditions. The White House had saidthe President would veto the bill if either of the Senate provisions on internationalfamily planning had remained in the final bill. The conference agreement alsoprovides for $432 million for bilateral family planning assistance, a compromisebetween the $425 million proposed by the President and passed by the House, and$445 million recommended by the Senate. In other decisions made by conferees, the final Foreign Operations bill includes: $3.2 billion for USAID's "core" aid accounts of ChildSurvival/Health and Development Assistance, $380 million higher than therequest. $255 million for international disaster and famine aid, rejecting the proposal to establish a separate Famine Fund account. $326.5 million across all accounts for basic education programs, an increase over the President's approximate request of $303.5million. $731 million for the Andean Counter Drug Initiative, as requested. full funding for the President's requests for aid to Israel, Egypt, and Jordan. $405 million for Afghanistan, an amount that could be lowered from the $600 million earmarked in both House and Senate bills because of additionsmade in the Iraq/Afghanistan reconstruction supplemental. $325 million for the Peace Corps, including a $15 million transfer from the HIV/AIDS account. $95 million for debt reduction, including full funding for "topping up" the HIPC initiative and for the Tropical Forest debt program, but nofunds for bilateral debt forgiveness for the Democratic Republic ofCongo. $913 million for the World Bank's International Development Association (IDA), an amount that will fully fund the first U.S. contribution to thenew IDA replenishment but which will provide no funds to cover past paymentarrears ($27 million) and only partially fund with $63 million the President's $100million "incentive" contribution for IDA managementreforms. <6. Iraq War Supplemental for FY2003 and Foreign Operations Funding> On March 25, 2003, the President requested a nearly $75 billion FY2003supplemental that included $7.6 billion for near-term Iraq reconstruction and relief,additional aid to coalition partners and other states cooperating in the global war onterrorism, and related USAID administrative expenses. By comparison, thesupplemental request totaled a little less than half of the $16.2 billion appropriatedpreviously by Congress for FY2003 Foreign Operations activities. The proposal, asdetailed below in Table 6, was roughly divided into two components: Iraq relief andreconstruction (about $2.85 billion) and aid to coalition partners and other nationsengaged in the war on terrorism (about $4.7 billion). (3) <6.1. Reconstruction Efforts> Normally, it would be presumed that transfers for reconstruction and post-conflict aid would be made to USAID, the State Department, and othertraditional foreign assistance management agencies. But with plans for the DefenseDepartment to oversee the governing of Iraq immediately after the end of hostilities,the proposal stimulated immediate controversy. A number of critics, includingMembers of Congress, argued that aid programs should remain under the policydirection of the State Department and under the authorities of a broad andlongstanding body of foreign aid laws. They pointed out that during other recentreconstruction initiatives in Bosnia and Kosovo, resources and policy decisionsflowed through the Secretary of State. Others argued that groups which would playa significant role in post-war rehabilitation efforts -- non-governmentalorganizations (NGOs), foreign donors, and international organizations -- would bereluctant to take direction and funding from the U.S. military. This, they contended,would hamper relief activities. Furthermore, the placement of reconstruction funding in a Presidential account appeared to grant the White House significant discretion in responding to changingand unanticipated demands, unencumbered by specific programmatic allocations. The Administration said only that $543 million would cover humanitarian expenses,$1.7 billion would be set aside for reconstruction needs, and up to $200 millionwould be available to reimburse foreign aid accounts from which funds were drawnprior to the conflict. As with other parts of the supplemental dealing with defense and homeland security resources, the White House wanted to maintain maximum flexibility overthe distribution of the appropriations so that it could respond to changingcircumstances and unanticipated contingencies. Executive officials, whoacknowledged that some or all of the funding would be transferred to DOD, arguedthat the military would be best situated following the conflict to immediately launchthe reconstruction efforts. Moreover, the Administration noted that the Defenseoffice in charge of reconstruction operations would most likely re-direct most of theresources to the State Department and USAID who would then be responsible formanaging rehabilitation projects. Officials further argued that it was too early toidentify specific reconstruction activities and that it was possible to only provide themost general outlines of how the money would be spent until assessment teams couldreport on the extent of needs throughout the country. Congressional Action on Iraq Reconstruction. As cleared by Congress, H.R. 1559 appropriated $2.475 billion for the Relief and Reconstruction Fund, slightly higherthan requested. The President was able to apportion Fund resources directly to fivefederal agencies: the Departments of Defense, State, Health and Human Services,Treasury, and USAID. Subsequently the funds were allocated to the CoalitionProvisional Authority, headed by Ambassador Paul Bremer, who reports to theSecretary of Defense. In previous congressional debate, the House and Senate hadeach expressed their expectations that these funds would be channeled to theSecretary of State, and in most instances, further directed to USAID. The reportaccompanying S. 762 specifically noted that the funds were not expectedto be transferred to the Secretary of Defense. Nevertheless, the White Housecontinued to argue for greater flexibility and authority to place reconstructionresources under DOD auspices, and ultimately conference committee membersagreed. Table 6. Iraq Reconstruction, International Aid, and Related Activities (in millions of dollars) NS = Not specified. a. The House Appropriations Committee stated that up to $495 million in reimbursements was includedin H.R. 1559 . b. No appropriation required. c. DOD funds ($1.3 billion) were requested and enacted for Jordan, Pakistan, and other "key cooperatingstates" providing logistical and military supportto U.S. military operations in Iraq and in the global war on terrorism. d. Request "supported" in Senate bill. e. Although the enacted supplemental does not set a specific level for this country, the Administration hasallocated the full amount requested. f. DOD funds ($34 million) were also requested and enacted for drug interdiction and counter-drugactivities in Colombia. g. Due to Congressional reductions in overall ESF funding and increases for Afghanistan and the Philippines,the Administrations allocated $100 millionfor MEPI. h. House bill funded an Islamic Partnership and Outreach Program. i. The Administration requested funds for 10 Central European nations but has altered the list of recipientsand the allocation of military grants followingenactment of the supplemental, as follows: Poland ($15 million requested and allocated); Hungary ($15 millionrequested; $8 million allocated);Czech Republic ($15 million requested and allocated); Estonia ($2.5 million requested, $2.75 million allocated);Latvia ($2.5 requested, $2.75 millionallocated); Slovakia ($6 million requested, $6.5 million allocated); Romania ($15 million requested and allocated);Slovenia ($5 million requested,$0 allocated ); Lithuania ($3.5 million requested, $4 million allocated); Bulgaria ($5 million requested, $10 millionallocated); Albania $0 requested,$3 million allocated); Macedonia ($0 requested, $1 allocated); and Ukraine ($0 requested, $1.5 million allocated). The enacted bill further directed higher and more specific amounts that should be used to replenish several foreign aid accounts that had been drawn upon in orderto preposition food and medicine stocks in the region and for other pre-conflicthumanitarian purposes. The conference agreement directed "full and prompt"reimbursement of USAID and State Department accounts from the Iraq Fund. Thesupplemental provided $143.8 million for international disaster assistance, $112.5million of which would restore funds diverted previously for Iraq. The remainingbalance augmented USAID disaster relief resources to respond to foreigncontingencies that may arise through the end of FY2003. Similarly, Congressincreased the State Department's refugee reserve account from the $50 millionrequested to $80 million in order to address needs in the Persian Gulf region as wellas other global requirements. <6.2. International Assistance> The Administration's supplemental appropriation proposal, which was only slightly modified by Congress, provided about $4.7 billion in additional aid to 23countries and regional programs that are contributing to the war in Iraq andcooperating in the global fight against terrorism. See the table below for a completelist of proposed recipients. Among the largest and most complex aid packages were: Jordan -- $700 million in economic grants and $406 million in military transfers. This was on top of Jordan's regular $452 aid package from theU.S. Israel -- $1 billion in supplemental military aid (on top of the $2.7 billion regular FY2003 assistance) and $9 billion in economic loans guaranteedby the U.S. government over the next three years. Israel would pay all costs -- feesthat may total several hundred millions of dollars -- associated with these economicstabilization loans. Conditions on how the funds would be spent, similar to thosethat were applied in the early 1990s when Israel drew on a $10 billion U.S.-backedloan package, would be employed. Turkey -- $1 billion for economic grants which could be applied to fees associated with $8.5 billion in direct loans or loanguarantees. Afghanistan -- $325 million in economic grants, anti-terrorism, demining, and military transfers. This would be in addition to roughly $350 millionalready scheduled for Afghanistan this year. Egypt -- $300 million for economic grants, a portion of which could be used to gain access to up to $2 billion in loan guarantees. Depending on theterms of the loan, if Egypt chose to receive the full $2 billion, about $120 million ormore of the $300 million would be applied to the costs faced by the United States ofguaranteeing the loans. The Administration further proposed to reprogram $379.6million in previously appropriated commodity import program aid to Egypt as a cashtransfer. The supplemental would come on top of $1.9 billion in regular U.S. aid toEgypt. Pakistan -- $200 million in military grants and law enforcement assistance. Pakistan currently receives $305 million inFY2003. The Administration further requested $150 million to initiate a U.S. Emergency Fund for Complex Emergencies, a contingency account that would allow the President toaddress quickly unforseen needs of coalition partners. The Fund, which would bemanaged by the White House, had originally been proposed for an FY2004 startupof $100 million. Congressional Action on International Assistance. H.R. 1559 , as approved, included $4.52billion in additional aid to countries and regional programs, about $180 million lessthan requested. Nearly all of this reduction, however, came from Congress' decisionnot to fund the President's $150 million emergency account for complex crises. Inmost other cases, the Administration was able to allocate these foreign aid resourcesas it had intended. Congress earmarked funding at the requested levels for Israel,Egypt, Jordan, and Pakistan, while adding resources for Afghanistan and thePhilippines. Turkey may receive "not to exceed" $1 billion in aid that is conditionedon a requirement for the Secretary of State to certify that Turkey is cooperating withthe United States in Operation Iraqi Freedom (including facilitating the movementof humanitarian aid into Iraq), and has not unilaterally deployed forces in northernIraq. The restriction on Turkey's aid package, the size of which could grow to $8.5billion if the loan option is implemented, combined text in House and Senate-passedbills. Earlier, the House had defeated two amendments that would have eliminatedaid to Turkey or reduced it by $207 million. For Israeli loan guarantees, the enacted supplemental included the full $9 billion proposal, but added conditions not included in the Administration's proposal. Loansmay be issued in $3 billion allotments in each of FY2003 to FY2005, a provision thatwould allow the President to reduce disbursements in the second and third years ifIsrael violated any of the loan conditions. One such condition added by Congressprohibited loan resources from supporting any activity in geographic areas that werenot administered by Israel prior to June 5, 1967. This is similar to a conditionattached to the 1992 $10 billion loan guaranty package for Israel, some of which wasnot disbursed because of continued Israeli settlement activity in the West Bank area. Table 7. Proposed Recipients of SupplementalForeign Aid ($s millions) * Up to this amount. Loans would not require additional appropriations since economic grants would be used to pay for loan fees. a. Amount was earmarked or recommended in the enacted supplemental appropriation. b. The enacted supplemental appropriation provided $167 million. c. The enacted supplement appropriation included $30 million for economic aid forthe Philippines. d. Following enactment of the supplemental, the Administration has modified itsplans to allocate funds for these recipients. See footnote "i" in Table 6, above,for the allocated amounts. While most of the President's request for international assistance was supported in the enacted emergency supplemental, the Administration had to reduce economicassistance in one instance. Congress cut Economic Support Fund appropriations by$20 million, but because of earmarks and additions for Afghanistan and thePhilippines, and $10 million to investigate possible Iraqi leadership war crimes,executive officials had $100 million less than requested in economic assistance forcountries not protected by legislative directives. Non-earmarked programs included$50 million for the Palestinians, $25 million for Djibouti, and $200 million for theMiddle East Partnership Initiative. The Administration chose to fully allocateamounts for the Palestinians and Djibouti, but cut resources for the Middle EastPartnership Initiative (including Muslim Outreach) to $100 million, half of the levelrequested. The State Department also chose to modify its distribution of military aid grants to several Central Europe states. Most significantly, the executive branch decidedto add funds (not requested) for Albania, Macedonia, and Ukraine, and increaseamounts above the requested levels for Estonia, Latvia, Lithuania, and Bulgaria. Asoff-sets, the State Department cut funds for Hungary and eliminated the $5 millionrequest for Slovenia. These alterations appear to reflect Administration views on theextent to which selected countries supported or did not support U.S. operations inIraq. See footnote "i" in Table 6 above for specific amounts allocated to eachrecipient. <6.3. DOD Authorities to Provide Military Aid> Under sections relating to Defense Department funds and authorities, the supplemental proposed two items that drew particular congressional attention. Thekey issue was whether they infringed on congressional oversight and the StateDepartment's traditional role in directing foreign aid policy and resource allocations. They were both similar to proposals made last year in the FY2002 supplemental thatfocused on the war on terrorism and were closely scrutinized by Congress. The first would provide $1.4 billion for the Defense Department, "notwithstanding any provision of law," to pay Jordan, Pakistan, and other nationsthat have provided logistical and military-related support to U.S. military operationsin Iraq or in the global war on terrorism. In the past, Defense officials argue,competing demands on regular military aid resources have delayed reimbursementto key friends that provide services to American forces. Congress approved fundingin the FY2002 supplemental for this purpose, but included a 15-day prior notificationrequirement that is not part of the FY2003 supplemental draft legislation. The more controversial authority concerned DOD's request for $150 million to support "indigenous forces" assisting U.S. military operations, including those aimedat the global war on terrorism. Decisions to draw on these funds would be made bythe Secretary of Defense, with the concurrence of the Secretary of State. TheDefense Department defines indigenous forces as "irregular forces and resistancemovements" and notes that such forces "generally conduct military and para-militaryoperations in enemy-held or hostile territory and conduct direct offensivelow-intensity, cover, or clandestine operations." (4) Although it was unclear from thebudget justification and bill text exactly what groups and under what scenarios theAdministration would utilize these resources, a senior Administration officialsuggested that the intent was to have resources available for groups in Iraq. DeputySecretary of State Richard Armitage testified on March 27 that because of theuncertainty of the war's duration, it might be necessary to transfer additional armsand equipment to Kurdish and other forces, and that the $150 million would providea "hedge" in case of a more prolonged conflict. In last year's supplementalappropriation debate, DOD asked for $30 million to support indigenous forces, fundsthat would be exclusively under the control of the Secretary of Defense. Congressrejected the proposal, however. At that time, the House Appropriations Committeeobserved in deleting the request that the Secretary of State's primary responsibilityover U.S. military assistance programs is well established and that the Administrationhad the necessary authorities under existing foreign aid laws to undertake therequested activities. (5) Congressional Action on DOD Authorities. H.R. 1559 , as enacted, provided the $1.4billion for nations supporting U.S. military operations in the global war on terrorism,but did not authorize the $150 million for aid to indigenous forces. <7. Selected Major Issues in the FY2004 Foreign Operations Debate> While the Foreign Operations appropriations bill can include virtually anyforeign policy issue of interest to Congress, the annual debate usually focuses onseveral major policy and spending issues. For FY2004, substantial debate hasfocused on the following. <7.1. Foreign Aid to Combat Terrorism> Since the September 11, 2001 terrorist attacks and the initiation of military operations in Afghanistan, combating global terrorism has become one of the toppriorities of American foreign assistance. Indeed, Secretary of State Powell has saidat several 2003 congressional hearings that fighting terrorism is the most importantobjective of the FY2004 Foreign Operations request. While there is disagreement regarding the extent to which foreign aid can directly contribute to reducing the threat of terrorism, most agree that economic andsecurity assistance aimed at reducing poverty, promoting jobs and educationalopportunities, and helping stabilize conflict-prone nations can indirectly addresssome of the factors that terrorists use in recruiting disenfranchised individuals fortheir cause. As illustrated in the table below, the United States has provided morethan $5.9 billion to 26 so-called "front-line" states in the global war on terrorism inimmediate post-September 11 and FY2002 appropriations, while FY2003 regular andsupplemental spending bills have provided $7.4 billion. The Administrationproposed $4.7 billion for the "front-line" states in FY2004, plus $1.2 billion inadditional reconstruction funds for Afghanistan enacted in P.L. 108-106 , for a totalof $5.9 billion. (None of these figures include post-conflict reconstruction assistancefor Iraq which totals about $21 billion enacted in FY2003 and FY2004supplementals.) While increased levels of foreign aid are only one sign of the importance the United States assigns to the support provided by these front-line states, the amountsallocated since September 11 are in sharp contrast to the $3.4 billion provided tothese 26 countries prior to the attacks in regular FY2001 appropriations. Additionaleconomic and military assistance has been particularly evident in a few countries,including Jordan, Pakistan, Afghanistan, Turkey, the Philippines, Kyrgyzstan,Tajikistan, Uzbekistan, Oman, Yemen, and Djibouti. Foreign aid can be programmed in a number of ways that contribute to the war on terrorism. Assistance can be transferred, as has occurred in Pakistan andAfghanistan, to bolster efforts of a coalition-partner government, to counter domesticdissent and armed attacks by extremist groups, and to promote better health care,education, and employment opportunities to its people. Security assistance canfinance the provision of military equipment and training to nations facing threatsfrom their own internally-based terrorist movements. While there has been congressional support for additional foreign aid resources aimed at countering terrorism, some warn that the United States needs to be cautiousabout the risks of creating a close aid relationship with governments that may havequestionable human rights records, are not accountable to their people, and arepossibly corrupt. Some Members have been especially critical of Administrationefforts to include in aid proposals for "front-line" states legislative language thatwould waive all existing restrictions and prohibitions on the transfers. Instead, thesecritics argue, the Administration should specifically identify any obstacles toproceeding with a country aid program and seek a congressional waiver for thoseparticular problems. For example, in late 2001 when the Administration wanted toprovide Pakistan with $600 million in fast-disbursing economic aid, instead ofproviding a blanket waiver of legislative obstacles, Congress approved in P.L. 107-57 specific waivers of aid prohibitions that applied to countries that engaged in missileproliferation, whose leaders came to power through a military coup, and which werebehind in debt payments to the United States. Table 8. U.S. Assistance to Front-Line States in War on Terrorism ($s in millions) Source: U.S. Department of State and CRS calculations. Countries are listed in order of the size of aid provided and requested since September 11, 2001. Amountsinclude funds appropriated for programs under jurisdiction of the Foreign Operationsspending measure, plus food assistance provided in the Agriculture appropriation bill. a. FY2001 pre-September 11 are amounts allocated from regular FY2001 appropriations. FY2001 post-September 11 are amounts distributed from theEmergency Response Fund, funding for which was provided in P.L. 107-38 ,enacted in September 2001. Beyond substantial amounts of bilateral aid for "front-line" states, the Foreign Operations appropriation bill funds several global programs specifically aimed atanti-terrorism efforts overseas and the provision of security for USAID employeesliving abroad. Anti-Terrorism Assistance (ATA). Since FY1984, the State Department has maintained the ATA program designed tomaximize international cooperation in the battle against global terrorism. Throughtraining, equipment transfers, and advice, the ATA program is intended to strengthenanti-terrorism capabilities of foreign law enforcement and security officials. Sinceits initiation in 1984, over 23,000 officials from 112 countries have participated inATA projects. ATA funding is included within the Foreign Operations account ofNon-proliferation, Anti-terrorism, Demining, and Related Programs (NADR). Resources for the $38 million annual ATA program (FY2001) rose sharply following September 11, with an additional $45.5 million allocated out of theTerrorism Emergency Response Fund. Congress approved $38 million for FY2002and $64.2 million for FY2003. Increased funding for FY2003 is intended to financethree ATA program strategies: expanding existing U.S.-based training activities; initiating new in-country programs in participant nations;and adding program flexibility to respond rapidly to changingglobal circumstances. For FY2004, the State Department sought $106.4 million for ATA programs, up nearly two-thirds from existing levels. Most FY2004 training would continue fortraining of officials from the "front-line" states, with a focus on in-country trainingin Afghanistan, Pakistan, and Indonesia. The ATA program further planned tolaunch a Mobile Emergency Training Teams (METT) initiative ($10 million) whichwould deliver in-country instruction for VIP protection, bomb squads, and crisisresponse operations. The State Department had planned to begin METT in FY2002but reprogrammed a $20 million appropriation in order to provide protective servicefor Afghan President Karzai. Terrorist Interdiction Program (TIP). As one response to the 1998 bombings of Americanembassies in East Africa, the State Department launched the TIP, an activity intendedto restrict the ability of terrorists to cross international borders, launch attacks, andescape. TIP strengthens border security systems in particularly vulnerable countriesby installing border monitoring technology, training border security and immigrationofficials in its use, and expanding access to international criminal information toparticipating nations. Like ATA, funds for TIP are part of the NADR account in theForeign Operations spending bill. Since September 11, the State Department has expanded from 34 to 60 the number of countries where it believes TIP would immediately contribute to theglobal counterterrorism campaign. The $4 million TIP budget doubled for FY2001following September 11, and grew to $14 million in FY2002. After falling back to$5 million for FY2003, the request for FY2004 was $11 million. The Administrationplanned to expand operations in up to ten new countries with the additionalresources. Counterterrorism Engagement with Allies. Following the September 11 attacks, the United States beganto conduct Senior Official Policy Workshops and multilateral conferences in orderto better respond to terrorist incidents involving weapons of mass destructionoverseas. With $3 million from emergency FY2002 supplemental spending, the StateDepartment conducted workshops in 18 countries as well as several regionalconferences. The $2.5 million budget request for FY2004 would finance tenscheduled workshops, including three in Greece in advance of the 2004 Olympicgames. Terrorist Financing. In December 2001, an interagency review group identified 19 countries where a significantterrorist financing threat existed, and with $3 million allocated from the EmergencyResponse Fund, launched a training and technical assistance program. The StateDepartment allocated $10 million out of the FY2002 supplemental appropriation toexpand the program, while the Treasury Department is utilizing approximately halfof its $10 million FY2003 "Technical Assistance" program for these purposes. InFY2004, Treasury proposed $5 million for combating terrorist financing activities. USAID Physical Security. USAID maintains about 97 overseas facilities where much of its workforce --including both Americans and foreign nationals -- is located. Many missions arebased in places where there is a high threat of terrorist activity, and especially sincethe 1998 embassy bombings in Kenya and Tanzania, agency officials have beenconcerned about insuring adequate security. In countries where USAID is or isscheduled to be co-located with the U.S. embassy, the State Department's ForeignBuildings Operations office had been responsible for financing USAID securefacilities. These funds are appropriated in the Departments of Commerce, Justice,and State appropriations. Nevertheless, there have been serious construction delaysfor USAID co-located facilities -- especially in Uganda -- due to competing StateDepartment building priorities and conflicting congressional directives. In an effort to overcome these problems, USAID requested for FY2003 a new Foreign Operations account -- the Capital Investment Fund -- that would supportenhanced information technology ($13 million) and facility construction ($82million) specifically at co-located sites where security enhancements are needed. USAID planned to use the money in FY2003 for construction projects in Kenya,Guinea, Cambodia, and Georgia. Congress, however, reduced funding for thisaccount to $43 million, with $30 million assumed for Kenya and $10 million for anew facility in Afghanistan. With reductions made to the FY2003 request, USAID proposed a $146.3 million Capital Investment Fund request for FY2004. Of the total, $20 million wouldsupport information technology needs, while the balance would finance constructionof seven co-located facilities where the State Department is already building newembassies. In addition to Guinea, Cambodia, and Georgia, which went unfunded inFY2003, USAID requested resources for co-located missions in Zimbabwe, Armenia,Mali, and Uganda. For construction of co-located missions at embassies wherebuilding will begin in FY2004 or later, resources for USAID facilities would bedrawn from State Department appropriations under the Capital Surcharge Proposal. Security upgrades for the 64 overseas missions situated some distance from American embassies have been provided out of USAID operating expenses, aForeign Operations account that has been under funding stress in recent years due toagency relocation costs in Washington, D.C., replacement of failed financialmanagement systems, and dwindling non-appropriated trust funds used to financesome in-country costs. As a result, security upgrades for some USAID missions havebeen deferred due to funding shortfalls. For FY2003, USAID estimated that it willspend $7.1 million for security needs out of its operations account, compared to $6.75 million in FY2002. USAID requested the same amount -- $7.1 million -- forFY2004 as it had available for FY2003. Aid Restrictions for Terrorist States. Annual Foreign Operations spending bills routinely includegeneral provisions prohibiting U.S. assistance to countries engaged in terroristactivities or providing certain types of support to terrorist groups. Included in theFY2003 funding measure were two: Sec. 527 prohibited bilateral U.S. assistance to any country that the President determined grants sanctuary from prosecution to any individual orgroup which has committed an act of international terrorism, or otherwise supportsinternational terrorism. The President could waive the restrictions for nationalsecurity or humanitarian reasons. Sec. 543 prohibited U.S. aid to a government which provides lethal military equipment to a country that the Secretary of State determined isheaded by a terrorist supporting government. The President could waive therequirement if it is important to U.S. national interests. Despite these restrictions, however, certain types of humanitarian foreign assistance could be provided "notwithstanding" other provisions of law, which would overridethe terrorism restrictions. Disaster and refugee relief, child survival and HIV/AIDSprograms, emergency food and medicine, and demining operations are among thecategories of U.S. assistance that could potentially be provided to a country thatwould otherwise be ineligible. Congressional Action. For specific counter-terrorism programs, the Foreign Operations conference agreementprovides amounts as shown in Table 9. Table 9. Selected Counter-Terrorism ProgramFunding ($s -- millions) For USAID construction, the Foreign Operations conference agreement includes full funding for new USAID buildings in Cambodia, Uganda, Guinea, and Mali, asrequested, but resources for other facilities in Armenia, Georgia, and Zimbabweappear to be less certain. More generally, the conference agreement, similar to earlier actions by the House and Senate, largely but not totally supports bilateral security and military aidrequests for the "front-line" states. Congress makes small reductions in the twoForeign Operations accounts from which most assistance for the 26 "front-line" statesis drawn: the Foreign Military Financing (FMF) and the Economic Support Fund(ESF) accounts. As shown in Table 8 (above), country allocations based on theenacted FY2004 appropriation largely follow amounts requested by theAdministration. The major exception is Turkey, where the proposed $256 millionaid package is reduced to $145 million. P.L. 108-119 gives the President authorityto transfer an additional $100 million in economic aid for Turkey, but the moneymust be drawn from the Iraq reconstruction program. Many believe it is unlikely theAdministration will implement such a transfer. Previous House action on the FY2004 Foreign Operations bill ( H.R. 2800 ) would have posed more difficult decisions for theAdministration in funding some of the "front-line" states. The House reduced theESF recommendation by $275 million (10.8%), but the impact on certain countries,including some "front-line" states, would have been more significant. About 70%of the ESF appropriation was earmarked at or above levels requested for countriesof special congressional interest, including the "front-line" nations of Afghanistan,Egypt, and Jordan. On the other side of the equation, the legislation reduced by $100million amounts available for Middle East Partnership Initiative (MEPI). Of theremaining ESF funds, at the House-passed level the Administration would haveneeded to cut non-earmarked countries collectively by about 21%. Among thesenon-earmarked ESF recipients were the "front-line" states of Pakistan ($200 millionrequested), Turkey ($200 million), Indonesia ($60 million), the Philippines ($20million), and India ($20 million), which would most likely have had to absorb someof the ESF reductions. A similar situation existed in the Senate bill, although with an ESF cut of only $120 million (5%) the impact on "front-line" states would have been less significant. Still, aid to non-earmarked recipients would have fallen collectively by about 18%below requested amounts and include the same "front-line" nations cited above. TheSenate measure had also acknowledged the contributions made by several countriesin the war in Iraq -- including Albania, El Salvador, Macedonia, Mongolia, EastTimor, and Uganda -- and encouraged the Administration to increase militaryassistance to these nations. <7.2. Millennium Challenge Account> In a speech on March 14, 2002, at the Inter-American Development Bank, President Bush outlined a proposal for the United States to increase foreign economicassistance beginning in FY2004 so that by FY2006 American aid would be $5 billionhigher than three years earlier. The funds would be placed in a new MillenniumChallenge Account (MCA) and be available to developing nations that are pursingpolitical and economic reforms in three areas: Ruling justly -- promoting good governance, fighting corruption, respecting human rights, and adhering to the rule oflaw. Investing in people -- providing adequate health care,education, and other opportunities promoting an educated and healthypopulation. Fostering enterprise and entrepreneurship -- promoting openmarkets and sustainable budgets. If fully implemented, the initiative would represent one of the largest increases in foreign aid spending in half a century, outpaced only by the Marshall Plan followingWorld War II and the Latin America-focused Alliance for Progress in the early1960s. The concept is based on the premise that economic development succeeds best where it is linked to free market economic and democratic principles and policies. Conditioning assistance on policy performance and accountability by recipientnations is not new to U.S. aid programs. Since the late 1980s at least, portions ofAmerican development assistance have been allocated to some degree on aperformance-based system. What is different about the MCA is the size of thecommitment; the competitive process that will reward countries for what they havealready achieved not just what is promised for the future; the pledge to segregate thefunds from U.S. strategic foreign policy objectives that often strongly influencewhere U.S. aid is spent; and to the decision to solicit program proposals developedsolely by qualifying countries. If Congress fully funds the President's MCA request and assuming that FY2003 will be the baseline from which to compare growth in foreign aid spending duringimplementation of the MCA, a $5 billion increase by FY2006, combined with otherannounced foreign aid initiatives, would result in a $19.3 billion foreign aid budget. In real terms (constant FY2003 dollars), taking into the account the estimated effectsof inflation, U.S. economic assistance in FY2006 would be $18.2 billion, the highestamount since FY1979 and the signing of the Camp David Middle East peace accords,and FY1985, an unusual year in which the United States responded to special MiddleEast economic stabilization and African famine requirements. The nominal increasebetween FY2003 and FY2006 would be about 47%, while in real terms, FY2006funding would be nearly 38% more. These figures are less than Administrationclaims of a 50% increase in funding due to the MCA, a figure that is apparentlycalculated using the $10 billion aid level in FY2000 as the base year. Because of thesize of the U.S. economy and continued growth projected over the next several years,the MCA increases will have minimal impact on the amount of U.S. aid as a percentof GDP. According to current projections, assistance would rise from the 2002 levelof 0.12% of GDP to 0.15%. During the first year of the MCA, participation will be limited to the 74 poorest nations that are eligible to borrow from the World Bank's International DevelopmentAssociation and have per capita incomes below $1,435. The list will expand toinclude all lower-middle income countries by FY2006 with per capita incomes below$2,975. Participants will be selected largely based on 16 performance indicatorsrelated to the three categories of good governance, economic freedom, and investingin people. Countries that score above the median on half of the indicators in each ofthe three areas will qualify. Emphasizing the importance of fighting corruption,however, should a country fall below the median on the corruption indicator (basedon the World Bank Institute's Control of Corruption measure), it will beautomatically disqualified from consideration. To manage the MCA, the Administration has proposed the creation of a Millennium Challenge Corporation (MCC), a new independent government entityseparate from the Departments of State and the Treasury and from the U.S. Agencyfor International Development (USAID). The White House envisions a staff of about100, drawn from various government agencies and non-governmental organizations,led by a CEO confirmed by the Senate. A review board, chaired by the Secretary ofState and composed of the Secretary of the Treasury and the Director of OMB, wouldoversee operations of the MCC. The decision to house the MCA in a new organization was one of the most debated issues during early congressional deliberations of the President's foreign aidinitiative. The Administration argued that because the MCA represents a newconcept in aid delivery, it should have a "fresh" organizational structure,unencumbered by bureaucratic authorities and regulations that would interfere ineffective management. Critics, however, contended that if the MCA is placedoutside the formal U.S. government foreign aid structure, it would lead to furtherfragmentation of policy development and consistency. Some believed that USAID,the principal U.S. aid agency, should manage the MCA, while others say that theMCA should reside in the State Department where more U.S. foreign policy entitieshave been integrated in recent years. At least, some argued, the USAIDAdministrator should be a member of the MCC Board, possibly in place of the OMBDirector. For FY2004, the Administration sought $1.3 billion for the MCA's first year and remained committed to a $5 billion budget by FY2006. Some believed,however, that the FY2004 request was less than promised in 2002. At the time,Administration officials implied that funding might be phased in over three years inequal increments, resulting in a $1.67 billion program in FY2004, a $3.34 billionlevel in FY2005, and $5 billion in FY2006. In the President's budget submission thisyear, however, budget officials said the pace at which resources would rise was neverspecifically set, and that only the $5 billion target for FY2006 is a firm commitment. Congressional Action (Appropriations). H.R. 2800 , as passed by the House,provided $800 million for the Millennium Challenge Account in FY2004, while theSenate, included $1 billion. Both were below the $1.3 billion request. The Senatefurther incorporated into H.R. 2800 authorizing legislation that had beendebated, amended, but not passed by the Senate on July 9 and 10. (See below fordetails on the authorizing text, as originally included in S. 925 ). Needing to find additional resources for international HIV/AIDS funding and for other priorities, House-Senate conferees tentatively agreed on November 17 toprovide $650 million for the MCA in FY2004, half the level requested. Appropriation Committee leaders said that because the program was new and wouldrequire some months to begin operations, larger amounts were not necessary in thefirst year of the MCA. The White House, however, strongly objected to the reducedappropriation and convinced lawmakers to add back $350 million as part of apackage of additional spending needs that were offset by a rescission of prior yeardefense appropriations and an across-the-board cut for non-defense FY2004programs. The conference agreement on H.R. 2673 , the ConsolidatedAppropriations Act, 2004, into which Foreign Operations has been incorporated, includes a total of $1 billion for the MCA, $650 million of which is made availablein Division D of the bill (Foreign Operations) and $350 million in Division H(Miscellaneous Appropriations and Offsets). The House passed H.R. 2673 on December 8, but the Senate most likely will not consider the conferenceagreement until Congress returns on January 20, 2004 for the second session. Congressional Action (Authorization). In legislation related to the Foreign Operationsappropriations bill, the Senate and House debated separate bills to authorize theMillennium Challenge Account. When these efforts stalled, however, the authorizingtext was added to the Senate-passed Foreign Operations measure, and ultimatelyincorporated into the conference agreement on H.R. 2673 . Earlier, on May 29, 2003, the Senate Foreign Relations Committee reported S. 1160 , legislation providing $1 billion for the MCA in FY2004, $2.3billion in FY2005, and $5 billion in FY2006. On a vote of 11-8, the Committeefurther approved an amendment by Senators Biden and Hagel that would establishthe MCA inside the State Department under the direction of the Secretary of State. The legislation abandoned the separate corporation proposal put forward by theAdministration. Secretary of State Powell wrote the Committee saying he wouldadvise the President to veto the legislation if this provision to locate the MCA in theState Department remained in the bill. Senator Lugar, who opposed the Biden-Hagel amendment, proposed an alternative structure in new legislation. S. 1240 , as introduced on June11, would create a Millennium Challenge Corporation, headed by a CEO who wouldreport to the Secretary of State. Senator Lugar intended that such an arrangementwould provide the Corporation with the same degree of independence and status asUSAID, but establish a chain of command that would permit the Secretary of Stateto exercise broad authority over the MCA. S. 1240 created a Board ofDirectors, made up of the Secretary of State (Chairman), the Secretary of theTreasury, the USAID Administrator, the U.S. Trade Representative, and the MCCCEO. The full Senate adopted the general approach proposed by Senator Lugar whenit voted on July 9 to incorporate a modified text of MCA authorizing legislation into S. 925 , the Foreign Affairs Authorization, Fiscal Year 2004. Therevised composition of the Board of the Directors proposed in S. 1240 was included. The approved text further strengthened the explicit relationshipbetween the Corporation and the Secretary of State by adding that the CEO shall"report to and be under the direct authority and foreign policy guidance of theSecretary." The Administration did not express objection to the revised legislation. S. 925 , as amended, also would have permitted low-middle income nations to participate in the MCA program only if appropriations in FY2006 andbeyond exceeded $5 billion annually. In such years, these relatively wealthiercountries could compete for only 20% of the total appropriation. In many otherareas, however, the legislation adopted the broad concepts recommended by theexecutive. On June 12, the House International Relations Committee reported an MCA authorizing measure -- H.R. 2441 -- containing at the time significantdifferences with the Senate and the Administration. The legislation authorized $1.3billion for FY2004, as requested, $3 billion for FY2005, and $5 billion for FY2006. Unlike the original Senate measure, H.R. 2441 created a newMillennium Challenge Corporation sought by the President, but altered thecomposition of the Board of Directors and the authority of the MCC's ChiefExecutive Officer. The Board, as designed under H.R. 2441 , includedthe Secretary of State as Chairman and the Secretary of the Treasury, as proposed, butdeleted the Director of OMB and added the USAID Administrator, the U.S. TradeRepresentative, and the CEO of the MCC. The bill also included four additionalmembers, to be appointed by the President from a list submitted by the majority andminority leaders of the House and Senate. The Board would have further includedas non-voting ex-officio members the CEO of OPIC, and the Directors of the Tradeand Development Agency, Peace Corps, and OMB. Additionally, H.R. 2441 designated the CEO of the Corporation as the individual responsible for determining eligible countries rather than the Board ofDirectors, as recommended by the Administration. The House bill allowedlow-middle income countries to participate in the MCA beginning in FY2006regardless of the amount of money appropriated, but limited the allocation to theserelatively wealthier countries to 20% of MCA assistance. Similar to the Senate, theHouse incorporated a slightly modified version of H.R. 2441 as DivisionA in H.R. 1950 , an omnibus foreign policy authorization bill. TheHouse passed H.R. 1950 -- now called the "Millennium ChallengeAccount, Peace Corps Expansion, and Foreign Relations Authorization Act of 2003"-- on July 16. As noted above, the Senate added its MCA authorizing legislation, as amended in S. 925 , to the Foreign Operations Appropriations measure( H.R. 2800 ) during debate in late October. Subsequently, H.R. 2800 was incorporated into H.R. 2673 , theConsolidated Appropriations Act, 2004, in which conferees resolved House andSenate differences in the earlier versions of MCA authorizing legislation. On keyissues, conferees agreed to: create a Millennium Challenge Corporation, headed by a CEO who would report to the Board of Directions, rather than the Secretary of State(Senate) or the President (House). include on the Board the Secretary of State (chairman), the Secretary of the Treasury, the U.S. Trade Representative, the USAID Administrator,the MCC CEO, and four others from lists submitted by congressional leaders andnominated by the President. allow low-middle income countries to participate in MCA programs beginning in FY2006, as proposed, but caps the total amount funds that canbe allocated to these countries at 25% of the MCA appropriation. The House hadproposed a 20% cap, while the Senate had recommended a 20% ceiling but onlywhen MCA appropriations exceeded $5 billion. authorize "such sums as may be necessary" for FY2004 and FY2005, with no mention of FY2006. House and Senate bills had included specificamounts for the first two years and an FY2006 authorization of $5billion. Table 10, below, summarizes these and other key MCA issues under debate in authorizing legislation. Because the MCA authorization was not enacted until January 23, 2004 ( P.L. 108-199 ), and the bills' requirement for consultation with Congress and publicdisclosure of eligibility criteria and methodology, it appears that MCA operationswill begin much later than originally anticipated. The conference agreement requiresa period of at least 90 days between naming "candidate countries" -- those that meetbasic income and other criteria -- and "eligible countries," those that are judged tobe the best performers and selected to receive MCA assistance. During this period,the eligibility criteria, performance indicators, and overall methodology of theselection process must be notified to Congress and published in the Federal Register. Public hearings may be held and public comments will be received. As a result, itappears likely that MCA eligible countries will not be named before May 1, 2004, atthe earliest. The selection of program proposals and initial implementation ofprojects would be expected several months beyond that date. Table 10. Comparison of MCA Authorization Legislation a. The status of the Senate bill is based on S. 925 , the Foreign Affairs Act, Fiscal Year 2004, as amended during debate on July 9 and 10. S. 925 remains pending in the Senate. Previously, the Senate Foreign Relations Committee had approvedlegislation authorizing theMillennium Challenge Account in S. 1160 . A modified text of S. 1160 was subsequently incorporatedinto S. 925 as Division C on July 9. The House bill, H.R. 1950 , is also a combined foreign policy authorizationmeasure to which earlier MCAauthorizing text was added. The House International Relations Committee had reported H.R. 2441 , whichwas incorporated, withmodifications, to H.R. 1950 , and passed by the House on July 16. <7.3. Development Assistance, Global Health Priorities, and HIV/AIDS> A continuing source of disagreement between the executive branch and Congress is how to allocate the roughly $3-$3.8 billion "core" budget for USAIDdevelopment assistance and global health programs. Among the top congressionaldevelopment aid funding priorities in recent years have been programs supportingchild survival, basic education, and efforts to combat HIV/AIDS and other infectiousdiseases. The Administration has also backed these programs, but officials object tocongressional efforts to increase funding for children and health activities when itcomes at the expense of other development sectors. Most recently during theFY2003 and FY2004 budget cycles, some Members of Congress have argued that ithas been the executive branch that has added funds for Administration priorities bycutting resources for other development activities. In years when Congress has increased appropriations for its priorities, but not included a corresponding boost in the overall development aid budget, resources forother aid sectors, such as economic growth and the environment, have beensubstantially reduced. This was more problematic during the mid-to-late 1990s whenworld-wide development aid funding fell significantly. In more recent years, andespecially for FY2003 and FY2004, Congress increased overall developmentassistance so that both congressional and executive program priorities could befunded without significant reductions for non-earmarked activities. Nevertheless,Administration officials continue to argue that such practices undermine theirflexibility to adjust resource allocations to changing global circumstances. In 2001, the Bush Administration set out revised USAID core goals for sustainable development programs focused around three "spheres of emphasis" or"strategic pillars" that include Global Health, Economic Growth and Agriculture, andConflict Prevention and Developmental Relief. The Administration furtherintroduced a new initiative -- the Global Development Alliance (GDA) -- in aneffort to expand public/private partnerships in development program implementation. Under the initiative, USAID identifies good development opportunities beingconducted by private foundations, non-governmental organizations, universities, andfor-profit organizations, and provides parallel financing to leverage resources alreadycommitted to these activities. USAID officials envisioned that the agency wouldbecome much more of a coordinating and integrating institution to expand andenhance development efforts of these non-governmental development partners.Although it started out as a much more ambitious project -- USAID requested $160million for FY2002 -- the GDA has received relatively modest funding allocations:$20 million in FY2002 and $14.9 million in FY2003. The FY2004 request sought$15 million. Underscoring the importance of the debate over funding allocations of development aid resources has been an elevation by the Administration of the valueof foreign economic assistance as an instrument of U.S. foreign policy since theterrorist attacks of September 11, 2001. President Bush announced plans to launchtwo major foreign aid initiatives -- the Millennium Challenge Account and theGlobal AIDS Initiative -- that if approved by Congress, would significantly boostfunding for development assistance programs. Moreover, the President's September2002 National Security Strategy established global development, for the first time,as the third "pillar" of U.S. national security, along with defense and diplomacy. For FY2004, the President sought a substantial increase in overall development assistance, although the programs are configured differently than they have been inthe past, raising questions in some observers' minds about the Administration'scommitment to broad-based, worldwide development. For "core" developmentassistance -- programs that match the current structure of USAID's "strategicpillars" and Foreign Operations appropriation accounts for Development Assistanceand Child Survival and Health Program Fund -- the Administration proposed $2.84billion, as shown in Table 11. This represented a $245 million, or 8% reduction from amounts for FY2003. With the exception of HIV/AIDS, democracy programs, andto a far less extent agriculture and economic growth activities, all other developmentsectors would have received less funding in FY2004 than appropriated for FY2003. Table 11. Development Assistance Funding ($s millions) Source : USAID. a. USAID's "strategic pillars" for Economic Growth and Democracy correspond to the Development Assistance account in title II of annual Foreign Operationsappropriations bills. b. USAID's "strategic pillar" for Global Health corresponds to the Child Survivaland Health Program Fund account in title II of annual Foreign Operationsappropriations bills. Two new initiatives proposed for FY2004 that would be managed outside of USAID "core development" programs, however, pushed overall U.S. developmentassistance well above FY2003 levels. With the additions of the Global AIDSInitiative and the Millennium Challenge Account, for which $450 million and $1.3billion, respectively, were requested, total development aid in FY2004 would growto $4.6 billion, or 49% higher than FY2003 amounts. While development assistance supporters applauded the increases sought for the new initiatives, they remained concerned over the reductions proposed for USAID's"core" development accounts. The latter are worldwide activities that serve multipledevelopment needs in over 55 countries that range from nations with a soundcommitment to economic and democratic reforms, to countries emerging fromconflict, to failed states that confront humanitarian crises. The HIV/AIDS and MCAproposals, on the other hand, are more narrowly focused. The Global AIDSInitiative, implementing prevention, treatment, and care projects, are to focus largelyon 14 priority countries in Africa and the Caribbean. The Millennium ChallengeAccount will likely support programs in the first year in perhaps as few as 8-10"best-performing"countries that have demonstrated progress in the areas ofgovernance, economic freedom, and social investments in people. TheAdministration further had said that MCA funding would be in addition, not asubstitute for continuing "core" development activities. Critics charged that theFY2004 budget request violated that pledge by cutting amounts for "core" programs. What some observers found most problematic about the FY2004 development assistance request was that increases for selected areas, especially those forHIV/AIDS, to some extent resulted from reductions in other development programs. (See Table 12.) Among health programs, each sub-sector was cut, except forHIV/AIDS. Funding for other infectious diseases, including tuberculosis andmalaria, would have fallen by one-third under the President's budget request, childsurvival activities would be cut by 11%, reproductive health would drop by 5%, andvulnerable child programs would be reduced from $27 million to $10 million. TheAdministration recommended similar reductions in its FY2003 budget request lastyear, but Congress restored most of the funds that would have been lost under thePresident's recommendation. For example, USAID had sought $110 million fornon-HIV/AIDS infectious diseases out of the Child Survival and Health ProgramFund account for FY2003, an amount that rose to $154.5 million due to subsequentcongressional additions in the Foreign Operations appropriation. Aside from global health programs, USAID proposed a mix of budget increases and cuts for other "core" development sectors. Those scheduled for higher spendingincluded: Agriculture programs would increase by 4% to $268 million. Economic growth activities, including trade and investmentprograms, would rise less than 1%. Democracy and local governance would grow by 20%, althoughlarge increases for Afghanistan and Pakistan would leave similar programs in Africaand Latin America below FY2003 levels. Funding for other "core" development areas would decline: Environmental activities would drop by 6% to $286 million. Basic education, a high congressional priority for a number ofyears, would fall by 2% to $212 million, and resources for higher education wouldbe cut by 17%. Human rights and conflict prevention programs would bereduced collectively by over one-third. Resources for some or all of these sectors, however, could rise, and in some cases significantly, when MCA programs are selected. The $1.3 billion sought by thePresident in FY2004 will be allocated among a selected few "best performing," lowincome countries, supporting the highest development priority identified by theparticipant nation. Table 12. USAID "Core" Development Assistance Funding ($s millions) Source: USAID. Note: Amounts in this table reflect levels allocated from USAID's "core" development aid accounts: Development Assistance and the Child Survival andHealth Program Fund. In addition to figures shown here, funds are drawn from othereconomic aid programs -- Economic Support Fund, aid to Eastern Europe, andformer-Soviet assistance -- that are co-managed by USAID and the StateDepartment. For activities such as basic education and global health, most fundingcomes from these "core" development accounts. In other areas, however, especiallyeconomic growth , agriculture, and democracy, a sizable amount of resources aredrawn from these non-"core" accounts. Complete data for all years across allaccounts are not currently available. Consequently, it is only possible to drawcomparisons for "core" development aid resources. International HIV/AIDS. By far, the largest growth area for development assistance was for HIV/AIDS prevention,treatment, and care programs (Table 13). Resources requested under the ForeignOperations bill for HIV/AIDS in FY2004 totaled $1.24 billion, a 41% increase over$877 million appropriated for FY2003. Moreover, the Administration sought another$680 million for international HIV/AIDS from non-Foreign Operations accounts,most importantly for the Centers for Disease Control and Prevention funded underthe Labor/HHS/Education appropriation bill. The total request across allappropriation measures for FY2004 was $1.92 billion. (The Administrationfrequently used a total of $2 billion in its estimates of FY2004 funds requested forinternational HIV/AIDS programs. These executive estimates included USAIDresources for tuberculosis and malaria that are not calculated in the $1.92 billion levelshown in Table 13.) A controversial issue was the President's proposal for a $200 million contribution to the Global Fund to Fight AIDS, Tuberculosis, and Malaria -- $100million each from Foreign Operations and Labor/HHS/Education appropriationmeasures. For FY2003, Congress increased the U.S. contribution to $350 millionand subsequently authorized "up to" $1 billion for FY2004 in P.L. 108-25 , the UnitedStates Leadership Against HIV/AIDS, Tuberculosis, and Malaria Act of 2003. Congressional Action. House Debate. On July 23, the House approved $3.43 billion for "core" bilateral development programs, an amount about$140 million higher than the President's request and $350 million above regularFY2003 amounts. The bill ( H.R. 2800 ), while adding over $320 millionto FY2003 totals for the Child Survival and Health account, reduced non-healthprograms by nearly $30 million from the Administration's request and $63 millionfrom FY2003 amounts. At these levels, this have would resulted in small cuts foractivities such as agriculture, economic growth, environment, and democracypromotion. For one of the highest Administration and congressional foreign aid priorities, the House provided $1.27 billion for international HIV/AIDS, $30 million above thePresident's request and $395 million higher than FY2003. Combined with parallelfunding approved in the House Labor-HHS spending measure, the House providedin both bills $1.9 billion for HIV/AIDS, $20 million less than the Administration'sproposal. Out of this, $500 million would be available as a U.S. contribution to theGlobal Fund ($400 million would come from the Foreign Operations bill). ThePresident proposed $200 million for the Global Fund, $100 million from each bill. The House measure also restored funding for bilateral tuberculosis and malariaprograms -- amounts that are not included in those for AIDS spending above -- thatthe President's budget had scheduled for cuts. The House bill increased amounts fornon-HIV/AIDS infectious diseases from $104 million to $156 million. H.R. 2800 , within the Development Assistance account, placedhigh priority on trade capacity building activities, increasing funding to $194 million,$35 million higher than in FY2003. Spending on basic education would also riseunder the House measure, with $259 million specified out of the bilateraldevelopment aid funds. In FY2003, USAID allocated $217 million for basiceducation and requested $212 million for FY2004. Across all Foreign Operationsaccounts, the House bill directed a total of $350 million for basic education. Table 13. U.S. International HIV/AIDS Programs ($s millions) Sources : House and Senate Appropriations Committees, Departments of State and HHS, USAID,and CDC. a. The Division H of the Consolidated Appropriation Act, 2004 ( P.L. 108-199 ; H.R. 2673 ) requires an across-the-board rescission of 0.59%for each account, amounts that are calculated for lines in this column. b. Includes the AIDS-related portion of $53.5 million earmarked for AIDS, tuberculosis, and malaria inEastern Europe and the Baltics, as well asunearmarked assistance through other programs. c. The House bill ( H.R. 2800 ) did not fund this new account for the Global AIDS Initiative, butinstead provided additional amounts in theChild Survival/Health account, above. d. This amount is not specified in the legislation, but overall program funding appears sufficient to meet thistarget. Senate Debate. In H.R. 2800 (originally reported as S. 1426 ), the Senate provided about $3.85billion in overall "core" bilateral development programs. The Senate measure wasabout $560 million higher than the President's request and $420 million above theHouse bill. As one of its top priorities, the Senate provided $1.54 billion for international HIV/AIDS, $300 million above the President's request and $665 million higher thanFY2003 levels. The HIV/AIDS total included as much as $250 million for theGlobal Fund, compared with the President's request of $100 million. (The Presidentalso requested $100 million for the Global Fund in the Labor/HHS appropriationmeasure.) Unlike the House bill, the Senate included HIV/AIDS funds in both theChild Survival/Health (CS/H) and Global AIDS Initiative accounts. The GlobalAIDS Initiative account is a new request for FY2004, funding programs managed bya new State Department Coordinator. The House bill kept nearly all HIV/AIDSfunds in the CS/H account, consistent with past practice. The Senate bill alsorestored cuts to bilateral tuberculosis and malaria proposed by the President,increasing spending for non-HIV/AIDS infectious diseases from $104 million to$185 million. Of that total, tuberculosis was to receive $80 million, while malariafunding was set at $85 million. Besides increasing health programs, the Senate bill also added to the request for other development activities, providing about $80 million more than requested andover $100 million more than the House. Basic education programs received $220million under bilateral development assistance, while environmental activities ($485million) and microenterprise ($180 million) were other areas emphasized in theSenate bill that were set above the President's request. Table 14. "Core" Development Aid Accounts -- Congressional Action ($s millions) Source: House and Senate Appropriation Committees. * Figures in this column have been adjusted to reflect a 0.59% across-the-board rescission required in Division H of H.R. 2673 , the ConsolidatedAppropriations Act, 2004 ( P.L. 108-199 ). a. UNICEF contributions of $120 million have been deducted from these figures in order to be consistent with the FY2004 request, Senate, and Conference accounttotals. b. The House bill included funding for the Global AIDS Initiative in the ChildSurvival/Health account. Conference Agreement. In conference consideration -- added as Division D of H.R. 2673 , the ConsolidatedAppropriations Act, 2004 -- lawmakers set total funding for development aid "coreaccounts" at $3.7 billion, about $400 million or 12% higher than the President'srequest. While much of the increase is directed for HIV/AIDS and other infectiousdisease programs, funding for other development priorities also rose, most notablyfor basic education, family planning, and biodiversity programs. Table 15 lists 29programs for which Congress set specific funding targets in the final legislation. The top development aid funding priority for House-Senate conferees was the $1.46 billion agreed to for international HIV/AIDS (See Table 13, above). With theaddition of resources for malaria and tuberculosis, the total for these infectiousdiseases comes to $1.64 billion in the Foreign Operations measure. When combinedwith appropriations in the Labor/HHS/Education bill (also included in theConsolidated Appropriations Act, 2004, H.R. 2673 , as Division E),Congress will have recommended a total of $2.4 billion for global HIV/AIDS,malaria, and tuberculosis. (The final amount is slightly less than this due to a 0.59%across-the-board rescission required in Division H of the Consolidated Appropriationconference agreement.) The Foreign Operations portion is about $300 million abovethe President's request. Conferees further agreed to a $400 million contribution tothe Global Fund for AIDS, Malaria, and Tuberculosis that together with $150 millionin Division E of H.R. 2673 , would bring the total level to $550 million,rather than the Administration's $200 million proposal. Table 15. Selected Development Aid Funding Targets -- Congressional Action ($s millions) Source: House and Senate Appropriation Committees; USAID. Note: Amounts in this table reflect program funding targets specified in House and Senate Foreign Operations bills and Committee reports. Targets are not set for allprograms in each bill, but are selectively identified, often to establish minimumamounts for development aid activities of special congressional importance. Amounts shown in the columns are allocated from USAID/State Department "core"development aid accounts: Development Assistance, the Child Survival and HealthProgram Fund, and the Global AIDS Initiative. In addition to figures shown here,funds are drawn from other economic aid programs -- Economic Support Fund, aidto Eastern Europe, and former-Soviet assistance. See footnotes below for additionalinformation regarding funding targets across all Foreign Operations accounts for eachprogram. a. Amounts in this column are not adjusted to reflect the 0.59% across-the-board rescission that the conference agreement of H.R. 2673 requires. b. Across all Foreign Operations accounts for Trade Capacity Building, the FY2003estimate was $449.1 million; the House bill provided $517 million; theconference agreement provides $503 million. c. The FY2003 estimate across all Foreign Operations accounts for Microenterpriseprograms was $160 million; the House Appropriations Committee report"expects " USAID to fund Microenterprise programs at the authorized level forFY2004 ($200 million); the conference agreement "supports" the SenateAppropriations Committee report regarding Microenterprise policy and funding. d. Across all Foreign Operations accounts for Plant Biotechnology, the conferenceagreement provides $25 million. e. Across all Foreign Operations accounts for Diary Development, the FY2003estimate was $24.8 million; the Senate Appropriations Committee said thatFY2004 funding for dairy development should increase over FY2003 levels. f. No estimate available. g. Across all Foreign Operations accounts for Basic Education, the House billprovided $350 million; the conference agreement provides $326.5 million. h. Across all Foreign Operations accounts for Environment activities, the Senate billprovided $485 million. i. Across all Foreign Operations accounts for Drinking Water activities, the FY2003estimate was $99.4 million; the Senate bill provided $100; the conferenceagreement provides $100 million. j. Across all Foreign Operations accounts for Energy Conservation/Climate Change,the FY2003 estimate was $173.9 million; the Senate bill provided $185 million;the conference agreement provides $180 million. k. Across all Foreign Operations accounts for Iodine Deficiency Disorder, the Houseand Senate bills provided $3.5 million. l. Across all Foreign Operations accounts for bilateral HIV/AIDS programs, theFY2003 estimate was $628.1 million; the House bill provided $870.8 million;the Senate bill provided $1.291 billion; the conference agreement provides$1.035 billion. m. The Senate bill provided two separate targets: $29 million for Injection SafetyPrograms and $46 million for Blood Safety Programs. n. Across all Foreign Operations accounts for bilateral tuberculosis programs, theHouse bill provided $85.1 million ; the Senate bill provided $80 million; theconference agreement provides $101 million. o. For bilateral Malaria programs, the House bill provided not less than the FY2003funding level. Across all Foreign Operations accounts for bilateral Malariaprograms, the conference agreement provides $101 million. p. Across all Foreign Operations accounts for Family Planning/Reproductive Health,the FY2003 estimate was $446.5 million; the House bill provided $425 million;the Senate bill provided $445 million; the conference agreement provides $432million. <7.4. International Family Planning and UNFPA Funding> U.S. population assistance and family planning programs overseas have sparked continuous controversy during Foreign Operations debates for nearly two decades. For FY2004, the Administration requested $425 million for bilateral populationassistance, the same as proposed last year, but below the $446.5 million appropriatedby Congress for FY2003. Although funding considerations have at times beenheatedly debated by Congress, the most contentious family planning issues addressedin nearly every annual congressional consideration of Foreign Operations bills havefocused on two matters: whether the United States should contribute to the U.N.Population Fund (UNFPA) if the organization maintains a program in China whereallegations of coercive family planning have been widespread for many years, andwhether abortion-related restrictions should be applied to bilateral USAID populationaid grants (commonly known as the "Mexico City" policy). UNFPA Funding. The most contentious issue usually concerns the abortion restriction question, but most recentattention has focused on UNFPA and a White House decision in July 2002 to blockthe $34 million U.S. contribution to the organization. During the Reagan and BushAdministrations, the United States did not contribute to UNFPA because of concernsover practices of forced abortion and involuntary sterilization in China whereUNFPA maintains programs. In 1985, Congress passed the so-called Kemp-Kastenamendment which has been made part of every Foreign Operations appropriationsince, barring U.S. funds to any organization that supports or participates "in themanagement" of a program of coercive abortion or involuntary sterilization. In 1993,President Clinton determined that UNFPA, despite its presence in China, was notinvolved in the management of a coercive program. In most years since 1993,Congress has appropriated about $25 million for UNFPA, but added a directive thatrequired that the amount be reduced by however much UNFPA spent in China. Consequently, the U.S. contribution has fluctuated between $21.5 million and $25million. For FY2002, President Bush requested $25 million for UNFPA. As part of a larger package concerning various international family planning issues, Congressprovided in the FY2002 Foreign Operations bill "not more than" $34 million forUNFPA. While members of the Appropriations Committees say it was their intentto provide the full $34 million, the language allowed the President to allocatehowever much he chose, up to a $34 million ceiling. According to February 27,2002, testimony by Arthur Dewey, Assistant Secretary of State for Population,Refugees, and Migration before the Senate Foreign Relations Committee, the WhiteHouse placed a hold on UNFPA funds in January 2002 because new evidencesuggested that coercive practices were continuing in Chinese counties where UNFPAconcentrates its programs. A September 2001 investigation team, sponsored by thePopulation Research Institute, concluded that a consistent pattern of coercioncontinued in "model" UNFPA counties, including forced abortions and involuntarysterilizations. Refuting these findings, a UNFPA-commissioned review team foundin October 2001 "absolutely no evidence that the UN Population Fund supportscoercive family planning practices in China or violates the human rights of Chinesepeople in any way." (See House International Relations Committee hearing, Coercive Population Control in China: New Evidence of Forced Abortion andForced Sterilization , October 17, 2001. See also testimony of Josephine Guy andNicholaas Biegman before the Senate Foreign Relations Committee, February 27,2002.) Although most observers agree that coercive family planning practices continue in China, differences remain over the extent to which, if any, UNFPA supportsinvoluntary activities and whether UNFPA should operate at all in a country wheresuch conditions exist. Given the conflicting reports, the State Department sent itsown investigative team to China for a two-week review of UNFPA programs on May13, 2002. The team, which was led by former Ambassador William Brown andincluded Bonnie Glick, a former State Department official, and Dr. Theodore Tong,a public health professor at the University of Arizona, made three findings andrecommendations in its report dated May 31: Findings: There is no evidence that UNFPA "knowingly supported orparticipated in the management of a program of coercive abortion or involuntarysterilization" in China; China maintains coercive elements in its population programs;and Chinese leaders view "population control as a high priority"and remain concerned over implications of loosening controls for socioeconomicchange. Recommendations: The United States should release not more than $34 million ofpreviously appropriated funds to UNFPA; Until China ends all forms of coercion in law and practice, noU.S. government funds should be allocated to population programs in China;and Appropriate resources, possibly from the United States, shouldbe allocated to monitor and evaluate Chinese population controlprograms. Despite the team's recommendation to release the $34 million, Secretary of State Powell decided on July 22, 2002, to withhold funds to UNFPA and torecommend that they be re-directed to other international family planning andreproductive health activities. (The authority to make this decision had beendelegated previously by the President to the Secretary of State.) The StateDepartment's analysis of the Secretary's determination found that even thoughUNFPA did not "knowingly" support or participate in a coercive practice, that alonewould not preclude the application of Kemp-Kasten. Instead, a finding that therecipient of U.S. funds -- in this case UNFPA -- simply supports or participates insuch a program, whether knowingly or unknowingly, would trigger the restriction. The team found that the Chinese government imposes fines and penalties on families that have children exceeding the number approved by the government, apractice that in some cases coerces women to have abortions they would nototherwise undergo. The State Department analysis concluded that UNFPA'sinvolvement in China's family planning program "allows the Chinese governmentto implement more effectively its program of coercive abortion." (The full text of theState Department's analysis is online at the State Department's website at http://www.state.gov/g/prm/rls/other/12128.htm . The State Department'sassessment team report is also online, at http://www.state.gov/g/prm/rls/rpt/2002/12122.htm .) Critics of the Administration's decision opposed it not only because of the negative impact it may have on access to voluntary family planning programs bypersons in around 140 countries where UNFPA operates, but also because of thepossible application of the determination for other international organizations thatoperate in China and to which the U.S. contributes. For FY2003, the President proposed no funding for UNFPA, although $25 million was requested in "reserve" for the account from which UNFPA receives itsfunding. Presumably, this could have been made available to UNFPA if it was foundnot to be in violation of Kemp-Kasten. Following several legislative attempts toreverse the Administration's denial of UNFPA -- in both FY2002 supplementalappropriations and regular FY2003 Foreign Operations measures -- Congressapproved in P.L. 108-7 , the Consolidated Appropriations Act for FY2003, aprovision allocating $34 million to UNFPA, the same as in FY2002, so long asseveral conditions were met. The most significant requirement was that the Presidentmust certify that UNFPA is no longer involved in the management of a coercivefamily planning program. Since the July 2002 determination, the Administration has transferred to USAID $34 million from FY2002 appropriations and $25 million from FY2003 that wouldhave otherwise been provided to UNFPA in order to fund USAID bilateral familyplanning programs for which UNFPA has no involvement. The State Department'sjustification of its September 25, 2003 letter to Congress regarding the FY2003resources noted that the "factual circumstances" do not support making adetermination that UNFPA no longer supports or participates in the management ofa program of coercive abortion or involuntary sterilization. Section 572 of theFY2003 Foreign Operations Appropriations required the President to issue such astatement before restoring U.S. funding to UNFPA. Like for FY2003, the FY2004 Foreign Operations request did not propose funding for UNFPA, but placed $25 million in "reserve" for unidentified voluntarycontributions to international organizations. "Mexico City" Policy. The debate over international family planning policy and abortion began nearly three decadesago, in 1973, when Congress added a provision to the Foreign Assistance Act of1961 prohibiting the use of U.S. appropriated funds for abortion-related activitiesand coercive family planning programs. During the mid-1980s, in what has becomeknown as the "Mexico City" policy (because it was first announced at the 1984Mexico City Population Conference), the Reagan Administration, and later theGeorge H. W. Bush Administration restricted funds for foreign non-governmentalorganizations (NGOs) that were involved in performing or promoting abortions incountries where they worked, even if such activities were undertaken with non-U.S.funds . Several groups, including International Planned ParenthoodFederation-London (IPPF-London), became ineligible for U.S. financial support. Insome subsequent years, Congress narrowly approved measures to overturn thisprohibition, but White House vetoes kept the policy in place. President Clinton in1993 reversed the position of his two predecessors, allowing the United States toresume funding for all family planning organizations so long as no U.S. money wasused by those involved in abortion-related work. Between 1996 and 2000, the House and Senate took opposing positions on the Mexico City issue, actions that repeatedly held up enactment of the final ForeignOperations spending measures. The House position, articulated by RepresentativeChris Smith (N.J.) and others, supported reinstatement of the Mexico City policyrestricting U.S. aid funds to foreign organizations involved in performing abortionsor in lobbying to change abortion laws or policies in foreign countries. The Senate,on the other hand, rejected in most cases House provisions dealing with Mexico Citypolicy, favoring a position that left these decisions in the hands of theAdministration. Unable to reach an agreement satisfactory to both sides, Congressadopted interim arrangements during this period that did not resolve the broadpopulation program controversy, but permitted the stalled Foreign Operationsmeasure to move forward. The annual "compromise" removed House-added MexicoCity restrictions, but reduced population assistance to $385 million, and in severalyears, "metered" the availability of the funds at a rate of one-twelfth of the $385million per month. In FY2000, when the issue became linked with the separate foreign policy matter of paying U.S. arrears owed to the United Nations, a reluctant PresidentClinton agreed to a modified version of abortion restrictions, marking the first timethat Mexico City conditions had been included in legislation signed by the President (enacted in the Foreign Operations Act for FY2000, H.R. 3422 ,incorporated into H.R. 3194 , the Consolidated Appropriations Act forFY2000, P.L. 106-113 ). Because the President could waive the restrictions for $15million in grants to organizations that refused to certify, there was no major impacton USAID family planning programs in FY2000, other than the reduction of $12.5million in population assistance that the legislation required if the White Houseexercised the waiver authority. When Congress again came to an impasse in FY2001, lawmakers agreed to allow the new President to set policy. Under the FY2001 Foreign Operationsmeasure, none of the $425 million appropriation could be obligated until afterFebruary 15, 2001. Subsequently, on January 22, 2001, two days after taking office, President Bush issued a Memorandum to the USAID Administrator rescinding the 1993memorandum from President Clinton and directing the Administrator to "reinstatein full all of the requirements of the Mexico City Policy in effect on January 19,1993." The President further said that it was his "conviction that taxpayer fundsshould not be used to pay for abortions or to advocate or actively promote abortion,either here or abroad." A separate statement from the President's press secretarystated that President Bush was "committed to maintaining the $425 million fundinglevel" for population assistance "because he knows that one of the best ways toprevent abortion is by providing quality voluntary family planning services." Thepress secretary further emphasized that it was the intent that any restrictions "do notlimit organizations from treating injuries or illnesses caused by legal or illegalabortions, for example, post abortion care." On February 15, 2001, the day on whichFY2001 population aid funds became available for obligation, USAID issued specificpolicy language and contract clauses to implement the President's directive. Theguidelines are nearly identical to those used in the 1980s and early 1990s when theMexico City policy applied. Critics of the certification requirement oppose it on several grounds. They believe that family planning organizations may cut back on services because they areunsure of the full implications of the restrictions and do not want to risk losingeligibility for USAID funding. This, they contend, will lead to higher numbers ofunwanted pregnancies and possibly more abortions. Opponents also believe the newconditions undermine relations between the U.S. Government and foreign NGOs andmultilateral groups, creating a situation in which the United States challenges theirdecisions on how to spend their own money. They further argue that U.S. policyimposes a so-called "gag" order on the ability of foreign NGOs and multilateralgroups to promote changes to abortion laws and regulations in developing nations. This would be unconstitutional if applied to American groups working in the UnitedStates, critics note. Supporters of the certification requirement argue that even though permanent law bans USAID funds from being used to perform or promote abortions, money isfungible; organizations receiving American-taxpayer funding can simply use USAIDresources for permitted activities while diverting money raised from other sources toperform abortions or lobby to change abortion laws and regulations. The certificationprocess, they contend, closes the fungibility "loophole." Since reinstatement of the Mexico City policy in early 2001, several bills have been introduced to reverse the policy, but except for language included in the SenateFY2004 Foreign Operations appropriations bill (see below), none has passed eitherthe House or Senate, and no measure has been enacted into law. Congressional Action. On July 23, the House approved in H.R. 2800 $425 million for bilateral familyplanning programs, as requested. For UNFPA contributions, the House bill provided$25 million, available only under certain conditions: none of the funds can be used in China; funds must be maintained by UNFPA in a separate account andmay not commingle amounts; UNFPA does not perform abortions; UNFPA does not provide any resources for the Chinese StatePlanned-Birth Commission or its regional affiliates; and U.S. contributions will be reduced by whatever amount, if any,UNFPA spends in China. In addition, the terms of the Kemp-Kasten amendment continued to apply, the terms of which resulted in a cut-off of U.S. contributions in FY2002. On July 17, the Senate Appropriations Committee approved its FY2004 Foreign Operations ( S. 1426 ), including several significant changes regardinginternational family planning funding and policy that were opposed by theAdministration. (The Senate, on October 30, subsequently passed the legislation,approving the House bill, H.R. 2800 , without making changes to theCommittee-reported text concerning international family planning issues.) For bilateral family planning activities, the Senate bill provided $445 million, $20 million above the President's request. In Section 691, the bill effectivelyreversed the Administration's Mexico City policy. Specifically, the provision statedthat foreign NGOs shall not be declared ineligible for U.S. funds solely on the basisof health or medical services they provide (including counseling and referral services)with non-U.S. government funds. This exemption would apply so long as theservices do not violate the law of the country in which they are performed and thatthey would not violate U.S. laws if provided in the United States. Section 691 furtherprovided that non-U.S. government funds used by foreign NGOs for advocacy andlobbying activities would be subject to conditions that also apply to U.S. NGOs. Since it is largely held that American NGOs would not be subject to these restrictionsunder the Constitutional protection of free speech, it was possible that this latterexemption would have lifted current prohibitions that apply to overseas NGOs. Inthe White House "Statement of Administration Policy" for S. 1426 , theexecutive said that the President would veto the bill if it included this provision. For UNFPA, the Senate bill provided $35 million in FY2004, but made these funds, together with those appropriated for FY2002 and FY2003, subject toKemp-Kasten limitations and current restrictions that apply in FY2003. The conference agreement on H.R. 2673 , the Consolidated Appropriations Act, 2004 ( P.L. 108-199 ), within which Foreign Operations isincluded as Division D, earmarks $432 million for bilateral family planningassistance, $7 million higher than the request, deletes the Senate provision reversingthe Mexico City policy, and modifies House and Senate-passed text regardingUNFPA. For UNFPA, the legislation earmarks $34 million, subject, however, to the Kemp-Kasten conditions that resulted in the withholding of funds the past two years. More specifically, the bill specifies that: none of the funds can be used in China; funds must be maintained by UNFPA in a separate account andmay not be commingled with other sums; and UNFPA does not perform abortions; The conference agreement further directs how the previously withheld money will be disbursed, thereby resolving a long-standing dispute over whether to commit theseresources to other development programs or place them in a reserve account in caseUNFPA again becomes eligible for U.S. support. H.R. 2673 specifiesthat the $34 million withheld in FY2002 shall be used for family planning programsin twelve countries, including Congo, Ethiopia, Uganda, Haiti, and Russia. The $25million in FY2003 funds that was earmarked but not transferred to UNFPA will nowbe made available for a new initiative within the Child Survival and Health accountassisting young women, mothers, and children who are victims of trafficking inpersons. In authorizing legislation related to portions of the Foreign Operations appropriation bill, the House voted on July 15 (216-211) to delete acommittee-approved amendment added to H.R. 1950 that sought torestore U.S. funding to UNFPA. On May 8, the International Relations Committeehad approved a provision offered by Congressman Crowley that authorized $50million for a U.S. contribution to UNFPA for each of FY2004 and FY2005. TheCrowley amendment further would have altered existing law for determining UNFPAeligibility by requiring that the President find that UNFPA does not "directly"support or participate in coercive or involuntary activities. This would appear tomake it more difficult for the President to block funding for UNFPA than underconditions that apply for this year. Not only would the Crowley amendment haveadded the word "directly," but also defined the circumstances under which UNFPAwould be found ineligible as "knowingly and intentionally working with a purposeto continue, advance or expand the practice of coercive abortion or involuntarysterilization, or playing a primary and essential role in a coercive or involuntaryaspect of a country's family planning program." In another authorizing bill -- S. 925 , the Foreign Relations Authorization for FY2004 -- the Senate added on July 9 an amendment by SenatorBoxer that, like S. 1426 , would effectively reject the President's MexicoCity policy. Senate opponents had tried to table the Boxer amendment, an effort thatfailed on a vote of 43-53. The Administration strongly opposes the Boxeramendment and says the President would veto the bill if it remains in the legislation. The Senate has not resumed consideration of S. 925 . <7.5. Afghanistan Reconstruction (6)> Congress considered simultaneous requests in 2003 for additional reconstruction aid for Afghanistan. In the regular FY2004 Foreign Operations budget proposal,submitted in February 2003, the Administration asked for $550 million for economicand military support for Kabul. More recently, as part of the President's $87 billionFY2004 supplemental request, most of which would support U.S. military operationsin Iraq and Afghanistan, and Iraq reconstruction, the White House proposed $799million additional aid for Afghanistan. (The Administration further planned tore-program $390 million prior year DOD, State Department, and USAIDappropriations for Afghan reconstruction.) The Emergency SupplementalAppropriations Act for Defense and Reconstruction of Iraq and Afghanistan ( P.L.108-106 ) appropriated $1.164 billion to Afghanistan. The ConsolidatedAppropriations Act, 2004 ( H.R. 2673 ; P.L. 108-199 ), within whichFY2004 Foreign Operations regular spending was incorporated, provides $405million for humanitarian and reconstruction assistance to Afghanistan. This bringsthe total FY2004 aid package for Afghanistan to nearly $1.6 billion. The conditions in Afghanistan represent a challenging mix of ongoing security concerns, infrastructure destruction, and humanitarian needs likely requiring a robustand sustained intervention. While the hunt for Al Qaeda forces within Afghanistancontinues, transitional and reconstruction assistance are well underway. Anexamination of the progress of reconstruction efforts and aid priorities sinceDecember 2001 reveals the complexity of the tasks at hand and the important rolesto be played by the United States and the international community. The case ofAfghanistan may present a special category of international crisis response, in whichthe United States and others pursue the war on terrorism in a country whilesimultaneously providing humanitarian and reconstruction assistance. So far, the international community has continued to provide large amounts of aid and resources for the reconstruction effort. A long-term commitment will likelybe necessary to ensure that a stable, democratic Afghanistan emerges and will not fallprey to the twin evils of drugs and terrorism. The outcomes of the internationaldonors conference in January 2002 and other donor conferences since then indicatea strong willingness on the part of the international community to assist in therestoration of Afghanistan. However, reconstruction costs are estimated by some tobe more than $15-$30 billion over the next decade. Current Operating Environment. Key developments since September 11, 2001 and the collapse of the Taliban focuson three main pillars: First, the development of plans for security including thepresence of an International Security Assistance Force (ISAF), the establishment andtraining of an Afghan National Army and police force, the demobilization of privatemilitias, and the formation of provincial reconstruction teams; second, establishingthe political framework through the Bonn Conference and Afghanistan InterimAdministration (AIA), the loya jirga and Islamic Transitional Government ofAfghanistan (ITGA), and renewed diplomatic ties with the international community;and third, the creation of a strategy for reconstruction beginning with the TokyoReconstruction Conference in January 2002. The current operating environmentcontinues to highlight the importance of these three themes and the work that remainsto be done to assure Afghanistan's recovery. The most serious challenge facing Afghanistan today is the lack of security. Former commanders maintain control over their own areas and continue fighting withtheir rivals, making difficult the extension of control by the national government, theprovision of humanitarian assistance, and progress on reconstruction. The ISAF,created by the Bonn agreement, has reached its agreed strength of about 5,500. NATO assumed command of the 30-nation force in August 2003. Because ofongoing threats to Afghanistan's internal security, there have been calls for ISAFexpansion and deployment to other cities. In October 2003, the U.N. SecurityCouncil formally backed an expansion of ISAF outside of Kabul by adoptingResolution 1510. U.S. forces, with participation from French and British forces, are continuing to train a new Afghan National Army that it is hoped will ultimately allow the Kabulgovernment to maintain security on its own, and enable foreign forces to departAfghanistan. The targeted size of the army is 70,000, but it is expected to takeseveral years to achieve full strength. With the continued fighting and insecurity, theJapan and UN-led process of demobilization and integration of combatants has alsobeen slow. Ensuring a secure environment for reconstruction gained greater attention with an initiative by the Pentagon to expand the role of the U.S. military in Afghanistan.In December 2002, DOD announced that it would be setting up "provincialreconstruction teams" (PRTs), composed of U.S. combat and civil affairs officers,to provide security for reconstruction workers and to extend the influence of theKabul government. Plans call for eight to ten PRTs. Six of these PRTs are alreadyin operation (including one run by Britain, one by New Zealand, and one byGermany) and observers say NGOs are gravitating to areas where they are presentdue to improved security. This marks a departure from the previous policy of relyingsolely on security through the development of an Afghan national army or expansionof the ISAF, and engages U.S. forces beyond military action to oust the Taliban andAl Qaeda. Still, factional fighting and increased criminal activity have undermined relief and reconstruction operations. In some cases, where operations were directlytargeted, this has led to the temporary suspension of U.N. missions or withdrawal ofaid agencies from certain areas. The United Nations has begun a database to recordnational security incidents and to provide more effective, timely information andsituation assessments to the aid community. The strength and influence of the central government is viewed as a key factor that will determine the success of the intervention and assistance on the part of theinternational community. Humanitarian and reconstruction programs face thechallenge of maintaining their foothold despite the complex humanitarianrequirements (such as population returns and resettlement, food security, shelter, andwinter assistance) and reconstruction problems (such as rebuilding the infrastructure,economy and agricultural base; addressing landmines and environmental damage;and reestablishing health, education, and community centers.) Afghanistan isbeginning to prepare for presidential elections to take place in 2004, followed byparliamentary elections one year later. A loya jirga began in mid December 2003 toconsider a draft permanent constitution that was publicly unveiled on November 3. After a constitution is adopted, U.S., Afghan, and international attention will turn tothe holding of elections. Apart from the security problems, the current operating environment presents a number of other urgent challenges. The collapsed infrastructure, rugged terrain, andextreme weather are significant factors with regard to access, food aid, logistics, reconstruction and must be understood in the context of the continuing vast numbersof refugees and IDPs, the differences among the regions in which they are located,and the political and security situation throughout the country. There is a need forstronger links between humanitarian and reconstruction projects so that Afghans canbegin to move beyond initial reintegration to more permanent resettlement. UNHCRcontinues to assist refugees and IDPs, although some have raised concerns that theinfrastructure may not yet be able to support this many returnees. The United States has international help in carrying out the reconstruction of Afghanistan. The United States is training the new army and about 9,000 U.S. troopscontinue to combat Taliban/Al Qaeda remnants. The U.S. Treasury Department isadvising the government on its budget and other financial affairs. Amongcontributions by other countries, Italy is providing advice on judicial reform andGermany is helping establish a national police force. The United States, Japan andSaudi Arabia are financing the rebuilding of the Kabul-Qandahar-Herat majorroadway. There have been some reports that Afghanistan officials have complained about the slow pace at which pledged funds were being paid. In a similar vein, in the pastthe United States has been critical of other donors for not meeting their "fair share"of the cost of recovery and for not doing enough on a multilateral level. On the onehand, determining the "fair share" of the costs of reconstruction for any one countryor group of countries varies from conflict to conflict and depends in part on theresources being spent on conflicts elsewhere. On the other hand, the way in whichfunds are distributed -- be it multilaterally through U.N. agencies or bilaterally withfunds supporting international organizations and NGOs directly -- has a directimpact on implementation. Others are concerned that international donors mightshift their focus to Iraq reconstruction, and lose interest or run too low on resourcesto continue to participate in Afghan reconstruction. If progress on security, road construction, and reconstruction efforts are made in advance of the planned 2004 elections, it could increase the chances of the successof moderates in those elections. Additional funding could also have an impact ondecisions by the international community possibly resulting in larger contributions. It could also help efforts of the Afghan government to expand ISAF, which is nowlimited only to Kabul. Increased funding could also have negative implications. There are concerns that it could add to the already high levels of corruption. Some experts are concernedabout absorption capacity and whether additional funds can be allocated quickly andeffectively. If progress is not achieved, the increase could be seen as largelysymbolic and ineffective. Others have raised the possibility that the United Stateswill be seen giving too much support to the Karzai government in advance of the2004 elections. Tokyo Pledging Conference. The International Conference on Reconstruction Assistance to Afghanistan held in Tokyoin January 2002 gave the Afghan Interim Authority (AIA) a chance to demonstrateits commitment to the next phase of Afghanistan's recovery and provided theinternational donor community an opportunity to come together and formallydemonstrate support for this initiative. The sixty-one countries and twenty-oneinternational organizations represented pledged $1.8 billion for 2002. The U.S.government pledged $297 million, drawn from existing sources -- either from the$40 billion Emergency Terrorism Response supplemental ( P.L. 107-38 ) that waspassed shortly after the September 11, 2001 attacks or from regular FY2002appropriations. The total pledged at Tokyo was $4.5 billion, with some statesmaking pledges over multiple years and commitments to be carried out in differenttime frames. Some countries offered support in kind but placed no monetary valueon that. Subsequent U.S. Aid Transfers, FY2002 and FY2003. Since the Tokyo pledging conference, throughsupplemental and regular appropriation bills, Congress has approved an additional$970 million in U.S. assistance to Afghanistan, making Kabul one of the largestrecipients of American aid. An emergency FY2002 supplemental measure ( P.L.107-206 ) added $258 million for Afghanistan to amounts previously allocated,bringing the total amount of U.S. assistance in FY2002 to $686 million, well inexcess of funding pledged at the Tokyo conference. In FY2003, Congress passedin regular ( P.L. 108-7 ) and supplemental ( P.L. 108-11 ) appropriation acts over $700million, of which $647 million came under Foreign Operations programs. In eachof these actions, Congress increased levels beyond those requested by theAdministration. The $40 million add-on in P.L. 108-11 allowed USAID to acceleratethe Kabul-Qandahar-Herat road construction project that is jointly financed withJapan and Saudi Arabia. In related legislation, the Afghanistan Freedom Support Act of 2002 ( P.L. 107-327 , S. 2712 ), passed by Congress on November 15, 2002, andsigned by the President on December 4, 2002, authorizes an additional $3.3 billionfor Afghanistan over four years. Included is $2 billion for humanitarian,reconstruction, and enterprise fund assistance through FY2006 and $300 million indrawdown from U.S. military stocks of defense articles and equipment forAfghanistan and other countries and organizations participating in restoring Afghansecurity. The legislation also includes a Sense of Congress that calls for an expandedInternational Security Assistance Force with an authorization of an additional $1billion over two years. FY2004 Regular Afghanistan Aid Request. For FY2004 Regular Appropriations, the Administrationrequested $550 million for Afghanistan. Although the FY2004 proposal was lessthan for FY2002 and FY2003, when funding for humanitarian programs in FY2004(food, refugees, disaster relief) are added, the total sum is nearer the aid amounts ofprevious years. (Humanitarian funds are usually not allocated on a country basisuntil the fiscal year begins.) FY2004 Supplemental Request. Subsequently, as part of an $87 billion FY2004 supplemental proposal, mainly tofund continuing military operations and reconstruction programs in Iraq, theAdministration's requested in September 2003 $1.2 billion in additional Afghanistanassistance. Of the total, $799 million would be for new appropriations and $390million would come from previously appropriated DOD, State Department, andUSAID funds. The new funding more than doubled U.S. assistance to Afghanistanin FY2003. The proposal came at a time of growing criticism over delays in aiddelivery, deteriorating security conditions, and concern that U.S. and internationalattention was shifted to Iraq. Key features of the $799 million in new appropriationincluded targeting projects that would have the most immediate impact on the livesof the Afghan population, such as: $402 million for security, with funding included to train and support police, border patrol, the military and counter-narcotics forces, disarmamentand de-mobilization programs, and courthouse construction inKabul; $129 million to reinforce the authority of the Government ofAfghanistan with budget support for high priority projects, technical experts placedin Afghan ministries, and voter registration and electionsupport; $105 million for completion of the Kabul-Kandahar-Heratmajor highway, a program jointly financed by the United States, Japan, and SaudiArabia; and $163 million for social programs and critical infrastructure,including education, health, and local projects. An additional $390 million was planned to come from reallocated, prior-year funds, but the Administration did not specified how they would be used. The White Housealso asked that the $300 million limit on military drawdowns from DOD stocksenacted in the Afghanistan Freedom Support Act of 2002 ( P.L. 107-327 ) be increasedto $600 million. <7.6. Congressional Action> FY2004 Regular Afghanistan Appropriation. In mid-July 2003, the House approved not less than$600 million for Afghan reconstruction in FY2004 in the Foreign Operations fundingmeasure ( H.R. 2800 ). This level was $50 million higher than theAdministration's request, although the President's proposal did not reflect fundsdrawn from the refugee and disaster relief Foreign Operations accounts which couldcount towards the $600 million House target. The House Appropriations Committeefurther urged the State Department Coordinator of Assistance to Afghanistan andUSAID to allocate at least $10 million ($5 million from funds in H.R. 2800 ) to support Afghan women, to include the construction of 17 Women's Centersthat provide legal and protective services, computer and literacy classes, andvocational courses. The Senate measure -- S. 1426 , as amended and passed as H.R. 2800 -- also provided $600 million. The Senate AppropriationsCommittee highlighted several aspects of U.S. reconstruction efforts for continuedsupport: training for the Afghan National Army and national police, combatingnarcotics production, bolstering democratic institutions, protecting and strengtheningopportunities for Afghan women in the economy and politics of the country,including support for women-led Afghan NGOs, supporting the Afghan HumanRights Commission and the Judicial Reform Commission, targeting aid on Afghancommunities and families who were victims of military operations, and removing mines, ordnance, and munitions in Afghanistan. Subsequently, Foreign Operations spending was incorporated as Division D into the Consolidated Appropriations Act, 2004, ( H.R. 2673 ) legislation thatincludes 7 appropriation measures for FY2004. The enacted text of H.R. 2673 provides $405 million be made available for humanitarianand reconstruction assistance for Afghanistan. Because of the nearly $400 millionin additional funds over the President's request for Afghanistan provided in theFY2004 Iraq/Afghanistan reconstruction supplemental (see below), conferees couldreduce amounts in the regular Foreign Operations measure for Afghanistan below the$600 million recommended in House and Senate-passed bills and still meet or exceedthe Administration's aid recommendation. (See Table 16.) Table 16. U.S. Assistance to Afghanistan, FY2002-FY2004 ($s millions) *Amounts reflect levels provided in the Consolidated Appropriations Act, 2004 ( H.R. 2673 ; P.L. 108-199 ). a. The FY2004 supplemental provides $50 million for peacekeeping activities in both Iraq andAfghanistan. b. The Consolidated Appropriations Act, 2004, earmarks $405 million for Afghanistan. Thespecific account allocations listed in the conference report's Statement of Managers, however,totals $403 million. In addition to specifying how the $405 million should be allocated across various Foreign Operations bill accounts, conferees earmarked amounts for severalpriority activities within these accounts: $2 million for reforestation activities; $2 million for the Afghan Judicial ReformCommission; $5 million to support the needs of Afghan women;and $2 million to assist Afghan communities and families sufferinglosses as a result of military operations Because Congress appropriated higher-than-requested amounts for counter narcotics, law enforcement, and peacekeeping programs in the FY2004 reconstructionsupplemental appropriation ( P.L. 108-106 ), conferees did not provide funding forthese activities in H.R. 2673 . FY2004 Supplemental. S. 1689 , as passed the Senate on October 17, approved the President's$799 million Afghan reconstruction proposal largely along the lines proposed (SeeTable 17). The House measure ( H.R. 3289 ), which also cleared onOctober 17, increased spending in Afghanistan to $1.174 billion. The add-ons forKabul come from transfers in what House lawmakers deemed to be low priority itemsrequested for Iraq. House and Senate conferees agreed on October 29 to fund Afghanreconstruction at roughly the higher House-approved levels. Table 17. Afghanistan FY2004 Supplemental: Sector Allocation ($ in millions) a. The House bill and conference agreement included funding for Experts and Policy within the category of Elections and Improved Governance. b. Total does not include $61 million provided by the Senate for a USAID interim facility in Kabul, $44 million provided in the House bill for an annex to the U.S.embassy in Kabul, or $56.6 million provided in the conference agreement forUSAID operating expenses in Afghanistan, a USAID interim facility in Kabul,and the USAID Inspector General. As shown in Table 17, the enacted legislation increased the overall reconstruction funding from new appropriations by $365 million with significantchanges over the Administration's request in allocations for infrastructure(particularly power generation and road construction), governance, and socialservices. Of note, the legislation included a $60 million ESF earmark for women'sprograms, including technical and vocational education, programs for women andgirls against sexual abuse and trafficking, shelters for women and girls, humanitarianassistance for widows, support of women-led NGOs, and programs for and trainingon women's rights. (For more details on the Afghan supplemental issue, see CRS Report RL32090 , FY2004 Supplemental Appropriations for Iraq, Afghanistan, andthe Global War on Terrorism: Military Operations and Reconstruction Assistance .) <7.7. Iraq Reconstruction (7)> Responding to mounting concerns regarding delays, impact, and expansion of Iraq reconstruction activities, President Bush submitted to Congress on September17, 2003, a $20.3 billion request in additional Iraq reconstruction and securityfunding. The resources were part of an $87 billion package covering U.S. militarycosts and smaller amounts for accelerating rehabilitation efforts in Afghanistan. Thisnew supplemental followed earlier approval in April of roughly $3 billion for thepurposes of relief and reconstruction in Iraq in the Emergency Wartime SupplementalAppropriations Act, 2003 ( P.L. 108-11 ; H.R. 1559 ). Of the totalprovided in P.L. 108-11 , $2.48 billion was placed in a special Iraq Relief andReconstruction Fund supporting efforts in a wide range of sectors, including waterand sanitation, food, electricity, education, and rule of law. The FY2003supplemental also provided $489.3 million through the Department of Defensebudget for repair of oil facilities. <7.8. FY2004 Supplemental Proposal> The FY2004 supplemental was intended to fund the most pressing, immediate needs in Iraq, with the aim of having a noticeable impact on the two greatestreconstruction concerns that have been raised since the occupation of Iraq began -- security and infrastructure. More than $5 billion would be targeted at improving thesecurity capabilities of the Iraqi people and government -- including training andequipment for border, customs, police, and fire personnel, and to develop a new Iraqiarmy and a Civil Defense Corps. Enhanced efforts to reform the judicial systemwould also be made. Most of the remaining supplemental reconstruction request would go toward rapid improvements in infrastructure, including electricity, oil infrastructure, waterand sewerage, transportation, telecommunications, housing, roads, bridges, andhospitals and health clinics. These, according to Administration officials,represented the most urgent needs over the next 12 months, but by no meansaddressed total reconstruction requirements in 2004. Other concerns in such areasof government reform, agriculture, economic development, education, and civilsociety were not included in the Administration request. A relatively small amountof funds -- $300 million -- were requested for programs designed to encourage thegrowth of the private sector and jobs training. Table 18. Iraq Supplemental: Sector Allocation (billions of dollars) Source: Office of the Coalition Provisional Authority Representative, September 8, 2003, OMB, FY2004 Supplemental Appropriation request, September 17, 2003, andHouse and Senate Appropriation Committees. a. The conference agreement excluded $50 million for Iraq traffic police, reduced by $300 million funding for two prisons, and reduced several other items. b. Excluded $25 million for consultants to plan for continued development andbuilding rehabilitation and reduced amounts for electric generation. c. Reduced funds for emergency supplies of refined oil petroleum products by $210million. d. House and Senate bills combined the categories of Water and sewerage servicesand Water resources. The House amount excluded $153 million for solid wastemanagement, including 40 trash trucks and $100 million for environmentalrestoration (marsh) projects. e. The conference agreement excluded $153 million for solid waste management,including 40 trash trucks and $100 million for environmental restoration(marsh) projects. f. Excluded $4 million for a nationwide telephone numbering system, $9 million forpostal information architecture and zip codes, and $10 million for television andradio industry modernization. g. Excluded $100 million for seven housing communities. h. Excluded $150 million for a children's hospital in Basra and $7 million forAmerican and Iraqi health care organization partnerships, but included anadditional $100 million for clinics and hospital modernization. i. Excluded $200 million for an American-Iraqi Enterprise Fund, but added $45million for micro-small-medium enterprises. j. Excluded $90 million for Public Information Centers in Iraq municipalities, butadded $90 million for education. <7.9. Reconstruction Overview> Among the key policy objectives laid out by the Bush Administration in conjunction with the war in Iraq were the restoration of basic human services and theeconomic and political reconstruction of the country. While immediate overallresponsibility for the war and management of U.S. military activity in post-war Iraqbelongs to the Commander of U.S. Central Command, the Coalition ProvisionalAuthority (CPA) is responsible for the administration of Iraq and implementingassistance efforts there. The Authority is headed by L. Paul Bremer, appointed bythe President on May 6. He reports to Defense Secretary Rumsfeld. The CPA isstaffed by officials from agencies throughout the U.S. government as well aspersonnel from other coalition member nations. A Coalition Coordinating Councilprovides liaison with NGOs, donor countries, and UN agencies and directshumanitarian affairs. The CPA has initiated a process intended to lead to Iraqi self-rule. It has appointed a 25-member Iraqi Governing Council and provided it with specificpowers and duties, including the choosing of a cabinet to serve as ministers under thesupervision of CPA advisors and the responsibility to set in motion formulation ofa national constitution. It has encouraged establishment of councils in villages andcities throughout the country to run local affairs and identify community needs. WithCPA funding and encouragement, institutions of civil and economic society havebeen reconstituted. Schools, including universities, hospitals and health clinics, arefunctioning. The oil-for-food program continues to provide basic foodstuffs. Newpolice and security forces are being trained. Programs to renovate and repair electricpower, water, oil production, roads and bridges, airports, and the seaport werelaunched. Jobs programs have been instituted to help stimulate the economy andlessen unemployment. Although much has been accomplished since the U.S. occupation began in April, the occupation authority in the view of many has failed to successfullyreestablish order and security, restore infrastructure, and introduce political andeconomic reform, including Iraqi self-governance, in a timely manner. Theseproblems are interlinked; the successful conduct of much reconstruction work iscontingent on an environment of order and stability, and the lack of visible progressin restoring basic infrastructure and institutions of security opens the door to politicaldiscontent and opposition. The $20.3 billion supplemental request sought to addressthose infrastructure and security concerns that have made insufficient progress andon which other U.S. objectives in Iraq hinge. Until mid-2003, the Administration had suggested that the cost of reconstruction up to the end of 2003 could largely be met by Iraqi and already previouslyappropriated U.S. resources. A national budget for Iraq covering the rest of the year,announced by the CPA on July 7, estimated expenditures of $6.1 billion and thecreation of a Central bank currency reserve of $2.1 billion, for a total budget of $8.2billion. New oil revenue, taxes, and profits from state owned enterprises would makeup $3.9 billion of these costs, according to the CPA's analysis. The remaining deficitof $4.3 billion would be covered by recently frozen and seized assets ($2.5 billion),the Development Fund for Iraq ($1.2 billion), and $3 billion in already appropriatedU.S. assistance. Iraq was projected to have $1.1 billion remaining for reconstructionby end of December 2003. The Administration request suggested that a reassessment of Iraq's immediate reconstruction needs demanded greater outlays of revenue than projected in July. Italso suggested that presumed sources of additional revenue in 2004 -- chiefly, oilexport production and international donor contributions -- might not be as large asoriginally anticipated. In any case, the result was a supplemental reconstructionrequest nearly 20% larger than the size of the entire national budget for Iraq projectedon an annualized basis in early July. Reconstruction Concerns and Critical Assessment. Total Reconstruction Costs. As noted above, the supplemental request was intended to meet only the most important,immediate needs in Iraq in the 2004 fiscal year. Until October 2003, the cost of Iraqreconstruction was based on speculation and educated guesswork. However, as partof the lead-in to an international donors conference held in Madrid on October 24,the World Bank and the U.N. Development Program released a needs assessmentthey conducted of 14 Iraqi economic and social sectors. (8) The Bank/UNDPassessments put the cost of reconstruction for the 14 sectors at $36 billion over fouryears, a figure that does not include $19.4 billion estimated by the CPA for security,oil, and other critical sectors not covered by the Bank assessments. (9) Total Bank/CPAprojected reconstruction costs through 2007 amount to $55 billion, $17.5 billion in2004 alone. If Iraqi oil revenues are not sufficient to meet the projected needs --which appears likely in the near term by most accounts -- and other internationaldonors do not pledge significant contributions, the United States may face increasedfinancial demands, if it seeks to meet projected Iraqi needs. Iraqi Oil Revenues and Financing Reconstruction. Until mid-2003, the Administration hadexpected most costs of reconstruction to be borne by Iraq through receipts from itsoil exports. While the decrepit state of oil production infrastructure and recurrentsabotage to pipelines and facilities have forced experts to downgrade expectationsof potential exports and receipts, any sustained increase in production will assist thereconstruction effort. Current rates of production are nearing 2 million barrels/day,but Iraqis do not expect to reach 2.5 million barrels until spring and 3 million untilthe end of 2004. Administration estimates of the prewar level range between 2.5 and3 million barrels. Ambassador Bremer indicated at a Senate hearing on September22 that he expected Iraq to produce sufficient oil in 2005 to take care of its basicneeds and provide additional funds for capital investment. (10) Undersecretary of StateLarson projected $12 billion in revenue in 2004 and $19 billion in 2005. (11) Anassociation of leading banks and financiers, the Institute of International Finance,predicted that oil revenue will be insufficient to cover the Iraqi operational budget in2004, leaving nothing for reconstruction. (12) Roughly $503 million had been allocated by September 2003 from the FY2003 Emergency Wartime Supplemental for repair of oil facilities and restoration ofproduction and distribution systems. The Administration request for these purposesunder the FY2004 supplemental was $2.1 billion. Additional sums for Iraqi securityforces were in part intended to create an Iraqi force that would prevent pipeline andother oil facility sabotage. Loans vs. Grants for Reconstruction. Closely related to the issue of Iraqi oil revenues as a means of financingreconstruction projects was the question of whether assistance could be extended ona loan rather than grant basis. Some argued that, given the substantial amount of oilrevenues that Iraq will generate at some point in the future, Baghdad would have themeans to service debt incurred for the purpose of rebuilding its infrastructure. Loans,either extended bilaterally or through some sort of trust fund, possibly managed bythe World Bank, would be repaid at some point, thereby reducing reconstructioncosts to the United States, they said. The Administration, which proposed that the entire $20.3 billion supplemental be offered as grants, argued repeatedly during congressional hearings against addingto Iraq's already substantial debt obligations. Witnesses asserted that Iraq owedroughly $200 billion in pre-war debts, reparations, and other claims. G7 leadersagreed informally at the June 2003 summit to suspend through 2004 the requirementfor Iraq to service any existing debt, giving time to construct some sort of multilateraldebt restructuring arrangement. (13) Further, U.N.Security Council Resolution 1483stated that Iraqi oil exports or proceeds could not be attached by creditors through2007 unless authorized by the Council. Beyond the matter of whether Iraq should incur more debt obligations in the near term was the question over who could legally assume responsibility for newsovereign debt. Although it would be possible that the World Bank could managean Iraq reconstruction trust fund that would receive contributions from internationaldonors, if the Bank were to use these resources for project lending, it would almostcertainly require, as it has in the past, that some sort of sovereign Iraq authorityassume the debt obligation. Until such time that legal authority is transferred to Iraqihands, the Coalition Provisional Authority is the temporary government of Iraq andwould be the one signing for the loans. Most legal scholars take the position that anoccupying power has no authority to incur new debts on behalf of the displacedsovereign. (14) Some contend, however, that thereis an exception in which a newgovernment would be responsible for the debt if it can be shown that the loans wererequired for the welfare of the occupied territory and the terms were fair andreasonable. (15) This issue was closely examined by lawmakers. The Senate adopted (51-47) an amendment by Senators Bayh and Nelson on October 16 converting $10 billion ofreconstruction grants to loans, which could be later restored as grants if foreigncreditors cancel 90% of Iraq's debt. Earlier, Senator Dorgan had offered amendments in committee markup and on the Senate floor (tabled in both venues)that would have created an authority to use Iraqi oil to secure reconstructionfinancing and convert U.S. grants to loans. Senator Hutchison and others submittedan amendment that did not come up for floor debate directing $10 billion of the totalreconstruction supplemental to a Trust Fund, to be established within the WorldBank, out of which loans and loan guarantees would be made. On the House side, Representative Wamp proposed but later withdrew an amendment during Committee markup that would have withheld one-half of Iraqfunds until after the election of a new Iraqi leader, at which time the remainingmoney would be available in the form of a loan. Representative Obey offered anamendment (defeated 25-36) that, among other things, would have transferred about$7 billion of reconstruction funds to a World Bank-administered loan facility. Afurther amendment by Representative Obey regarding a shift of grants to loans wasdefeated in the House 200-226. House and Senate conferees agreed to provide all Iraq reconstruction aid as grants rather than loans. Contracting Concerns. An Administration decision applied to the early reconstruction contracts to waive thenormal competitive bidding requirements and request bids from specific companieswhich were seen to have preexisting qualifications received considerable attentionby the business community. The closed bidding and lack of transparency disturbeda number of legislators, and some Members of Congress asked the GAO to determinewhether contracting agencies are following appropriate procedures. Some observers noted that, in addition to many American firms, a number of international organizations and non-U.S. companies were excluded from theselections made by USAID and other agencies, and even British companies were notconsidered despite that country's role in the war. U.S. officials pointed out that onlya few select firms possessed the particular skills that would qualify them for the jobspecifications for Iraq reconstruction, and that time and security clearances were alsocritical factors. Foreign entities, potentially excluded by "buy America" provisionsof law, and other U.S. firms could participate as sub-contractors to the selectedAmerican firms. Sub-contractors are likely to compose half or more of the total costof each contract. The Supplemental's Impact on Other Donors. At the time, it appeared possible that congressionalaction on the supplemental could influence the contributions of international donorsat the October donors' conference, and Administration officials encouraged Congressto complete debate on the spending bill prior that date. Some argued that a largepledge of U.S. aid prior to the conference might stimulate other donors to contributemore; diminution of the Administration plan, they argued, could have the oppositeeffect. Opponents of making U.S. aid for reconstruction in the form of loans alsocontended that other donors might follow the American lead and offer loans ratherthan grants, adding further to Iraq's debt problems. In addition, the supplementaltargeted sectors -- infrastructure and security -- that other donors were less likelyto support themselves. In similar "nation-building" exercises elsewhere, donors havetended to funnel contributions to the social sectors, such as education and health, andgrassroots democratization and economic development, all areas relatively untouchedby the supplemental. Perhaps a more important factor in other donor calculations was the extent to which they would have a say in the use of funds. Donors had been reluctant toprovide assistance because they were wary of being perceived as supporting aunilateral U.S. policy. In response to this concern, donors discussed at a September6 meeting in Brussels, the concept of creating Iraq reconstruction trust funds,managed by the U.N. or World Bank, which would accept and distributecontributions. Control over how the money was spent, according to Undersecretaryof State Alan Larson who represented the U.S. at the September 6 meetings, wouldbe handled by some sort of a multilateral management board that might includeofficials from international organizations, major donors, and Iraqis representinginterim ministries. (16) Management of Iraq Reconstruction Funds by U.S. Agencies. Administrative control over Iraq reconstructionfunds became a significant issue during congressional debate on the $2.475 billionappropriation in P.L. 108-11 . At that time, most had expected that transfers forreconstruction and post-conflict aid would be made to USAID, the State Department,and other traditional foreign assistance management agencies. But with plans for theDefense Department to oversee the governing of Iraq immediately after the end ofhostilities, the White House wanted to maintain maximum flexibility over thedistribution of resources so the President could transfer some or all of the funding toDOD. The proposal stimulated immediate controversy with a number of critics,including Members of Congress, arguing that aid programs should remain under thepolicy direction of the State Department and under the authorities of a broad andlongstanding body of foreign aid laws. Although initial House and Senate decisionswould have blocked Administration efforts to place control of reconstruction fundswith the Pentagon, ultimately Congress agreed to allow the White House to allocatethe resources among five agencies, including DOD. Funds for the Iraq Relief andReconstruction Fund appropriated in P.L. 108-11 have been managed by L. PaulBremer, head of the Coalition Provisional Authority (CPA), and the U.S. civilianadministrator in Iraq, who reports to the Secretary of Defense. The Administration proposed that the entire $20.3 billion be placed in the Iraq Relief and Reconstruction Fund, as was the case with the previous supplemental, andto continue Ambassador Bremer and the CPA's role as administrators of the Fundunder DOD guidance. After submitting the supplemental, however, the White Houseannounced the establishment of a new "Iraq Stabilization Group,"headed by NationalSecurity Advisor Condoleezza Rice. The Group was intended to help speed upreconstruction efforts by identifying and resolving problems that had in some casesbeen the source of decision-making disputes in Washington. Some analysts believedthat the move was also intended to allow the State Department a greater voice inreconstruction policy. At the same time, the State Department staff serving under theCPA in Iraq was expected to grow from 55 to about 110. Nevertheless, AmbassadorBremer would continue to report to the Secretary of Defense. (17) During congressional debate, the Senate tabled (56-42) an amendment by Senators Leahy and Daschle that would have placed the CPA under the directauthority and foreign policy guidance of the Secretary of State. The House bill,however, added a provision barring the coordination of defense or reconstructionactivities in Iraq or Afghanistan by a U.S. government officer who was not subjectto confirmation by the Senate. The House Committee wanted to ensure that whoeverwas in charge of coordination be available to testify at congressional oversighthearings. Senator Leahy proposed a similar amendment for Senate consideration. These proposals appeared to block the initiative of placing National Security CouncilAdvisor Rice, who is not subject to confirmation and who does not testify beforeCongress, in charge of coordinating reconstruction. The White House, however,contended that the new Iraq Stabilization Group did not affect control of reconstruction efforts and that the job remains under control of the DefenseDepartment. (18) In any case, the House provisionrequiring that the coordination ofreconstruction activities be headed by a confirmed U.S. official was deleted inconference negotiations. Reconstruction Priorities and Costs. The Administration said that the request included only the most pressing, immediateneeds for Iraq in FY2004. However, the relative importance of certain items detailedin the request -- 're-engineering of postal service business practices' andconstruction of seven residential communities, for example -- was challenged byCongress. Further, the costs associated with reconstruction requests were subject toskepticism, with some congressional staff reportedly suggesting that the price tag wasintentionally inflated so that the Administration would not have to return to Congressto ask for more funds in 2004. (19) Several Senateamendments were offered but notadopted that would have reduced funding for what the sponsors regarded aslow-priority needs and redirected the resources for domestic or other militaryprograms in Iraq. The House bill proposed a $1.655 billion cut in Iraq reconstructionfunding, reducing or eliminating resources for a wide range of activities that theHouse found to be un-executable, low priority, or likely to receive funding from otherinternational donors. A number of these House recommendations for cuts wereadopted in the conference agreement. See Table 17 above for details of sector andproject reductions recommended by Congress. Congressional Action. FY2004 Regular Foreign Operations Appropriations. The President did not request, nor did eitherHouse or Senate bills provide, additional funding for Iraq reconstruction in theregular FY2004 Foreign Operations Appropriations measures. Although the Housedid not address Iraq reconstruction funding matters in H.R. 2800 , Sec.572 of the legislation required that Iraq reconstruction contracts awarded withappropriated funds be subject to full and open competition. Conferees meeting on H.R. 2673 -- the Consolidated Appropriations Act 2004 within whichForeign Operations has been incorporated as Division D -- decided, however, todrop the House contract provision in Sec. 572, believing the issue had beenadequately addressed in the FY2004 supplemental measure (see below). FY2004 Iraq Reconstruction Supplemental. As illustrated in Table 17 above, theSenate-passed measure ( S. 1689 ) followed the general funding requestsproposed by the President, while the House bill ( H.R. 3289 ) reduced the$20.3 billion recommendation by $1.65 billion. Both bills further added sectionsrequiring more detailed reporting to Congress on reconstruction activities and placedlimits on, but not prohibiting non-competitive contracting procedures. The Housemeasure also prohibited reconstruction efforts to be coordinated by anyone notconfirmed by the Senate, apparently in reaction to the White House announcementestablishing the Iraq Stabilization Group, headed by national Security Advisor Rice. House and Senate negotiators agreed to total Iraq reconstruction at levels similar to House-passed amounts, reducing funds for a number of activities deemed tooexpensive or of low priority. The conference agreement was approved in the Houseon October 29. Perhaps the most challenging issue for conference committee consideration was whether to provide the entire reconstruction package as a grant, as proposed by thePresident and H.R. 3289 , or extend $10 billion in the form as a loan, asthe Senate bill recommends. The $10 billion loan in S. 1689 could laterbe converted to a grant if international creditors agree to cancel 90% of Iraq's debt. Under a threat of a Presidential veto, House and Senate conferees agreed to providethe entire package of aid as grants. (For more on Congressional action regarding theFY2004 supplemental, see CRS Report RL32090 , FY2004 SupplementalAppropriations for Iraq, Afghanistan, and the Global War on Terrorism: MilitaryOperations and Reconstruction Assistance .) <8. For Additional Reading> Overview CRS Report 98-916 . Foreign Aid: An Introductory Overview of U.S. Programs and Policy, by [author name scrubbed] and [author name scrubbed]. CRS Report RL31959 . Foreign Assistance Authorization Act, FY2005, by [author name scrubbed]. CRS Report RL32090 , FY2004 Supplemental Appropriations for Iraq, Afghanistan, and the Global War on Terrorism: Military Operations & ReconstructionAssistance , by [author name scrubbed], [author name scrubbed], [author name scrubbed], and RhodaMargesson. CRS Report RL31687 . The Millennium Challenge Account: Congressional Consideration of a New Foreign Aid Initiative, by [author name scrubbed]. CRS Report RL31829 , Supplemental Appropriations FY2003: Iraq Conflict, Afghanistan, Global War on Terrorism, and Homeland Security , by AmyBelasco and [author name scrubbed]. Foreign Operations Programs CRS Report RS20329(pdf) . African Development Bank and Fund, by Raymond Copson. CRS Issue Brief IB10050. AIDS in Africa, by Raymond Copson. CRS Report RL32252 . AIDS Orphans and Vulnerable Children (OVC): Problems, Responses, and Issues for Congress, by Tiaji Salaam. CRS Report RS21437 . The Asian Development Bank, [author name scrubbed]. CRS Issue Brief IB88093. Drug Control: International Policy and Approaches , by Raphael Perl. CRS Report 98-568 , Export-Import Bank: Background and Legislative Issues, by James Jackson. CRS Report RL31712 . The Global Fund to Fight to Fight AIDS, Tuberculosis, and Malaria: Background and Current Issues, by Raymond Copson and TiajiSalaam. CRS Report RS21181. HIV/AIDS International Programs: Appropriations, FY2002-FY2005, by Raymond Copson. CRS Report RS20622. International Disasters: How the United States Responds, by Lois McHugh CRS Report RL30830 . International Family Planning: The "Mexico City" Policy, by [author name scrubbed]. CRS Report RS21330. The International Monetary Fund: Current Reforms, by [author name scrubbed]. CRS Report RL30932(pdf) , Microenterprise and U.S. Foreign Assistance, by [author name scrubbed]. CRS Issue Brief IB96008. Multilateral Development Banks: Issues for the 108th Congress , by Jonathan Sanford. CRS Report 98-567 . The Overseas Private Investment Corporation: Background and Legislative Issues , by James Jackson. CRS Report RS21168 . The Peace Corps: USA Freedom Corps Initiative, by [author name scrubbed]. CRS Report RL30545. Trafficking in Women and Children: The U.S. and International Response , by Francis Miko. CRS Issue Brief IB96026. U.S. International Population Assistance: Issues for Congress , by [author name scrubbed]. CRS Report RL31689 . U.S. International Refugee Assistance: Issues for Congress , by [author name scrubbed]. CRS Report RL31433 . U.S. Global Health Priorities: USAID's Global FY2003 Budget, by Tiaji Salaam. Country and Regional Issues CRS Report RL31355 . Afghanistan's Path to Reconstruction: Obstacles, Challenges, and Issues for Congress, by [author name scrubbed]. CRS Report RL30883(pdf) . Africa: Scaling up the Response to the HIV/AIDS Pandemic, by Raymond Copson. CRS Issue Brief IB95052. Africa: U.S. Foreign Assistance Issues, by Raymond Copson. CRS Report RL32021 . Andean Regional Initiative (ARI): FY2003 Supplemental and FY2004 Assistance for Colombia and Neighbors, by [author name scrubbed] and ConnieVeillette. CRS Report RS21213 . Colombia: Summary and Tables on U.S. Assistance, by Nina Serafino. CRS Issue Brief IB93087. Egypt-United States Relations, by Clyde Mark. CRS Issue Brief IB96019, Haiti: Issues for Congress, by [author name scrubbed]. CRS Report RS21751 . Humanitarian Crisis in Haiti: 2004, by [author name scrubbed]. CRS Report RL31833 . Iraq: Recent Developments in Humanitarian and Reconstruction Assistance, by [author name scrubbed] and [author name scrubbed]. CRS Issue Brief IB85066. Israel: U.S. Foreign Assistance, by Clyde Mark. CRS Issue Brief IB93085. Jordan: U.S. Relations and Bilateral Issues , by Alfred Prados. CRS Report RL31412. Mexico's Counter-Narcotics Efforts Under Fox, December 2000 to April 2002, by [author name scrubbed]. CRS Report RS21457 . The Middle East Partnership Initiative: An Overview, by [author name scrubbed]. CRS Report RS21353 . New Partnership for Africa's Development (NEPAD), by Nicholas Cook. CRS Report RS20895. Palestinians: U.S. Assistance, by Clyde Mark. CRS Report RL31759 . Reconstruction Assistance in Afghanistan: Goals, Priorities, and Issues for Congress , by [author name scrubbed]. CRS Issue Brief IB98043. Sudan: Humanitarian Crisis, Peace Talks, Terrorism and U.S. Policy , by [author name scrubbed]. CRS Report RL31785 . U.S. Assistance to North Korea , by Mark Manyin and Ryun Jun. CRS Report RL31362(pdf) . U.S. Foreign Aid to East and South Asia: Selected Recipients , by [author name scrubbed]. CRS Report RL32260 . U.S. Foreign Assistance to the Middle East: Historical Background, Recent Trends, and the FY2005 Request, by [author name scrubbed]. CRS Report RL32239. World Bank Activities in the Middle East and North Africa (MENA), [author name scrubbed]. <9. Selected World Wide Websites> African Development Bank http://www.afdb.org/home.htm African Development Foundation http://www.adf.gov/ Asian Development Bank http://www.adb.org/ CRS Current Legislative Issues: Foreign Affairs http://www.crs.gov/products/browse/is-foreignaffairs.shtml Export-Import Bank http://www.exim.gov/ Global Fund to Fight AIDS, Tuberculosis, and Malaria http://www.theglobalfund.org/en/ Inter-American Development Bank http://www.iadb.org/ Inter-American Foundation http://www.iaf.gov/index/index_en.asp International Fund for Agricultural Development http://www.ifad.org International Monetary Fund http://www.imf.org/ Overseas Private Investment Corporation http://www.opic.gov/ Peace Corps http://www.peacecorps.gov/ Trade and Development Agency http://www.tda.gov/ United Nations Children's Fund (UNICEF) http://www.unicef.org/ United Nations Development Program (UNDP) http://www.undp.org/ United Nations Population Fund (UNFPA) http://www.unfpa.org/ United Nations Program on HIV/AIDS (UNAIDS) http://www.unaids.org/ U.S. Agency for International Development -- Home Page http://www.usaid.gov/ U.S. Agency for International Development -- Congressional Budget Justification http://www.usaid.gov/policy/budget/ U.S. Agency for International Development -- Emergency Situation Reports http://www.usaid.gov/our_work/humanitarian_assistance/disaster_assistance/countries/fy2003_index.html U.S. Agency for International Development -- Foreign Aid Data ("Greenbook") http://qesdb.cdie.org/gbk/index.html U.S. Department of State -- Home Page http://www.state.gov/ U.S. Department of State -- Foreign Operations Budget Justification, FY2004 http://www.state.gov/m/rm/rls/cbj/2004/ U.S. Department of State -- International Affairs Budget Request, FY2004 http://www.state.gov/m/rm/rls/iab/2004/ U.S. Department of State -- International Topics and Issues http://www.state.gov/interntl/ U.S. Department of the Treasury -- Office of International Affairs http://www.ustreas.gov/offices/international-affairs/index.html World Bank http://www.worldbank.org/ World Bank HIPC website http://www.worldbank.org/hipc/ Table 19. Foreign Operations: Discretionary Budget Authority (millions of dollars) Sources: House and Senate Appropriations Committee and CRS adjustments. a. Pursuant to Sec. 601 of P.L. 108-7 , the Consolidated Appropriations Act, 2003, an act within which regular Foreign Operations funds were enacted,most accounts were reduced by 0.65%. Figures for each account in this column for regular FY2003 ForeignOperations include the 0.65%across-the-board rescission. FY2003 supplemental includes funds appropriated in P.L. 108-11 , the Iraq WarSupplemental. b. Amounts shown in the column for FY2004 enacted are "regular" Foreign Operations funds included in H.R. 2673 ( P.L. 108-199 ), theConsolidated Appropriations Act, 2004. Pursuant to Sec.168 of Division H of H.R. 2673 , most accounts arereduced by 0.59%. Figuresfor each account in this column for regular FY2004 Foreign Operations include the 0.59% across-the-boardrescission. The 0.59% rescissionrepresents a $103.6 million reduction for regular FY2004 Foreign Operations from the $17.564 billion approvedin P.L. 108-199 . c. The FY2004 supplemental are amounts provided in P.L. 108-106 , funding for military operations and reconstruction in Iraq and Afghanistan. TheFY2004 Total column represents the sum of the FY2004 conference and the FY2004 supplemental. d. For the purposes of consistency and making accurate comparisons, amounts for the Child Survival and Health (CSH) exclude in each column a $120million contribution to UNICEF. The FY2003 enacted level and the House-passed FY2004 bill included UNICEFin the CSH account, while theAdministration's FY2004 request and the Senate-passed measure placed UNICEF funding in title IV of the billwithin the International Organizationsand Programs (IO&P) account. Because the FY2004 enacted bill places UNICEF funding within theIO&P account, the FY2003 enacted andHouse-passed amounts have been adjusted by removing $120 million for UNICEF and adding that amount to thelevels in the IO&P account line. e. Funding for the Global AIDS Initiative in the House-passed bill was included in the Child Survival and Health Account. The Senate-passed amountincluded $289 million for HIV/AIDS that was added in section 699K. f. The House-passed bill included $80 million for famine prevention and relief in the International Disaster Aid account. The FY2004 enacted amountincludes $20 million for famine prevention and relief in the International Disaster Aid account. g. The Administration request included the Ireland Fund as part of the Economic Support Fund. h. The enacted bill includes $650 million for the Millennium Challenge Account in Division D of P.L. 108-199 , plus $350 million more in Division H,for a total MCA appropriation of $1 billion. The 0.59% across-the-board rescission reduces th total to $994.1million. <10. Footnotes> 1. (back) Although the Foreign Operationsappropriations bill is often characterized as the "foreign aid" spending measure, it does not includefunding for all foreign aid programs. Food aid, an international humanitarian aid program administered under theP.L. 480 program, isappropriated in the Agriculture appropriations bill. Foreign Operations also include funds for the Export-ImportBank, an activity that isregarded as a trade promotion program, rather than "foreign aid." In recent years, funding for food aid and theEximbank have been aboutthe same, so that Foreign Operations and the official "foreign aid" budget are nearly identical. Throughout thisreport, the terms ForeignOperations and foreign aid are used interchangeably. 2. (back) Some of these swings, however, are notthe result of policy decisions, but due to technical budget accounting changes involving howCongress "scores" various programs. For example, the large increase in FY1981 did not represent higher fundinglevels, but rather the factthat export credit programs began to be counted as appropriations rather than as "off-budget" items. Part of thesubstantial rise in spendingin FY1985 came as a result of the requirement to appropriate the full amount of military aid loans rather than onlythe partial appropriationrequired in the past. Beginning in FY1992, Congress changed how all Federal credit programs are "scored" inappropriation bills whichfurther altered the scoring of foreign aid loans funded in Foreign Operations. All of these factors make it verydifficult to present a preciseand consistent data trend line in Foreign Operations funding levels. Nevertheless, the data shown in Figure 2 canbe regarded as illustrativeof general trends in Congressional decisions regarding Foreign Operations appropriations over the past 25 years. 3. (back) OMB documents estimated the totalamount for Iraq reconstruction was $3.5 billion, a figure that included nearly $500 million from DODfunding for the repair of oil facilities. 4. (back) U.S. Office of Management and Budget, FY2003 Request for Supplemental Appropriations , March 25, 2003. 5. (back) H.Rept. 107-480 , May 22, 2002. 6. (back) This section was prepared by RhodaMargesson. 7. (back) This section was prepared by [author name scrubbed]and [author name scrubbed]. 8. (back) For the full text of the report online, seethe World Bank website at http://lnweb18.worldbank.org/mna/mena.nsf/Attachments/Iraq+Joint+Needs+Assessment/$File/Joint+Needs+Assessment.pdf . 9. (back) "UN/World Bank Present IraqReconstruction Needs to Core Group." World Bank/United Nations press release no. 2004/100/S, October2, 2003. 10. (back) Testimony to Senate AppropriationsCommittee. September 22, 2003. 11. (back) "Donors Weigh Political Cost ofPaying for Iraq's Economic Revival," Financial Times , October 3, 2003. "The Struggle for Iraq," New York Times , October 5, 2003. "Iraq Donors' Meeting to be Multilateral, State's Larson Says,"Foreign Press Center Briefing, October22, 2003. 12. (back) "Donors Heed EU Plea to Pay ThroughTrust Fund," Financial Times , October 3, 2003. 13. (back) See, for example, testimony ofSecretary of Defense Rumsfeld before the Senate Appropriations Committee on September 22 and L.Paul Bremer before the House Foreign Operations Appropriations Subcommittee on September 24. 14. (back) See, for example, Pieter H.F. Bekker,"The Legal Status of Foreign Economic Interests in Occupied Iraq." ASIL Insights . AmericanSociety of International Law. July 2002. Available at the ASIL website at http://www.asil.org/insights/insigh114.htm . See also Gerhardvon Glahn. The Occupation of Enemy Territory...A Commentary on the Law and Practice of BelligerentOccupation. Minneapolis:University of Minnesota Press, 1957, p. 159, citing various sources. 15. (back) von Glahn, citing (with comments)U.S. Army Judge Advocate General's School. Law of Belligerent Occupation. (JAGS Text No.11) Ann Arbor: JAGS 1944, pp. ix, 277. 16. (back) Iraq Reconstruction anInternational Responsibility, Larson Says. Press briefing by Under Secretary of State for Economic, Business,and Agricultural Affairs Alan Larson, September 4, 2003 http://usinfo.state.gov/topical/pol/terror/texts/03090434.htm . 17. (back) "White House to Overhaul Iraq andAfghan Missions," New York Times , October 6, 2003; "Rice to Lead Effort to Speed Iraqi Aid," Washington Post , October 7, 2003. 18. (back) "Pentagon Still in Charge in Iraq, RiceTells Reporters," American Forces Information Service, October 15, 2003. 19. (back) "In GOP, Concern Over Iraq Price Tag;Some Doubt Need for $20.3 Billion for Rebuilding," Washington Post , September 26, 2003. Return to CONTENTS section of this Long Report.

The annual Foreign Operations appropriations bill is the primary legislative vehicle through which Congress reviews the U.S. foreign aid budget and influences executive branch foreign policymaking generally. It contains the largest share -- about two-thirds -- of total U.S. internationalaffairs spending. President Bush asked Congress to appropriate $18.89 billion for FY2004 Foreign Operations. The budget proposal was $2.7 billion, or 16.7% higher than regular (non-supplemental) ForeignOperations appropriations for FY2003. If enacted, the President's recommendation would haveresulted in one of the largest increases of regular Foreign Operations funding in at least two decades. Congress subsequently approved in mid-April an additional $7.5 billion FY2003 supplementalforeign aid spending in P.L. 108-11 , for Iraq reconstruction, assistance to coalition partners, andother activities supporting the global war on terrorism. Including the supplemental, ForeignOperations appropriations totaled $23.67 billion in FY2003. The FY2004 budget blueprint continued to make funding in support of the war on terrorism as the highest priority, with about $4.7 billion recommended. The submission also sought funding forfour new aid initiatives which together accounted for most of the $2.7 billion increase over regular FY2003 levels. Combined, the Millennium Challenge Account, a new foreign aid concept, the StateDepartment's Global AIDS Initiative, and two new contingency funds, totaled $2.05 billion. OtherForeign Operations programs were left with a more modest 4% increase. In total, the request included $1.2 billion for HIV/AIDS, about $350 million more than enacted for FY2003, and $7.1 billion for military and security-related economic aid, up nearly $650 millionor 10% from regular FY2003 appropriations. "Core" bilateral development assistance funding,however, would have fallen by 8%, although recipients of these accounts would be expected tobenefit significantly from the new Millennium Challenge Account (MCA) and Global AIDSInitiative. On July 23, the House passed H.R. 2800 , appropriating $17.12 billion. The Senate passed the legislation on October 30, providing $18.4 billion. Foreign Operations was merged into H.R. 2673 , the Consolidated Appropriations Act, 2004, a bill that passed the House onDecember 8 and the Senate on January 22, 2004. The enacted measure provides $17.48 billion, atotal that includes a 0.59% across-the-board rescission. This is about $1.4 billion, or 7.4% less thanthe President requested. The enacted measure increases resources for international HIV/AIDS byabout $400 million and cuts the request for the MCA by $300 million. The FY2004 Foreign Operations debate has included discussion of several significant policy issues, including foreign aid as a tool in the global war on terrorism, the Millennium ChallengeAccount, programs to combat HIV/AIDS, international family planning programs, and Afghanreconstruction. Key Policy Staff

<1. Introduction> In the last few decades, the United States has devoted enormous effort and billions of dollars towards restoring some of our most important ecosystems such as the Great Lakes, Florida Everglades (Everglades), and Chesapeake Bay. Restoration efforts have originated, in part, from controversies surrounding water supply and quality, federal laws (i.e., laws that protect endangered species or regulate water quality, and others), sport and commercial fishing, and environmental degradation. Ecosystem restoration initiatives have typically been accompanied with high expectations and publicity. Funding for these initiatives can amount to billions of dollars for each, and the duration of these initiatives can be 25 years or more. For example, in the San Francisco Bay-Sacramento/San Joaquin River Deltas (California Bay-Delta) a restoration program known as CALFED is expected to cost more than $7.8 billion, with more than $2.4 billion expected from the federal government, just for the first stage (7 years) of a 30-year restoration effort. Issues such as the coordination of multi-agency task forces, public participation, allocation of ecosystem resources (e.g., water supplies), and the science behind restoration projects have all been debated in ecosystem restoration efforts. Perhaps the greatest issue in ecosystem restoration efforts is that restoration can create "losers." People may lose (or perceive loss of) property, income, and potential income among other things, as a result of restoration activities. In some cases, the threat of stakeholder loss has resulted in controversies or even barriers to restoration work. <1.1. Definition> Ecosystem restoration is a process or activity that initiates the recovery of an ecosystem with respect to its health, integrity, and sustainability. Ecosystem restoration implies the recognition of impairment or disturbance to an ecosystem to the extent that remediation is necessary. In most cases, ecosystems that require restoration have been degraded, destroyed, or transformed directly or indirectly by human activities. For example, an ecosystem can deteriorate from polluted waterways, endangered species, transformed landscapes (e.g., forests to agricultural fields), and human development (e.g., urban areas, roads, or housing). Ecosystem restoration attempts to reverse the deterioration of an ecosystem, and to some extent, return it towards its "pre-disturbed" or Pre-Columbian state. Ecosystem restoration does not necessarily mean the restoration of an ecosystem to its original state. Rather, ecosystem restoration means human management that allows desirable uses without the negative impacts being incurred under the pre-restoration regime. Once an ecosystem is recovering under a desired trajectory, human management is important. Management may be required to counteract invasive species, the impact of human activities, climate change, and other unforeseeable events. One primary unknown of ecological restoration is the actual process of how to do it. Studying and monitoring current restoration initiatives and recording the lessons from these initiatives can provide insights for restoration. Policy makers creating or changing ecosystem restoration legislation may benefit from an understanding of the positive and negative aspects of previous ecosystem restoration projects. In this paper, key policy components of the ecosystem restoration effort in the South Florida ecosystem, which includes the Everglades, are examined to provide potential lessons for other ecosystem restoration efforts. <1.2. Government Role> Ecosystem restoration efforts pose several challenges for governance. In most cases, large-scale ecosystem restoration initiatives cross political boundaries, communities, and agency jurisdictions. Generally several stakeholders, ranging from environmentalists to users to government agencies, have an interest in restoration and its benefits. Restoration efforts can result in changes to farming practices and urban development; alterations in water supplies and access to other natural resources (e.g., minerals and timber); and laws that create programs to mitigate environmental damage and improve infrastructure. Because of the diverse interest in restoration, past restoration efforts have often been fragmented in dealing with specific problems or consequences of ecosystem degradation, instead of working on the root causes affecting the entire ecosystem. The federal government has a special role in coordinating multi-jurisdictional ecosystem restoration efforts in large part because of its involvement in altering natural systems (e.g., flood control in the Everglades and water transfers to the Central Valley in California). The federal government also must respond to legal obligations under laws that protect endangered species, and water quality. Additionally, it has the capacity to create multi-agency task forces, employ the expertise of multiple federal agencies (e.g., Fish and Wildlife Service with respect to endangered species or the U.S. Army Corps of Engineers for construction), and provide funds for restoration projects. Congress plays a key role in large-scale ecosystem restoration efforts. Congress is generally responsible for authorizing federal agency involvement in restoration efforts and establishing guidelines for managing and implementing restoration projects. In some cases, such as in the Everglades, Congress has a role in authorizing individual restoration projects and their guidelines for implementation and management. Ecosystem restoration efforts are generally based on improving or rehabilitating one or more ecosystem services (e.g., water supply or habitat recovery for plant and animal populations). Congress can create guidelines for allocating ecosystem services (e.g., regulating water supplies for farmers and the environment), or in some cases, Congress may ensure the delivery of ecosystem services through legislative provisions (e.g., water supply assurances for farmers). Lastly, Congress is responsible for authorizing and appropriating federal funds for ecosystem restoration. <2. Ecosystem Restoration Efforts in South Florida> After nearly 40 years of individual environmental restoration projects in South Florida, the federal government along with state, local, and tribal entities has begun a collaborative effort to restore the entire South Florida ecosystem. The Comprehensive Everglades Restoration Plan (CERP), authorized in the Water Resources Development Act of 2000 (WRDA 2000); ( P.L. 106-541 ), was a major step toward coordinated, multi-agency ecosystem restoration. Title VI of WRDA 2000 outlines the coordination among various stakeholders involved in the restoration process, identifies funding responsibilities, and authorizes the creation of programmatic regulations, which will detail the implementation process of restoration projects. Title VI of WRDA 2000 also contains several policy functions intended to facilitate inter-agency coordination, satisfy stakeholder demands, and ensure the goal of ecosystem restoration. In some cases these policy functions are complex and have potential drawbacks, yet in other cases, these functions have potential benefits and could be used as policy models for other ecosystem restoration projects. The restoration of the Everglades represents a recent effort to deal with the myriad of issues related to ecosystem restoration. Described as the largest environmental project in American history, the restoration effort in the South Florida ecosystem is expected to cost more than $14 billion and last 30 years. Restoration efforts in South Florida have several attributes similar to restoration elsewhere: multiple stakeholders are involved, including the federal, state, and local governments; water supply and distribution is a central issue; the effort is considered a solution to standing controversies or legal obligations; and environmental restoration is promoted as the main goal. Experiences in restoration efforts in South Florida might be viewed as a "test case" for future restoration projects. Indeed, an examination of what has been effective and what has been less effective in restoration efforts in South Florida may give insights on how to proceed in the successful development of other ecosystem restoration projects. <2.1. Factors Threatening the Florida Everglades> Like many wetlands in the United States, the wetlands of South Florida, including the Everglades have been altered by the growing demand for urban and agricultural water, the encroachment of development into sensitive areas, attempts to control flooding by state and federal governments, and invasion of non-native species. The South Florida ecosystem supports six million people, a huge tourism industry, a large agricultural economy, and a wide array of unique flora and fauna. The South Florida ecosystem covers 18,000 square miles and consists of a network of sub-tropical wetland landscapes, which once stretched from Orlando to Florida Bay, approximately 200 miles (see Figure 1 ). It is also home to the Everglades, which are regarded as one of the world's most valuable and unique wetlands. The Everglades are located in the southern portion of the South Florida ecosystem that consists of disjointed freshwater marshes between the southern tip of Lake Okeechobee and the Florida Bay. An important ecological process in the South Florida ecosystem is the movement of freshwater from Lake Okeechobee south to the Florida Bay in a moving "sheet" that replenishes marshlands and swamps. This shallow sheet of water moved across the Everglades a few inches per second and in addition to rainfall was responsible for recharging the Biscayne Aquifer and nourishing plant and animal life. Human development and manipulation of water flows have disrupted the natural flow of this sheet of water. Partly in response to flooding and the need for agricultural lands, the U.S. Army Corps of Engineers (Corps) was asked by Congress to divert water in the Everglades. Specifically, water flow in the Everglades was altered to control flooding, to open land for agriculture, and to provide water supplies for urban areas. The cornerstone of this effort was the Flood Control Project Act of 1948. This project initiated several years of construction by the Corps and the Central and Southern Florida Flood Control District to create nearly 1000 miles of canals, 720 miles of levees, and over 200 water control structures (e.g., dikes, dams and pumping stations). In addition, nearly 700,000 acres of land were drained and designated for agricultural use in what is now called the Everglades Agricultural Area (EAA). Another 900,000 acres were used to construct five Water Conservation Areas (WCAs), which were designed to recharge well fields, prevent flooding and provide habitat for plant and animal life. The man-made water distribution system created in South Florida led to environmental degradation. This system reduced water flow to the Everglades by nearly two-thirds by channelizing water to agricultural and urban areas, and the Atlantic Ocean. The alteration of water flow to the Everglades is widely believed to have degraded the environment. For example, studies have shown that the wading bird population has declined by 90% since alterations to the South Florida ecosystem were implemented. Further, there are more than 69 species in South Florida, including the loggerhead turtle, Florida panther, and wood stork, which are listed as endangered or threatened species under the federal Endangered Species Act (16 U.S.C. 1531-1543; P.L. 93-205 , as amended). The Everglades also suffer from mercury contamination, invasive plants, and high levels of phosphorous. <2.2. Restoration Efforts> Restoration activities in South Florida progressed from a series of individual activities by various state and federal agencies to a coordinated multi-stakeholder effort in the late 1990s. Restoration efforts in the South Florida ecosystem were initiated by state and federal programs before the authorization of CERP in WRDA 2000. For example, Florida passed laws that authorized the clean-up of its bays, estuaries, lakes and rivers, and authorized the protection of certain wetlands in the public interest. Restoration projects that involved construction and regulation of hydrology in the South Florida ecosystem began in 1992 with a partnership between the state and the Corps to restore natural water flow through the Kissimmee River and its floodplain. Later, in 1994, the state authorized other construction and regulation projects to restore portions of the South Florida ecosystem. Federal involvement in restoring the South Florida ecosystem originated with projects aimed at restoring specific waterways or wetlands. One impetus for federal involvement began in 1989 when the federal government sued the State of Florida for not enforcing state water quality standards for agricultural run-off entering Everglades National Park. This lawsuit resulted in a pledge that created a federal and state partnership with local agriculture to improve water quality, increase water quantity, and construct artificial wetlands to filter pollutants from agricultural run-off. It also led to an understanding that improving water quality in the Everglades was an ecosystem problem that crossed property boundaries and required the cooperation of various stakeholders. To coordinate this effort to restore water quality in South Florida, a commission (termed the Working Group) consisting of representatives from various federal and state agencies was created. The Water Resources Development Act of 1996 (WRDA 1996; P.L. 104-303 ; 33 U.S.C. 2201-2330) changed the Working Group into a task force by expanding its membership to include state, local and tribal representatives. WRDA 1996 also initiated further federal involvement in restoration of the South Florida ecosystem by directing the Corps to develop a comprehensive plan (known as the Restudy) for restoring, protecting, and preserving the South Florida ecosystem. The choice to involve the Corps in restoration efforts stemmed from the realization that restoration problems in South Florida had hydrological solutions. Since the Corps was responsible for constructing and operating the existing water distribution and supply infrastructure and had expertise in hydrological projects, it was deemed the best agency to lead the restoration process. The Restudy represented the first attempt to address environmental restoration in South Florida in a multi-agency, ecosystem-level framework. Congress authorized the implementation of a portion of the Restudy in Title VI of WRDA 2000. This portion was entitled the Comprehensive Everglades Restoration Plan (CERP) and focused on restoring the natural hydrological functions and water quality, while maintaining water supplies for natural, agricultural, and urban needs. CERP contains 68 components that are expected to be implemented over a 35-year span. CERP seeks to vastly increase the storage capacity and water supply for the natural system, as well as for agricultural and urban needs. Increased water flow to natural areas as a result of CERP is also expected to improve the environment by restoring and increasing habitat for native flora and fauna. <2.3. Parties Involved in the Restoration Effort> One of the advancements in restoration planning and implementation is the understanding that all stakeholders (e.g., environmentalists; farmers) must be involved and committed to sustain restoration efforts. Stakeholder involvement creates the possibility for consensus, facilitates coordination, and provides an arena for discussion and interaction among stakeholders with different interests. Several stakeholders are involved in the restoration effort in South Florida, including environmentalists, agriculturalists, and federal, state, tribal and local governments. Most stakeholders have expressed their desire to restore the South Florida ecosystem, but differ on their views of who should pay for restoration, the priorities of project implementation, water allocation assurances, and the balance of water supply for natural and human needs. <2.3.1. Federal Government> In restoration initiatives, the federal government can play a role in establishing a framework for governance, providing partial or full funding, and coordinating stakeholder participation through advisory committees. The federal government is often a partner in ecosystem restoration activities because of the numerous federal agencies with jurisdiction in areas of fish and wildlife, water allocation and construction, and federal lands. Further, if federal laws are applicable within an ecosystem (e.g., endangered species and water quality), the federal government and certain agencies usually become involved. The federal role in the Everglades restoration effort is defined in CERP as restoring and preserving the South Florida ecosystem without sacrificing existing ecosystem services (e.g., water supplies) to agricultural and urban areas. The federal government is also responsible for providing 50% of the funding for restoration activities authorized by CERP. Congress, the Corps, and certain agencies within the Department of the Interior (DOI), such as the National Park Service (NPS) and Fish and Wildlife Service (FWS), have significant roles in the restoration effort that are discussed below. <2.3.1.1. Congress> Congress is responsible for authorizing the implementation, major changes, and federal portion of funding for all restoration projects outlined in CERP. Congress, through WRDA 2000, has also established guidelines for project implementation and operation, coordination among agencies, and the relationship between federal and state authorities. Congress oversees CERP's progress toward achieving its restoration goals and monitors its adherence to legislation and policies. Congressional oversight is conducted through reviewing program reports, appropriating funds, and authorizing actions through legislation. Congress also authorizes restoration activities in the South Florida ecosystem outside of CERP. For example, the Everglades National Park Protection and Expansion Act of 1989 ( P.L. 101-229 ) authorizes the Corps to improve water deliveries to Everglades National Park (ENP), and the Water Resources Development Act of 1992 (WRDA 1992; P.L. 102-580 ) authorizes the restoration of the Kissimmee River and its floodplain. <2.3.1.2. Federal Agencies> The Corps and their non-federal sponsors are responsible for the planning and construction of restoration projects, which are expected to be done in consultation with other federal, state, local and tribal agencies. The Corps is also responsible for submitting and reviewing restoration project designs and plans, creating programmatic regulations that will detail project implementation, and monitoring restoration activities. DOI and its agencies have several responsibilities supporting interagency science efforts to implement CERP. DOI is expected to consult with the Corps during the development of the programmatic regulations (guidelines for project implementation); assist in monitoring, reviewing, and gauging the progress of restoration projects; and assist with the preparation of annual reports on the progress of CERP. Other federal agencies involved in restoration efforts come from within the DOI (i.e., the FWS and NPS), Department of Agriculture, and the Department of Commerce. These agencies generally conduct restoration projects that are not authorized by CERP, yet contribute toward restoration in the South Florida ecosystem. Some of these agencies are responsible for acquiring land, conducting studies to evaluate individual components of the South Florida ecosystem (e.g., invasive plants, water quality, or endangered species), and providing input in implementation and planning decisions that involve CERP projects. (See Table 1 for a description of agency tasks and funding history.) <2.3.2. State Government> State government and state agencies are generally involved in the operation and construction of restoration projects, and provide funds for restoration activities. States consider the economic impacts of restoration in terms of appropriations and development. These concerns are generally reflected in state legislation that promote restoration activities. State governments also aim to increase public awareness of restoration efforts. Florida seeks to restore the South Florida ecosystem, while maintaining water supplies and flood control for existing and future human and agricultural needs. The primary non-federal sponsor of the restoration effort for Florida is the South Florida Water Management District (SFWMD). SFWMD is one of five water management districts that have control over regional water allocation, supply, and quality. This level of authority over water supplies is high compared to water districts in most states, and may be one of the reasons why SFWMD was selected as the primary non-federal partner in restoration efforts. Under CERP, and with agreements made with the Corps, the SFWMD is expected to maintain its role of reserving and allocating water to natural, agricultural, and urban areas. SFWMD is also expected to assist in the implementation, construction, management, and monitoring of restoration projects. Further, SFWMD seeks to acquire land for restoration projects, as well as to assist in overseeing modifications to CERP ( 601(e)(2)(A) of CERP). Apart from the SFWMD, Florida has several other responsibilities under CERP. Florida is expected to provide half of the funding for restoration efforts under CERP as well as guarantee the allocation of water supplies (for each project and the entire restoration effort) and water quality standards under state laws. State representatives participate on several committees that analyze restoration policies, and state agencies are involved in scientific studies on restoration activities. The Governor of Florida, as provided by CERP, is expected to concur or assist on programmatic regulations related to project implementation, progress reports on CERP, and the development of dispute resolution mechanisms. <2.3.3. Tribal Government> Tribal lands are sometimes located in areas that are undergoing restoration efforts, such as in the South Florida ecosystem and the California Bay-Delta. Tribes are considered sovereign entities and generally have federal compacts or treaties defining water rights. The Seminole and Miccosukee Indian tribes have reservations located within the South Florida ecosystem. Both tribes raise crops and livestock on their land and depend on flood protection for their well-being. The Miccosukee tribe supports the restoration effort in the Everglades, yet believes that the restoration process has been slow and should concentrate on improving water quality and interagency cooperation, and in taking a system-wide approach. Furthermore, some representatives from the Miccosukee tribe have emphasized that equal priority should be given to federal and tribal lands for restoration activities, and that flood protection should be extended to all inhabited lands. The Seminole tribe also supports restoration efforts, emphasizing that agricultural, human, and natural water needs should receive equal priority, and that the decision-making authority for water allocation should emphasize local participation. In 2000, the Corps signed a contract with the Seminole Tribe of Florida to construct the Big Cypress Reservation Water Conservation Plan. This restoration project, which is part of CERP, is expected to improve water quality by reducing phosphorous in water that leaves the reservation, provide water for cattle and farming, and restore historic cypress slough systems, which are part of the tribal culture. <2.3.4. Environmentalists/Non-Governmental Organizations> Non-governmental organizations (NGOs) can assist restoration efforts, but might oppose efforts if they are seen as inadequate or inappropriate. NGOs participate in the development of restoration plans, contribute insight into the local environmental conditions, suggest solutions to diverse issues such as the governance of restoration activities and science behind restoration projects, and uncover potential economic, social, and ecological impacts of restoration activities. NGOs are generally the primary representative for environmental concerns in ecosystem restoration activities. In recent years, NGOs have become active partners in the implementation and monitoring of restoration efforts. For example, the Chesapeake Bay Foundation monitors a set of ecological indicators measuring factors such as toxic chemicals, fisheries, and nutrients in the Chesapeake Bay and publishes their results annually. The trends in these indicators and their reporting increase public and congressional awareness of the progress of restoration efforts in the Chesapeake Bay. Most NGOs support the restoration of the South Florida ecosystem and argue that ecological restoration should have priority over flood protection and water supplies. One group of NGOs, collectively known as the Everglades Coalition, advocates the restoration of the natural system as the first priority before supplying additional water to agricultural and urban uses. Further, they argue that the state of Florida should not have complete authority over land-use decisions in areas targeted for restoration, and should not determine water allocation only within state laws. Other environmental NGOs, such as the 1,000 Friends of Florida, have argued for the creation of quantitative assurances for water allocation to natural areas, and interim goals to gauge the success of restoration projects. Despite legislation and agreements stating that re-diverted water from CERP will go to natural areas first, some environmentalists (represented by NGOs) believe that CERP is primarily a water supply project and not a tool for ecological restoration. Indeed, some argue, CERP neglects to address the human activities that have harmed and continue to harm the Everglades. <2.3.5. Agriculture> Agriculture usually has significant economic importance and high water demands in rural areas where restoration activities can take place. Agriculture benefits from ecosystem services that provide water supplies and healthy soils. However, agriculture may contribute to ecosystem degradation by converting natural habitats to agricultural fields and by contaminating water supplies with fertilizers and pesticides as well as sediments. In recent years, farmers and ranchers have generally responded to ecosystem restoration efforts by incorporating Best Management Practices (BMPs) and using technologically improved crops that require less fertilizer or pesticides. The dominant agricultural activities in the Everglades are sugarcane production, livestock ranching, and vegetable farming. Sugarcane production, considered the largest agricultural commodity (in terms of value) in the Everglades, requires an abundant water supply and fertile soils. Most farmers and ranchers support CERP, and generally want assurances that existing water supplies and flood protection will not be lowered in agricultural fields in favor of water to natural areas. They believe that restoration efforts should give equal priority to the natural, agricultural, and urban water needs. Some agriculturalists also want certainty in water allocation amounts and would like targets established for future water needs. According to some farmers, if water deliveries fluctuate annually, obtaining credit for farm operations may become difficult, and the uncertainty of future crop production and personal income may increase. To support restoration activities, farmers and ranchers in South Florida have begun to adopt BMPs to reduce phosphorous and pesticides into water supplies. These practices are employed voluntarily and have been developed by researchers to reduce the environmental impact of agriculture, while not threatening the viability of the industry. <2.3.6. Municipal Water Suppliers and Local Government> Urban areas, represented by municipal water suppliers and local governments, require significant water supplies. Local governments are thought to have three primary roles in ecosystem restoration efforts that are in the vicinity of the cities they serve. Local governments are generally responsible for informing the public of restoration activities, and their effect on local water supply and land-use activities (e.g., agriculture). Some local governments often form, and have representatives sitting on, planning boards, task forces and commissions. And local governments, which are often the municipal water suppliers, are generally concerned with meeting current and future water demands in their region. Local governments in South Florida represent a variety of stakeholders in the restoration effort in the South Florida ecosystem. Most local governments and municipal water suppliers in southern Florida seek assurances for water supplies to satisfy existing and future water needs. They emphasize that CERP should be implemented in a "balanced" manner that incorporates the considerations of natural, agricultural, and urban needs. In addition, water suppliers and local governments seek flexibility in implementing CERP so that water supply decisions can reflect the expected growth of urban water demands in South Florida. For example, one county water management agency expressed that interim goals and quantitative water allocation levels should not be in the programmatic regulations because it will restrict the flexibility of CERP to change with different water needs. <3. Components of Restoration Policy In CERP> CERP is an example from which lessons on conducting ecosystem restoration can be drawn. CERP has completed early stages of planning and coordination, and presently has some projects being implemented. CERP is a widely supported restoration plan for a complex ecosystem and regional economies that contains many stakeholders with differing views and needs. Lastly, CERP is an example of a restoration effort that attempts to be adaptive. Flexibility in the project implementation and operations of CERP have been identified as successful attributes for restoration. Several components and conceptual ideas in CERP may be useful for other large-scale ecosystem restoration projects. They include coordination of restoration efforts, implementation and operation of restoration projects, monitoring and adaptive management, assurances and allocation of ecosystem services (e.g., water supplies), and strategies for funding. The section below summarizes these components as they are being used in the restoration effort in South Florida and lists the potential benefits and disadvantages of each one. <3.1. Coordination> Individual state and federal agencies have been working for decades in South Florida to restore parts of the South Florida ecosystem. Restoration of the ecosystem progressed slowly, in part, because restoration projects focused on specific problems in localized areas. In some cases, agencies have disagreed on how to operate and implement restoration activities, and overlapping efforts became apparent. In an effort to reduce conflicts and foster inter-agency dialogue, the South Florida Ecosystem Restoration Task Force (SFERTF) was created in 1993 by the Secretary of the Interior. The purpose of SFERTF is to coordinate strategies, policies, and plans for restoration efforts in South Florida. This task force was formalized into law by WRDA 1996 and includes representatives from 12 federal agencies, the State of Florida, the Miccosukee and Seminole tribes, the South Florida Water Management District, and local governments. The task force resolves conflicts among stakeholders, tracks and assesses restoration projects, and fosters public participation. The Task Force is assisted by various committees that have specific functions in the restoration effort. (See Table 1 .) Some committees focus on stakeholder coordination, management, and policy, and others focus on the science and the impacts of restoration activities. The Task Force and the Working Group (a sub-committee of the Task Force) oversee these committees, and in some cases committees oversee issue teams or sub-groups of their own creation. (See Figure 2 .) As authorized by 520(f) of WRDA 1996, these committees are exempt from the Federal Advisory Committee Act (FACA) (P.L. 92-463; 5 U.S.C. Appendix), and have members appointed by federal, state, tribal, local and private stakeholders. Sub-committees to SFERTF are either temporarily or permanently created by the Working Group, and generally have specific tasks to complete or certain issues to establish a position on. For example, the Water Resources Advisory Commission was created to formulate and debate water allocation issues related to restoration efforts derived from CERP. It contains members from all stakeholder interests and recently was involved in providing stakeholder comments to the programmatic regulations. The State of Florida also has commissions and committees that are devoted to discussing and debating restoration issues. The Governor's Commission was created in 1994 to work in conjunction with the Task Force in developing restoration plans that protected and fostered the environment and economy of South Florida. The commission contains a variety of regional stakeholders ranging from state and local officials to private entrepreneurs and farmers, and generally is concerned with how restoration efforts are going to affect the resources and economy of the state. Committees working with SFERTF are expected to reach consensus on issues and decisions. If disputes occur, the Task Force is responsible for resolving them until a new resolution is adopted. To resolve a dispute, the Task Force provides a forum for disputes, identifies stakeholder concerns, and analyzes relevant information for solutions. Disputes that are not resolved by the Task Force are expected to be settled by litigation. If disputes occur between the Corps and the state of Florida, a specific dispute resolution is to be used. Section 601(i) of WRDA sets out the process for the creation of this resolution. The dispute resolution is expected to be used for disputes between the Corps and the SFWMD, as well as provide a mechanism for the SFWMD to initiate a dispute, appropriate time frames for resolution, and a limit of 180 days for the final resolution of a dispute from the date it was started. A dispute resolution agreement has recently been signed by the Corps and the SFWMD, however it is unclear if it being used. <3.1.1. Summary of Potential Benefits> Committees expand the ability of the Task Force to focus on specific activities and tasks by decentralizing forces and authority. Committees generally have representatives from a variety of involved stakeholders. Therefore, when a committee meets, a forum is created where potentially conflicting ideas and views can be discussed and resolved with consensus among stakeholders. Because of their interactions in groups, state and federal agencies involved in restoration activities may avoid project overlap and combine their expertise to deal with the diverse issues facing the restoration effort that no one agency may be equipped to deal with. <3.1.2. Summary of Potential Disadvantages> Decision-making on restoration issues may get delayed in committees if a consensus cannot be reached. Indeed, the requirement for consensus may prevent controversial decisions from being made. The number of groups involved in the decision-making structure illustrate that coordination of the restoration effort is complex and confusing. The authority of the Task Force is limited since it cannot reprimand or penalize an agency or committee for not fulfilling its restoration tasks. Stakeholders with the greatest resources available for participation in committees can dominate the process and decision-making in committees. <3.2. Project Implementation> In some ecosystem restoration efforts, implementation of restoration projects has been delayed or prevented, in part, by limited institutional ownership (i.e., no single entity was specifically required to either prepare or implement restoration plans), limited commitment by stakeholders and local governments, and lack of funding. To avoid these problems and others, programmatic regulations detailing project implementation strategies have been developed for CERP. Programmatic regulations provide details on construction plans, timetables for implementation, and operating procedures. Programmatic regulations may be viewed as a mechanism to formalize agreed-upon guidelines for project implementation at the beginning of a long-term restoration effort. The content and structure of programmatic regulations, as exemplified in CERP, can be discussed and debated by involved stakeholders before a final version is implemented. Also, through the process of adaptive management, programmatic regulations are expected to remain flexible throughout the restoration effort in South Florida. The responsibility for implementing CERP lies primarily with the Corps and the SFWMD. The programmatic regulations that accompany CERP establish guidelines for project implementation and may facilitate achieving the purpose and goals of CERP. A draft of the programmatic regulations was released in December 2001 for public comment, and a proposed version (revised from the draft) was published in the Federal Register, August 2, 2002. The final version is expected in December 2002. The final version of the programmatic regulations must have the concurrence of the Secretary of the Interior and the Governor of Florida before promulgation. According to the proposed programmatic regulations, the process for implementing a restoration project follows a sequence that includes creating a project management plan, then a project implementation report, and lastly an operating manual and project cooperation agreement. (See " Glossary " for definitions.) At each step of the process, there are opportunities for agency and public comment, and independent scientific review. The seminal report for each project is called the project implementation report, and it must be approved by Congress before project construction can take place. The purpose of the project implementation report is to present a detailed plan of each project, thus bridging the conceptual details of CERP with instructions for project construction and operation. WRDA 2000 states that project implementation reports must contain the following information: (1) the timing, quantity, and distribution of water for the natural system, (2) the amount of water reserved for the natural system, and (3) an analysis of the cost-effectiveness and engineering feasibility of the project. The draft version of the programmatic regulations generated considerable controversy. Environmentalists argued that the programmatic regulations had few specific requirements and assurances for water allocation to natural areas, did not include quantitative goals for measuring success, and had no timetables for the implementation of some projects. The proposed version addresses some of these issues. Assurances for water allocation for each project are expected to be provided through a Project Cooperation Agreement between the Corps and non-federal sponsors. The identification of the appropriate quantity, timing, reservation, and distribution of water for the natural system is to be included in each project implementation report. To determine the amount of water each project will provide to users and the environment, "guideline memoranda" are expected to be followed. Guideline memoranda are not included in the proposed programmatic regulations and are expected to be created separately by the Corps with public and agency comment. Despite modifications, criticisms still exist. Some environmental groups argue that interim goals and overall restoration targets should be included in the programmatic regulations. Other criticisms of the programmatic regulations have come from Congress. Some members have argued that the assurances for water allocation should be included in the programmatic regulations; that the DOI should have a larger role in determining the distribution of water required for ecosystem restoration; that scientific integrity in the restoration assessment process should be defined and open to public access and comment; and that interim goals should be defined in the programmatic regulations. The proposed regulations clarify the role of the DOI in monitoring and assessing the implementation of CERP; however, on July 16, 2002 provisions allowing the DOI to share a "coequal role" with the Corps on the RECOVER team were stricken from the FY2003 Interior and Related Agencies Appropriation Act ( H.R. 5093 ) when points of order were raised against them. The proposed regulations establish a structure for adopting and implementing interim goals, yet do not define goals for restoration. Goals are expected to be determined by the RECOVER team by June 2003. The goals are expected to reflect the progress of CERP, and identify improvement targets in water quantity, timing, and distribution every five years beginning in 2005. Further, goals will include indicators for water quality and ecosystem conditions such as changes in wetlands, habitat quality, and animal and plant abundance. Interim goals are expected to be targets as opposed to set standards enforceable in court. Goals are expected to have the flexibility for changes through a reviewing process. <3.2.1. Summary of Potential Benefits> The proposed programmatic regulations provide greater detail to the procedures and regulations involved in implementing restoration projects than legislation. The proposed programmatic regulations may increase the opportunity for monitoring projects and discovering weaknesses in management plans or construction designs. They allow Congress the time and authority to check and authorize the contents of project implementation reports before a project is constructed. The proposed programmatic regulations strive to provide assurances that existing water supplies will be maintained for agricultural, urban, and natural needs. The proposed programmatic regulations attempt to create the opportunities for stakeholders to comment and view plans for the implementation and operation of restoration projects early in the restoration process. <3.2.2. Summary of Potential Disadvantages> The project implementation process for CERP can viewed as a long, complex process that must undergo several stages. Indeed, the Corps expects the first five years of the restoration effort (FY2001-FY2005) to be spent predominantly on developing project implementation reports, agreements and plans. The complexity and multiple stages of the implementation process may delay restoration efforts. Lengthy delays could render original scientific findings and project plans irrelevant to ecological conditions when a plan is approved. For example, appropriations for some CERP projects are contingent upon the completion of a previously authorized project termed the Modified Water Deliveries Project ( P.L. 101-229 ). Delay in the completion of this project will delay the implementation of some CERP projects and may require their planning to be revised. The proposed programmatic regulations that detail the implementation process do not provide quantitative assurances for water delivery. The uncertainty of future water supplies may result in farmers not being able to plan for future crops, and scientists not being able to estimate the recovery potential for natural areas. The programmatic regulations do not hold any agency accountable for delays and do not guarantee the expeditious completion of restoration projects. <3.3. Monitoring and Adaptive Management> Ecological systems are complex and understanding how they may respond to management efforts will always carry an expected level of uncertainty. For these and other reasons, ecosystem restoration generally is undertaken with a range of expected uncertainty in the restoration process (e.g., scientific uncertainty in the proficiency of some restoration projects). Specifically, restoration efforts may require the application of untested technologies, and may uncover unforeseen circumstances that may warrant a change in the initial restoration strategy. Indeed, some argue that identifying and eliminating all uncertainties involved with restoration is probably impossible. Trying to address all potential uncertainties, some argue, may delay the restoration process, consume time and money, and lead to further ecosystem degradation. Others argue that uncertainties must be reduced as much as possible with sound scientific studies before funds are devoted to restoration activities. Funds and time should not be spent on projects that are too ambitious or have a high risk of failure, according to some critics. To address uncertainty, some restoration initiatives have conducted scientific studies and pilot projects to better understand larger restoration projects. Further, policies that promote adaptive management and monitoring are being used to address uncertainty in restoration. Adaptive management is incorporating new information from scientific studies and new or unforeseen circumstances into the plans of a restoration effort, to assure that the restoration goals are achieved most efficiently. Some believe that the built-in flexibility of adaptive management is the key to solving complex technical problems and changing restoration strategies that are not successful. Others fear adaptive management can be used to justify delays or abandon previously set goals. Adaptive management is largely untested in ecosystem restoration projects and some are concerned that policy makers do not know how to implement policies to govern adaptive management procedures. In the restoration of the South Florida ecosystem, there is an anticipated level of uncertainty in some restoration projects and their desired outcomes. To address this uncertainty, the Corps is planning to monitor progress and use adaptive management as warranted. CERP and individual projects within CERP are to be reviewed periodically to determine if operational and management procedures need to change. CERP authorizes a team to monitor and assess the success of project implementation and operation, and requires that the procedures for monitoring, assessing, and implementing changes to CERP be outlined in the programmatic regulations. Adaptive management is expected to be done by two groups, the Restoration, Coordination and Verification team (RECOVER) and the Committee on the Restoration of the Greater Everglades Ecosystem (CROGEE). RECOVER is an interdisciplinary, and interagency scientific and technical team that is expected to use a system-wide perspective and the best scientific and technical information available to evaluate and implement CERP. RECOVER will be responsible for, among other things, developing system-wide performance measures for evaluating projects and goals, preparing project implementation reports, developing proposals for a monitoring plan for CERP, conducting adaptive assessment activities, considering proposed revisions to CERP, and developing interim goals for CERP. Every three years, RECOVER is expected to prepare a report detailing the results of adaptive assessment and suggest modifications to CERP. If CERP, or any of its components are to be changed, the Corps, in consultation with other federal, state and tribal agencies, will prepare a report detailing the changes. If the changes to a project or to CERP are significant, Congress must authorize them. A procedure for implementing modifications to CERP is included in the proposed programmatic regulations. RECOVER is expected to be overseen by the Corps and the SFWMD. Documents prepared by RECOVER are not self-executing and are expected to be reviewed by the Corps and SFWMD, in consultation with DOI, EPA, Seminole and Miccusukee Indian tribes, and others. Some critics of RECOVER favor a larger role for DOI on RECOVER. They believe that the expertise that DOI has in environmental restoration would be valuable for RECOVER and that the presence of DOI on RECOVER would help to ensure that environmental restoration would remain a priority for CERP. DOI, along with the Governor of the State of Florida, has a concurring role in determining six guidance memoranda that establish guidelines for determining (1) the content and format of project implementation reports; (2) processes for developing cost effectiveness and impacts of alternatives to project implementation reports; (3) the process for evaluating project implementation reports; (4) the content of operating manuals; (5) guidelines for conducting assessment activities expected to be done by RECOVER; and (6) the process in project implementation reports for identifying the timing, quantity, and distribution of water. The second group, CROGEE, is an independent panel of scientists organized by the National Academy of Sciences to review CERP's progress toward achieving restoration goals. CROGEE also evaluates technologies used in the restoration effort. For example, a CROGEE study evaluating the benefits and costs of the Aquifer Storage and Recovery Plan was published in 2002. CROGEE is authorized to prepare a biennial report on the assessment of ecological indicators and other measures that reflect the effectiveness of CERP ( 601(j) of WRDA 2000). It is unclear if CROGEE will have the jurisdiction to freely conduct and report in-depth studies and analyses of specific components in CERP or if detailed studies will be restricted to requests made by the Task Force. <3.3.1. Summary of Potential Benefits> An expected high level of scientific uncertainty is a common criticism of CERP. Monitoring and adaptive management can allow agencies to learn lessons from the restoration process and projects, and incorporate them into CERP. The programmatic regulations are expected to provide guidelines and mechanisms for incorporating adaptive management. With these guidelines in place, the process of implementing new information and changes could reduce delays in project implementation. An independent panel monitoring the progress of CERP may enhance the scientific integrity of the restoration effort. Through adaptive management, pilot projects are expected to be created and tested to measure the potential for larger projects with high scientific uncertainty. <3.3.2. Summary of Potential Disadvantages> Adaptive management may allow the Corps and the SFWMD to change estimated goals of water supplies or distribution. This can increase uncertainty in water supplies for farmers and local governments who need assurances for water deliveries. Restoration goals may lose some value and integrity since technical uncertainties can be used to explain why restoration projects may not reach their goals. The responsibility for successful restoration can be diluted if adaptive management is used to explain shortcomings of restoration projects and activities. The promise of adaptive management can be used to justify the implementation of restoration projects with a high level of scientific uncertainty. <3.4. Water Allocation> A strategy for water allocation in ecosystem restoration efforts is important when competing interests are vying for water that may be also needed to recover a degraded ecosystem. Indeed, water supply and allocation issues have been contentious in many ecosystem restoration projects in this country among stakeholders (e.g., California Bay-Delta and Klamath Basin, as well as the Everglades). Water allocation strategies seek to identify compromises between competing stakeholders, and generate commitments to a water allocation plan. Components of a water allocation strategy may include assurances for the delivery of future water supplies, or the maintenance of current water supply levels. Water assurances could be tied to rainfall and snowmelt levels from the previous year, or be based on quantitative values (e.g., 70% of water flow diverted to agricultural areas). Water assurances are important, because they can justify plans for ecological restoration, allow farmers to securely invest in cultivation or ranching, and increase the security of water supplies for urban areas. The expected result of CERP will be to deliver sufficient water to the natural system without sacrificing the current water needs of agricultural and urban areas. CERP is expected to accomplish this by primarily capturing and storing excess freshwater currently being discharged to the ocean via canals, and using it to restore the natural hydrological functions of the South Florida ecosystem. To accomplish this, CERP must control the quantity, quality, distribution and timing of water deliveries to stakeholders. The Corps estimates that 80% of the additional water supplies (i.e., water beyond the existing needs) generated from restoration efforts will be used to benefit the natural system, and the remaining 20% will be used for agricultural and urban needs. To deliver these demands for water, CERP will rely on assurances specified in WRDA 2000 and a strategy for allocating water supplies that will be specified in the programmatic regulations. <3.4.1. Water Assurances> Assurances for water delivery serve to meet concerns that existing water supplies and flood protection will be lowered when restoration projects are implemented. In addition, assurances seek to guarantee that newly re-allocated water from restoration projects will first be distributed to natural areas. There are three primary policy mechanisms that attempt to provide assurances for water delivery in the Everglades. First, Title VI ( 601(h)(5)) of WRDA 2000 states that existing legal sources and amounts of water cannot be depleted by CERP, unless a substitute source of water equivalent in quantity and quality is found to replace the original. Second, an agreement that new water generated from CERP first will be allocated to the natural system for restoration purposes before being used by other consumptive uses (e.g., agriculture) was signed on January 9, 2002 by President George W. Bush and Florida Governor Jeb Bush (see 601(h)(2) for authorization of this agreement). Third, the allocation or reservation of water for the natural system is to be guaranteed under state water laws for each project ( 601(h)(4)). <3.4.2. Water Allocation Strategy> Determining the quantitative allocation of water for environmental, agricultural, and urban needs is a controversial issue in the Everglades (and many other places). Most stakeholders want to know what quantitative values of water they can expect to receive annually. Although WRDA 2000 assures stakeholders that water levels will not fall below existing levels, some stakeholders (notably farmers and municipal water utilities) are concerned that future demands for water may exceed current demands, This issue is addressed by the Corps and the SFWMD in the proposed programmatic regulations. Water made available from restoration projects will be quantified according to guidelines established by a "guideline memorandum." The programmatic regulations provide direction for the development of guideline memoranda, yet do not provide specific formulas for determining water allocation values. Water allocation values are expected to be calculated according to the "pre-CERP baseline." The Pre-CERP baseline is the estimated hydrological conditions in South Florida before the enactment of CERP. This baseline is expected to be determined through models and hydrological records, and take into account seasonal variability in water supplies, land use, population, and water demand, as well as other factors relating to water distribution in South Florida. After water allocation values are determined from the guideline memorandum and the pre-CERP baseline, the project implementation report is expected to identify the appropriate quantity, timing, distribution of water allocated to the environment, other uses (e.g., agriculture and urban areas), and storage. The reservation of water for the environment will be implemented by Florida Water Management Districts under the authority of state law. Based on values listed in the project implementation report, a project cooperation agreement between the Corps and the non-federal sponsor is to be made before project construction can take place. The project cooperation agreement is expected to serve as a contract between the Corps and the non-federal sponsor that the allocation of water to the natural system from each project will be available for the duration of the project. <3.4.3. Summary of Potential Benefits> Restoration is the primary federal objective for the South Florida ecosystem. Water assurances support this objective by seeking to channel re-allocated water from restoration projects to natural areas. Assurances that existing supplies of water and flood protection will not be reduced by restoration aim to meet the concerns of farmers, water utilities, and local governments who oppose any lowering of water supplies caused by restoration. With adaptive management, water allocation values are flexible and can be changed to allow project managers to allocate water supplies in the most efficient manner possible. <3.4.4. Summary of Potential Disadvantages> Water allocation decisions will ultimately be decided by guidance memoranda, which may not be subject to congressional authorization. Memoranda are expected to be developed with the concurrence with the Secretary of the Interior and the Governor of Florida. It is unclear how future agricultural and urban water demands will be met by CERP. Aside from estimating that 20% of the water allocated from restoration will go to urban and agricultural uses, there appear to be no provisions or assurances in WRDA 2000 that address future water needs for farmers and cities. Lack of quantitative assurances for water allocation in the programmatic regulations may create uncertainty in how much water is going to be allocated for urban, agricultural and environmental needs. The assumed flexibility of water allocation values may increase uncertainty. The pre-CERP baseline will be based on models and data, which may include uncertainties. Uncertainty in the pre-CERP baseline will create uncertainty in the amounts of water expected to be re-directed from restoration projects. <3.5. Funding> Initial and long-term funding is generally viewed as a critical aspect of implementing a large ecosystem restoration project. Some advocates of ecosystem restoration initiatives believe that funding must be guaranteed for the long-term duration of the initiative if restoration is to be successful. Funding for large scale ecosystem restoration efforts is generally distributed among stakeholders. However, in most cases, the majority of the funding has come from federal and state governments. From a federal perspective, funding for restoration efforts is typically given to specific agencies to carry out restoration activities or given to a restoration program authorized by legislation. The federal government is sharing half the cost of implementing CERP with the state of Florida, and to a lessor extent with local tribes and other stakeholders. The total estimated cost for restoring the South Florida ecosystem is $14.8 billion. From FY1993 FY2002, federal appropriations for projects and services related to the restoration of the South Florida ecosystem exceeded $1.7 billion and state funding has gone over $3.6 billion. In the next 10 years, the average annual Federal cost for restoration activities in Southern Florida is estimated at $286 million per year. Federal appropriations that contribute to restoration efforts in South Florida are predominately for project design, construction, and land acquisition. (See Table 2 .) For example, from 1993-2001, 48% of all federal funding for restoration activities in South Florida went to DOI for land acquisition, scientific research, and monitoring, and 34% went to the Corps for construction and management projects. In comparison, the State of Florida has appropriated a majority of their restoration funds (an estimated 75%) to SFWMD for project construction, land acquisition, water management, and waterway restoration. Restoration activities are conducted by several federal agencies in the South Florida ecosystem under CERP and other laws. For example, for FY2002, the Corps was appropriated $92.8 million for restoration work in central and southern Florida, yet only $30.3 million of this total was appropriated for projects authorized by CERP. The remaining $62.5 million was for projects authorized by other laws, namely the Everglades National Park and Protection Act of 1989 ( P.L. 101-229 ) and WRDA 1996 ( P.L. 104-303 ). For FY2003, the Bush Administration has requested approximately $260 million for restoration activities in the South Florida ecosystem, of which approximately $46 million is for the implementation of CERP. Appropriations for restoration projects in the South Florida ecosystem have been included in several annual appropriations laws, including (a) Department of the Interior (DOI) and Related Agencies Appropriations, (b) Energy and Water Development Appropriations (funding for the Corps), (c) Departments of Commerce, Justice, and State, the Judiciary, and Other Related Agencies Appropriations, (d) U.S. Department of Agriculture and Related Agencies Appropriations, and (e) VA, HUD, and Related Agencies Appropriations (funding for the Environmental Protection Agency (EPA)). <3.5.1. Summary of Potential Benefits> The funding responsibility is shared by different stakeholders, which lowers the financial burden on just one stakeholder. If assurances for funding the entire ecosystem restoration effort are in place, stakeholders will have greater confidence in the successful outcome of restoration. <3.5.2. Summary of Potential Disadvantages> Federal funding of restoration efforts could be used to improve infrastructure that may promote development in the state, yet not completely serve the national interest for restoration. For example, federal funding may be used in part to construct water purification plants. These plants may be necessary infrastructure for the state to develop and expand urban areas, which may impact the ecosystem. If funding held back by or unavailable from one stakeholder, restoration efforts may cease even if funding is available from other stakeholders. <4. Conclusion> Policies that drive ecosystem restoration efforts are complex. Ecosystem restoration efforts generally strive to meet the desires and meet the concerns of multiple stakeholders, as well as address issues of environmental deterioration and regional development. Further, some ecosystem restoration efforts may plan to spend billions of dollars on projects that cross state boundaries and overlap private, state and federal lands. Ecosystem restoration in South Florida is considered the largest restoration initiative to date in this country in terms of money and resources. Other ecosystem restoration initiatives may look to the policies and lessons learned in restoring the South Florida ecosystem to better their efforts. Although restoration in South Florida is relatively new, several lessons can be learned from the structure and experiences of this restoration effort so far: Involvement of all stakeholders in restoration planning. Ecosystem restoration represents a long-term commitment of time and resources from several stakeholders. Decisions reached through consensus among stakeholders, as opposed to unilateral decisions, may be more enduring and likely to be implemented. Establishment of guidelines for stakeholder input and disputes. Guidelines for participation in meetings and committees are expected to create equitable stakeholder input into the decision-making process and lower delays. Application of adaptive management to deal with uncertainty in scientific and other factors in the restoration effort. The use of adaptive management is expected to allow restoration activities to be implemented with fewer delays and provide flexibility for improving activities once they have been implemented. Use of interim goals to set targets for restoration activities. Interim goals are expected to help restoration efforts focus on pre-determined objectives. Further, interim goals can create a basis for evaluating the progress of restoration (i.e., whether or not restoration activities meet their goals). Use of monitoring and assessment to measure progress in restoration activities. Monitoring and evaluation restoration efforts are expected to answer the basic question of whether restoration is working. In addition, deficiencies or opportunities for improvement in the restoration effort uncovered by monitoring can be used by adaptive management to improve restoration. <5. Glossary> <5.1. Appendix. Federal Legislative History of Restoration Efforts in South Florida54> Everglades National Park Authorization Act of 1936 (16 U.S.C. 410) . Set aside 1.3 million acres as wilderness to create Everglades National Park. The Park was dedicated by President Truman in 1947. River Basin Monetary Authorization and Miscellaneous Civil Works Amendments Act of 1970 (P.L. 91-282; 2) . Set minimum water flow of 315,000 acre/feet per year from the Central and Southern Florida Project to Everglades National Park. Supplemental Appropriations Act of 1984 ( P.L. 98-181 , Title XI) . Authorized Corps to modify water delivery to Everglades National Park, thereby increasing water flowing into the Park. The Everglades National Park Protection and Expansion Act of 1989 ( P.L. 101-229 ; 16 U.S.C. 410(r)(8)). Expanded Everglades National Park and authorizes restoration projects (e.g., Modified Water Deliveries Project) to increase the natural water deliveries to the Park. Water Resources Development Act of 1992 ( P.L. 102-580 ) . Authorized the restoration of the Kissimmee River projects ( 101(8)) and creation of the Central and Southern Florida Project Restudy ( 301(l)). 1994 Amendment to Everglades National Park Protection and Expansion Act of 1989 ( P.L. 103-219 ; 16 U.S.C. 410). Authorized federal funds to assist the State of Florida to acquire land adjacent to the Park to improve water flows for restoration. Water Resources Development Act of 1996 (WRDA 1996, P.L. 104-303 ; Title V, 528). Expanded the task force to include tribal, state and local governments and authorized the task force to address the entire scope of the restoration process. Directed the US Army Corps of Engineers to devise a Comprehensive Plan for restoration. Water Resources Development Act of 2000 (WRDA 2000, P.L. 106-541 ; Title VI, 601) . Approved Comprehensive Everglades Restoration Plan (CERP), which outlines 68 infrastructure projects to modify water delivery systems to improve water quality, distribution, quantity and timing to the natural system without sacrificing urban and agricultural needs. Appropriated $686 million in funds to carry out projects, modifications, and monitoring.

Several complex water resource systems are receiving increasing intergovernmental and private sector efforts to balance human and broader ecosystem values. Examples include the Florida Everglades, San Francisco Bay-Sacramento/San Joaquin River Delta, and the Chesapeake Bay, among others. The Florida Everglades is especially prominent because of its inclusion of Everglades National Park and because human impacts in and around the Park have caused a substantial erosion of the balance and diversity of the original ecosystem. Government and private sector efforts to mitigate the effects of large-scale human change in the broader Everglades ecosystem are complex and sometimes contradictory undertakings. Complexities and conflicts arise because of definitions and goals; because of uncertainty about achieving desirable goals; because of costs; and because of likely tradeoffs with established economic and business activities. The restoration initiative in the South Florida ecosystem (which includes the Everglades) is a recent intergovernmental effort that attempts to address the ecological and socio-economic factors involved with ecosystem restoration. An examination of what has been effective and what has been less effective in ecosystem restoration efforts in the Florida Everglades may give insights on how to proceed in the implementation of other restoration projects. After being reduced to half its original size by flood control projects, agriculture, and urban development, the Florida Everglades is now targeted for a large restoration effort by an unusual partnership among federal, state, tribal and local stakeholders. A major step in this restoration effort was the authorization of the Comprehensive Everglades Restoration Plan (CERP) in the Water Resources Development Act (WRDA) of 2000 (P.L. 106-541). The objective of CERP is to restore the quantity, quality, distribution and timing of water supplies to natural areas without disrupting existing sources of water for agricultural and human needs. There are several policy components within CERP that may be applicable to other ecosystem restoration efforts. They include multi-agency committees for coordination, programmatic regulations for project implementation, adaptive assessment and monitoring, assurances for water allocation, and funding. This report provides a description of each policy component as well as an analysis of its potential benefits and disadvantages in the restoration process. A proposed version of programmatic regulations is cited throughout this report. Programmatic regulations are expected to provide guidelines for project implementation, monitoring, adaptive management, and water allocation for restoration activities provided by CERP. A proposed version of the programmatic regulations was published in the Federal Register in August 2002; the final version is expected in December 2002. This report will be updated as warranted.

<1. The Paris Agreement in Context> <1.1. Introduction> Debate continues in the United States over whether and how the federal government should address human-relat ed climate change. A large majority of scientists and governments accept that stabilizing the concentrations of greenhouse gases (GHG) in the atmosphere and avoiding further GHG-induced climate change would require concerted effort by all major emitting countries. Toward this end, 195 governments attending the 21 st Conference of Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC) in Paris, France, adopted an agreement in 2015 outlining goals and a structure for international cooperation to address climate change and its impacts over decades to come. The "Paris Agreement" (PA) is subsidiary to the UNFCCC, a treaty that the United States ratified with the advice and consent of the Senate and that entered into force in 1994. The PA entered into force on November 4, 2016, 30 days after at least 55 countries representing at least 55% of officially reported global GHG emissions had deposited their instruments. On behalf of the United States, President Obama signed an instrument of acceptance of the PA on August 29, 2016, and deposited it with U.N. Secretary General Ban-Ki Moon on September 3, 2016. As of April 1, 2017, 142 additional nations have become Parties. On June 1, 2017, President Donald Trump announced his intent to withdraw the United States from the PA. He also stated that his Administration would seek to reopen negotiations on the PA or on a new "transaction." As discussed later, a Party may withdraw from the PA if it chooses to do so. Article 28 allows a Party to give written notice of withdrawal to the U.N. depositary after three years from the date on which the agreement has entered into force for that Party. The withdrawal could take effect one year later. The United States could give notice of withdrawal as soon as November 4, 2019, with withdrawal taking effect as soon as November 4, 2020. The President did not indicate how the United States might participate in PA procedures until withdrawal should take effect. The PA creates a structure for nations to pledge to abate their GHG emissions, adapt to climate change, and cooperate toward these ends, including financial and other support. The PA is intended to be legally binding on Parties, though not all provisions are mandatory. The Parties in Paris also adopted a Decision to help implement the PA, and the specified processes to define rules, methods, and other tasks are underway. Members of Congress have expressed diverse views about the PA and may have questions about its content, process, and obligations. This report is intended to answer some of the primary factual and policy questions about the PA and its implications for the United States. It touches on nearly all of the 29 articles in the 16-page agreement, as well as some in the accompanying decision of the Parties to give effect to the PA. Other CRS products, available by request or on the CRS website, may provide additional or deeper information on specific questions. <1.2. What is the relationship of the PA to the UNFCCC and the Kyoto Protocol?> The UNFCCC is a "framework" treaty. (See text box.) The PA is subsidiary to the UNFCCC, meaning that it is understood to exist within the scope and terms of the UNFCCC. As such, only Parties to the UNFCCC are eligible to become Parties to the PA (PA Article 20.1). The PA is the outcome of the so-called Durban Mandate: The Conference of the Parties (COP) to the UNFCCC agreed at its 2011 meeting in Durban, South Africa, "to develop a protocol, another legal instrument or an agreed outcome with legal force under the Convention applicable to all Parties," which could be adopted by the COP in December 2015 and come into effect and be implemented by 2020. The PA may take advantage of many rules and processes that currently support Parties' implementation of their UNFCCC obligations (e.g., to submit and review national GHG inventories). UNFCCC processes will continue in parallel with new ones under the PA unless Parties modify them. In developing implementation of the PA, the Parties may elect to make use of existing UNFCCC or Kyoto Protocol processes and agreed rules such as to promote adaptation to climate change or to account for emissions from land use change rather than beginning new ones. Some processes may be streamlined or merged under the related agreements. <1.3. What are some key policy takeaways from Paris?> While the PA is only 16 pages long, it contains a number of complex mechanisms many of which will require further definition by the negotiating Parties. Some experts and observers, noting the PA's largely procedural nature and lack of binding quantitative GHG obligations, have questioned whether the PA marks significant change. Others note a number of substantive differences from prior commitments, specifically for some Parties. Below are several ways in which the PA embodies change under the UNFCCC. Common process for all Parties . For the first time under the UNFCCC, all Parties will participate in a common framework with common guidance, although some Parties will have flexibility in line with their capacities. The commonality largely supersedes the bifurcation into wealthier and developing countries that has held the negotiations in often-adversarial stasis for many years. Ratcheting process to ward quantified objective . The PA defines a quantitative (though collective) long-term objective to hold the GHG-induced increase in temperature to well below 2 o Celsius (C) and pursue efforts to limit the temperature increase to 1.5 o C above the pre-industrial level. The PA establishes a process, with a "ratchet mechanism" in five-year increments, for countries to set and achieve GHG abatement targets until the long-term goal is met. Greater subsidiarity . The PA embodies greater decentralization than, for example, the Kyoto Protocol. The PA increases reliance on decisionmaking and strategy by individual countries or countries cooperating among themselves, not necessarily through central decision mechanisms. Examples of subsidiarity include the nationally determined contributions (pledges) that set countries' GHG targets, and recognition that Parties will use market-based mechanisms (e.g., emissions trading) to transfer emission reduction credits to meet their commitments. Growing role of non-state entities . The negotiations leading to the Paris conference and the PA grew more inclusive of non-state entities (including the private sector) as observers and influencers. Parties recognized them as key decisionmakers and implementers of activities expected to be necessary to achieve the GHG abatement and increased resilience to climate change envisioned in the PA. The government of France established a website for non-state actors to make pledges and share information. Moderate compliance incentives for all. For the first time, all countries agreed to a single system for transparency, accountability, and public accessibility to emissions and policy information to promote compliance with the PA. The UNFCCC lacks universal obligations for transparency and review; the Kyoto Protocol's more intrusive non-compliance provisions may have discouraged participation in commitments by some Parties. To promote compliance, the PA works to balance accountability necessary to build and maintain trust (if not certainty) with the potential for public and international pressure ("name-and-shame"). A compliance mechanism is defined to be expert-based and facilitative rather than punitive. Many Parties and observers will closely monitor the effectiveness of this strategy. <2. Requirements and Recommendations in the PA> <2.1. What is the purpose and long-term goal of the PA?> The PA states its purpose in Article 2: to enhance implementation of the UNFCCC and "to strengthen the global response to the threat of climate change." Parties to the UNFCCC adopted the PA "in pursuit of the objective of the Convention" to stabilize GHG concentrations in the atmosphere at a level to avoid dangerous anthropogenic interference in the climate system. Although stabilizing GHG concentrations would require eventually reducing human-related net emissions to near zero, the UNFCCC did not state when or at what levels stabilization should occur. The levels at which GHG atmospheric concentrations stabilize ultimately determines the degree of GHG-induced temperature change. The PA quantifies the intent of Parties in this regard in Article 2, stating that it aims to [hold] the increase in the global average temperature to well below 2 C above pre-industrial levels and to pursue efforts to limit the temperature increase to 1.5 C above pre-industrial levels, recognizing that this would significantly reduce the risks and impacts of climate change. Article 2 also calls for, inter alia , increasing the ability to adapt to climate change and making financial flows consistent with a pathway toward low GHG emissions and climate-resilient development. In order to achieve the PA's "long-term temperature goal," Parties aim to make their GHG emissions peak as soon as possible and then reduce them rapidly "so as to achieve a balance between anthropogenic emissions by sources and removals by sinks of greenhouse gases in the second half of this century." In other words, the PA envisions achieving net zero anthropogenic GHG emissions within a defined time period. While this is arguably synonymous with the UNFCCC's objective of stabilizing GHG atmospheric concentrations, the PA puts a time frame on the objective for the first time. The objective, however, is collective. It remains unclear whether the PA could hold an individual Party accountable if the collective objective were not met. <2.2. What does the PA require?> The PA establishes a single framework under which all Parties shall: communicate every five years and undertake Nationally Determined Contributions (NDCs) to mitigate GHG emissions, reflecting the "highest possible ambition"; participate in a single "transparency framework" that includes communicating Parties' GHG inventories and implementation of their obligations including financial support provided or received not less than biennially (with exceptions to a few least-developed states); and be subject to international review of their implementation. The requirements are procedural. There are no legal targets and timetables for reducing GHG emissions. All Parties will eventually be subject to common procedures and guidelines. However, developed country Parties should provide NDCs stated as economy-wide, absolute GHG reduction targets, while developing country Parties are exhorted to enhance their NDCs and move toward similar targets over time in light of their national circumstances. Further flexibility in the transparency framework is allowed to developing countries (depending on their capacities) regarding the scope, frequency, and detail of their reporting. Many observers consider this flexibility key to gaining the participation of many low-income countries, while some observers note that the flexibility may allow reticent Parties to resist more stringent commitments. The administrative Secretariat of the UNFCCC will record the NDCs and other key reports in a public registry. The PA also requires "as appropriate" that Parties prepare and communicate their plans to adapt to climate change. Adaptation communications, too, will be recorded in a public registry. The PA reiterates the obligation in the UNFCCC for developed country Parties to provide public and private financial support to assist developing country Parties with mitigation and adaptation efforts. It also urges scaling up of financing. The Parties agreed to set, prior to their 2025 meeting, a new collective quantified goal for mobilizing financial resources of not less than $100 billion annually to assist developing country Parties. Financing is not restricted to public funds, and many stakeholders expect that most would flow through private investment. The PA permits Parties to participate in cooperative approaches (implicitly, emissions markets ) that "involve the use of internationally transferred mitigation outcomes." Additional mechanisms for cooperative activities, and efforts to incentivize private sector participation, are identified. Further, the PA establishes a committee that will address compliance issues under the PA in a facilitative and non-punitive manner. Finally, the PA contains provisions for voluntary withdrawal by Parties. <2.3. Is the PA legally binding?> The Department of State in 2016 communicated to Congress that, in its view, some elements of the PA are legal and binding: "Once the Agreement enters into force for the United States, the legally binding provisions of the Agreement will apply to the United States." Negotiators intended the PA to be a legal instrument, though not all provisions in it are mandatory. Some are recommendations or collective commitments to which it would be difficult to hold an individual Party accountable. As explained in CRS Report RL32528, International Law and Agreements: Their Effect upon U.S. Law : An international agreement is generally presumed to be legally binding in the absence of an express provision indicating its nonlegal nature. State Department regulations recognize that this presumption may be overcome when there is "clear evidence, in the negotiating history of the agreement or otherwise, that the parties intended the arrangement to be governed by another legal system." Other factors that may be relevant in determining whether an agreement is nonlegal in nature include the form of the agreement and the specificity of its provisions." The PA was negotiated as a subsidiary agreement to the UNFCCC, which is a legally binding treaty among its Parties under international law. Pursuant to enhancing implementation of the UNFCCC, the negotiators adopted the Durban Mandate for "a protocol, another legal instrument or an agreed outcome with legal force" applicable to all Parties. As negotiations under the Durban Mandate neared their resolution, many Parties stated their intentions that the PA be legally binding in many respects. The text contains provisions consistent with the form of an agreement intended to be governed by international law, such as entry into force, the depositary for the agreement, dispute settlement, and withdrawal from the agreement. As discussed above, the PA also contains specific obligations intended to be binding on Parties to it. Many of the mandatory obligations appear to be distinguishable by use of the imperative verb shall , although some are qualified in ways (e.g., "as appropriate") that soften the potential obligation. Not all provisions in the PA are mandatory. Some provisions exhort but would not legally require Parties (individually or collectively) or the Secretariat to undertake actions or to conform to norms under the PA. Some provisions are facilitative. The principal mandatory provisions for individual Parties are procedural. Among the most important of these is PA Article 4.2: [E]ach Party shall prepare, communicate, and maintain successive nationally determined contributions that it intends to achieve. Parties shall pursue domestic mitigation measures, with the aim of achieving the objectives of such contributions. While the PA obligates Parties to submit NDCs to mitigate GHG emissions with certain characteristics and frequency of those submissions identified in the PA or to be determined in guidance of the Parties the contents of the NDCs are not intended to be enforceable under the PA. The Department of State has stated: Even after the United States deposits its instrument and the Agreement enters into force, the U.S. 26-28 percent contribution will not, by the terms of the Agreement, be legally binding. Neither Article 4, which addresses mitigation efforts, nor any other provision of the Agreement obligates a Party to achieve its contribution. Article 4.8 requires that Parties' communications of their NDCs shall provide the information necessary for clarity, transparency, and understanding in accordance with guidance on reporting and NDCs to be developed by the APA for adoption by the CMA in its first session. Each Party must communicate an NDC every five years. Each shall also account for its NDC post-submission in accordance with CMA guidance, including reporting on its progress in achieving its NDC. Each Party must also, "as appropriate," engage in adaptation planning processes and implementation of adaptation-related actions. While the PA contains many additional requirements, such as to provide "continuous and enhanced support to developing country Parties" for required adaptation efforts, those provisions are collective obligations. There is currently no mechanism by which an individual Party could be held accountable for collective shortcomings. <2.4. Are PA requirements new for some Parties?> The PA contains a multitude of obligations for governments that are Parties to it, but few experts have suggested that there are substantive, legal obligations for the United States in the PA beyond those in the UNFCCC. The Obama Administration articulated its view: "The elements that are binding are consistent with already approved previous agreements." Some of the PA's provisions are, arguably, new obligations for other Parties, such as the (mostly low-income) Parties not listed in the UNFCCC's Annex I. One example is the provision requiring all Parties to ultimately be held to common transparency and review guidelines. All Parties to the UNFCCC, including the United States, have a host of obligations under the treaty. These existing obligations require Parties to: inventory, report, and control their human-related GHG emissions, including from land use; cooperate in preparing to adapt to climate change; seek to mobilize financial resources; and assess and review, through the COP, the effective implementation of the UNFCCC, including the commitments therein. The industrialized countries listed in Annex I of the UNFCCC, including the United States, took on stronger obligations than other countries with regard to reporting, communicating, and international review. In addition, the then-highest income countries, listed in Annex II of the UNFCCC, also agreed to provide financial, technological, and capacity-building assistance to help developing country Parties meet their obligations. For countries not listed in Annex I, some obligations under the PA will be new or stronger than those under the UNFCCC. The PA and Decision establish a single framework under which all Parties would: communicate every five years and undertake NDCs to mitigate GHG emissions, reflecting the "highest possible ambition" (Article 4.3), participate in a single transparency framework that includes communicating their GHG inventories and implementation of their obligations including financial support provided or received not less than biennially (with exceptions to a few least developed states), and be subject to international review of their implementation. The United States, as a Party listed in Annex I of the UNFCCC, has already taken on the PA's general obligations under the UNFCCC. In contrast, Parties not listed in Annex I were not subject to UNFCCC provisions that required detailed reporting of policies and measures and their effects, among other requirements. Additional provisions subjected Annex I Parties to certain reviews not applicable to other Parties. The PA expands reporting and reviews for non-Annex I Parties. All Parties to the PA will eventually be subject to common procedures and guidelines under it. However, while developed country Parties must provide NDCs stated as economy-wide, absolute GHG reduction targets, developing country Parties are exhorted to enhance their NDCs (i.e., deepen their GHG reductions) and move toward similar targets over time in light of their national circumstances. Article 4 states that "each Party's successive nationally determined contribution will represent a progression beyond the Party's then current nationally determined contribution." Many view this as a ratchet mechanism that would result in progressively deeper GHG emission reductions. This may be more an expectation than an obligation. <2.5. What are the financial obligations, if any, for the United States in the PA?> Article 9 of the PA reiterates the obligation in the UNFCCC for developed country Parties, including the United States, to mobilize financial support to assist developing country Parties with mitigation and adaptation efforts (Article 9.1). Also, for the first time under the UNFCCC, the PA encourages all Parties to provide financial support voluntarily, regardless of their economic standing (Article 9.2). The agreement states that developed country Parties should take the lead in mobilizing climate finance and that the mobilized resources may come from a wide variety of sources noting the significant role of public funds. It adds that the mobilization of climate finance "should represent a progression beyond previous efforts" (Article 9.3). The COP Decision to adopt the PA uses exhortatory language to restate the collective pledge by developed countries in the 2009 Copenhagen Accord of $100 billion annually by 2020 and calls for continuing this collective mobilization through 2025. In addition, the Parties to the COP agreed to set, prior to their 2025 meeting, a new collective quantified goal for mobilizing financial resources of not less than $100 billion annually to assist developing country Parties. The Decision strongly urges developed country Parties to scale up their current financial support in particular to significantly increase their support for adaptation. The Decision recognizes that "enhanced support" will allow for "higher ambition" in the actions of developing country Parties (1/CP.21 114). This is a collective commitment to which it would be difficult to hold an individual Party accountable. <2.6. What is the role of the Green Climate Fund in the PA?> The Decision recognizes the Green Climate Fund (GCF) as one of the entities entrusted with the operation of the financial mechanism of the UNFCCC (1/CP.21 58) and, thus, as one channel through which official UNFCCC financing may flow. In general, the Decision recognizes that adequate and predictable financial resources will flow from, inter alia , "public and private, bilateral and multilateral sources, such as the Green Climate Fund, and alternative sources" (1/CP.21 54). The GCF is a multilateral trust fund intended to operate at arm's length from the UNFCCC with an independent board, trustee, and secretariat. The GCF was proposed during the 2009 COP in Copenhagen, Denmark; accepted by Parties as an "operating entity of the financial mechanism under Article 11 of the Convention" during the 2011 COP in Durban, South Africa; and made operational in the summer of 2014. The governing instrument for the GCF states that the GCF is to be "accountable to and function under the guidance of the Conference of Parties" (3/CP.17 A4) that is, similar in legal structure to the Global Environment Facility as opposed to "accountable to and function under the guidance and authority of the Conference of Parties" (i.e., similar in legal structure to the Adaptation Fund). <2.7. Does the PA address "Loss and Damage"?> A key issue for some Parties in the PA negotiations was "loss and damage" due to climate change. Parties that perceived themselves as vulnerable to climate change have long sought commitments from the historically high-emitting countries to provide liability or funds to compensate for loss and damage that vulnerable Parties may suffer. The UNFCCC Secretariat defined loss and damage, at least temporarily, as "the actual and/or potential manifestation of impacts associated with climate change in developing countries that negatively affect human and natural systems." Loss and damage may occur even with preparation and adaptation to anticipated climate change. The United States and other historically high-emitting nations opposed new programs or commitments addressing loss and damage. In response to the interests of many countries, the Warsaw International Mechanism on Loss and Damage ("Warsaw Mechanism") was agreed under the UNFCCC in 2013 at COP19 in Decision 3/CP.19. The Warsaw Mechanism is procedural in nature. Despite strenuous negotiations, the UNFCCC Parties did not adopt proposals that could have established legal remedies such as liability or compensation for loss and damage. Instead, the negotiators agreed in Article 8 to continue the existing process under the authority of the CMA to explore cooperation and facilitation that could include early warning systems, emergency preparedness, comprehensive risk assessment and management, and improved resilience. <2.8. Does the PA include or allow market-based mechanisms to reduce GHG emissions?> Article 6 of the PA recognizes that Parties may use market-based mechanisms that generate and allow international transfer of GHG reduction credits that can be used to meet NDCs. The Decision calls for a work program that would govern market mechanisms and the additional mechanisms under the PA. Article 6 covers four distinct (but not mutually exclusive) opportunities for Parties to the PA to voluntarily cooperate to mitigate GHG emissions in ways that can lead to transfers of emission reduction credits between Parties: Cooperative approaches , acknowledging that Parties may choose, on a voluntary basis, to cooperate in the implementation of their NDCs. This provision may be read as broad, potentially encompassing the other means included in the article as well as additional approaches that may emerge through the duration of the PA. Transfers of mitigation outcomes between Parties are recognized as a means to meet Parties' NDCs. "Internationally transferred mitigation outcomes" will need to be consistent with future CMA guidance on their GHG accounting, intended to ensure "environmental integrity" that is, that there is no double counting or other misaccounting that could undermine the abatement pledged by Parties. The language is explicit that the transfers occur under the authorities of the participating Parties, not the CMA. This contrasts with the provisions in the Kyoto Protocol that required exchanges of credits to occur under and with the prior approval of Kyoto-established institutions (i.e., the Clean Development Mechanism). A m echanism to contribute to mitigation and support sustainable development is established under the CMA that could establish credit for cooperative programs that mitigate GHG emissions and development of a Party. Those credits could be used to meet one Party's NDC. A share of the proceeds from activities under this mechanism will help defray administrative expenses and assist developing countries. A framework for non-market approaches is defined but not "established." The provisions make clear that the framework should promote sustainable development; synergies across mitigation, adaptation, finance, and technology transfer; and capacity-building, along with additional purposes. But the nature and processes of this framework remain to be developed. Collectively, these four mechanisms encompass a diversity of interests and preferred approaches among Parties. They may be viewed as broadly inclusive, not suggesting preferences in the PA for one approach over another. <2.9. What gases and sectors does the PA cover?> The PA is silent regarding the anthropogenic gases and sectors potentially covered, leaving the scope bounded by the UNFCCC's scientific definition of what constitutes a GHG. The UNFCCC includes all human-related GHGs and all sectoral sources of them. It also includes removals of GHGs from the atmosphere by "sinks" and reservoirs, including land uses (i.e., photosynthesis by vegetation and soils). Article 5 explicitly exhorts Parties to "reduce emissions from deforestation and forest degradation, and conservation (REDD+), including through results-based payments." To support the PA negotiations, most UNFCCC Parties submitted Intended Nationally Determined Contributions (INDCs) during 2015, constituting country-driven intentions of what each would do to address GHG emission mitigation and, in some cases, adaptation. Each Party decided and communicated which GHG and sectors it covered in its INDC, and a wide diversity of scopes were identified across nations. A continuing task for the UNFCCC Secretariat will be to try to put those INDCs into a common metric and assess the aggregate effects of the INDCs. It began this task with an analysis released in October 2015 updated on May 2, 2016. The COP Decision giving effect to the PA requested the APA to develop guidance for the CMA to consider and adopt at its first session. The process of negotiating guidance will likely consider methods and approaches for estimating and accounting for anthropogenic GHG emissions and sinks in the NDCs. (See paragraphs 28 and 27 of Decision 1/CP.21.) This process will build on extensive but flexible guidance already adopted under the UNFCCC for estimating and reporting GHG inventories, but challenging issues such as reporting of sinks may arise as they have in the past. <3. Procedural Topics> <3.1. How did the PA enter into force?> In accordance with Article 21 of the PA, the agreement entered into force on November 4, 2016, on the 30 th day after at least 55 countries representing at least 55% of officially reported global GHG emissions deposited their instruments. Entry into force of the PA entailed four steps by Parties: 1. Signature by individual national governments; 2. Governments' processes of ratification, acceptance, approval, or accession, according to their domestic laws and practices; 3. Deposition of those instruments of ratification, acceptance, approval, or accession with the United Nations depositary; and 4. Passing a threshold of 55 countries, representing at least 55% of GHG emissions, that have deposited their instruments. The threshold in step 4, above, was passed on October 5, 2016, initiating the 30-day clock. The PA has legal force only for those nations that are Parties to it those that have deposited their instruments. The Durban Mandate for the PA envisioned the PA taking effect in 2020. The entry into force four years sooner than anticipated poses some challenges to the Parties. In particular as discussed later in " Next Steps for the PA " Parties are pressed to develop and adopt many procedures and methods to guide their compliance with the PA's provisions. Some procedures were envisioned in the PA as being ready for adoption in the first COP serving as the meeting of the Parties to the PA (CMA). That first meeting began in November 2016 rather than in 2020, and development of rules and procedures are ongoing. <3.1.1. Signatures> More than 170 governments (including the United States and EU) signed the agreement on April 22, 2016. This set a new record for signatures on a U.N. treaty in a single day. As of June 1, 2017, the PA had received 195 signatures. Signatories included all major emitting countries and the EU; only Nicaragua and Syria had not signed. The PA remained open for signature until April 21, 2017. Signature alone did not trigger entry into force of the agreement, but was a first step in the process for a UNFCCC Party to become Party to the PA. The PA is explicit in Article 20 that signature is further subject to ratification, acceptance, approval, or accession by the signing state or regional economic integration organization (REIO) before the agreement has legal force on that signatory. After signing, a state that seeks to become Party to the PA proceeds with its own domestic processes, defined by its laws, to ratify, accept, approve, or (for nations that do not sign before April 21, 2017) accede to the agreement. Finally, to become a Party, a national government or an REIO (e.g., the EU) must deposit an instrument of ratification, acceptance, approval, or accession with the U.N. depositary. On April 22, 2016, 15 nations deposited their ratifications with the United Nations, and others pledged to do so as quickly as possible. <3.1.2. Deposits of Instruments of Ratification, Acceptance, Approval, or Accession> By October 5, 2016, 72 nations had deposited their ratifications , acceptances , or approvals of the PA , accounting for more than 56% of global GHG emissions, passing the threshold for the PA to enter into force. In synchrony, the United States and China deposited their instruments with U.N. Secretary General Ban-Ki Moon on September 3, 2016. As of June 23, 2017, 149 Parties had joined the PA, including the major emitters Brazil, the EU and seven of its members, India, Indonesia, Japan, Mexico, South Africa, South Korea, and Ukraine. Additional Parties represent a spectrum of emissions and economies, from Albania to Vanuatu. Among the top 20 emitting countries, only Iran and Russia are not yet Parties. In 2016, Russia pledged to join the PA as quickly as possible. <3.2. What actions did the United States take to join the PA?> The United States completed a number of steps necessary to become a Party to the PA. First, the United States became a Party to the umbrella treaty, the UNFCCC, when it entered into force in 1994. The United States participated as a UNFCCC Party in the 21 st meeting of the COP when it adopted the PA by consensus, on December 12, 2015. The United States became a signatory of the PA when Secretary of State John Kerry signed the PA on behalf of the United States on April 22, 2016. On August 29, 2016, President Obama, on behalf of the United States, signed an instrument of acceptance of the PA, effectively providing U.S. consent to be bound by the PA. He deposited that instrument of acceptance directly with U.N. Secretary General Ban-Ki Moon on September 3, 2016. The United States became a Party to the PA when it entered into force on November 4, 2016. Whether the United States legally could or should have become a Party to the PA as a treaty with Senate advice and consent, or as an executive agreement , has been a matter of interest for some in Congress and the public. The PA is intended by its negotiators to be an international treaty as defined in the Vienna Convention on the Law of Treaties. Nonetheless, under U.S. law, the term treaty refers to agreements that receive Senate advice and consent in conformance with Article II of the Constitution. President Obama accepted the PA as an executive agreement rather than seeking the advice and consent of the Senate to ratify it; executive agreements may be made pursuant to congressional authorization, pursuant to authority granted to the executive in a prior treaty, or "solely on the basis of the constitutional authority of the President." This process has been used for other international treaties. At least one other international environmental agreement, the 2013 Minamata Convention on Mercury , was entered into as an executive agreement. The State Department's Handbook on Treaties and Other International Agreements identifies considerations for the executive branch's determination of the type of agreement and the constitutionally authorized procedures to be followed by the United States in joining an agreement. The determination depends on a number of considerations , including whether the PA was negotiated pursuant to a ratified treaty (e.g., the UNFCCC), its content and importance, whether it requires additional legislative authorizations for the United States to comply, related congressional resolutions, and other factors. As examples of application of these considerations, if the PA were to contain new legal obligations for the United States, or if the United States were unable to meet its obligations without additional authority from Congress, those factors would favor regarding the PA as requiring congressional action. Senior officials of the executive branch asserted that the PA is an executive agreement that does not require submission to the Senate because of the way it is structured. State Department officials stated that they had "a standard State Department exercise that [they were] going through for authorizing an executive agreement, which this is." The State Department's Handbook states, following its listing of considerations, that "[i]n determining whether any international agreement should be brought into force as a treaty or as an international agreement other than a treaty, the utmost care is to be exercised to avoid any invasion or compromise of the constitutional powers of the Senate, Congress as a whole, or the President." It also states that consultations on the type of agreement to be used "will be held with congressional leaders and committees as may be appropriate." The 2016 White House statement upon deposit of the U.S. instrument of acceptance provided little insight into the decision. The Senate Legislative Counsel in 1975 stated its position that "the scope of presidential authority to make executive agreements is unclear." Congress has interests in both the substance of the agreement and protecting its constitutional authorities. In 2015, Members of the 114 th Congress introduced several resolutions (e.g., S.Res. 329 , S.Res. 290 , H.Res. 544 , S.Con.Res. 25 ) to express the sense that the PA should be submitted for the advice and consent of the Senate. Additionally, resolutions were introduced in the House ( H.Con.Res. 97 , H.Con.Res. 105 , H.Res. 218 ) to oppose the PA or set conditions on its signature or ratification by the United States. None received further action. In the 115 th Congress, a number of resolutions have also been introduced to oppose or support U.S. participation in the PA (e.g., H.Con.Res. 55 , H.Res. 85 , H.Res. 390 , S.Con.Res. 17 ). Again, no further action has occurred. The 1997 Byrd-Hagel Resolution ( S.Res. 98 , 105 th Congress, adopted 98-0) expressed the Sense of the Senate opposing an agreement pursuant to the UNFCCC that would (A) mandate new commitments to limit or reduce greenhouse gas emissions for the Annex I Parties, unless the protocol or other agreement also mandates new specific scheduled commitments to limit or reduce greenhouse gas emissions for Developing Country Parties within the same compliance period, or (B) would result in serious harm to the economy of the United States. The PA could be seen to satisfy the first clause, as all Parties have the same obligation to submit NDCs to abate GHG emissions, with all Parties pledging to achieve their contributions by 2030. (The U.S. opted for a target date of 2025.) The substance of the NDCs is not binding for any Party. In the second clause, determining whether the agreement could cause "serious harm" to the U.S. economy would require analysis and judgment. Stakeholders have weighed in with their views regarding the appropriate legal form and process for the PA in the United States. Some commentators consider that the PA is appropriately an executive agreement because it does not contain new, specific legal obligations for the United States beyond those in the UNFCCC and already authorized under U.S. law. The United States and other Parties to the UNFCCC accepted legally binding obligations when they ratified the UNFCCC, including addressing GHG emissions (Articles 4.1 and 4.2), preparation to adapt to climate change (Article 4.1), financial assistance to developing countries (Articles 4.3-4.5), international cooperation and support (Article 4.1), and regular reporting of emissions and actions (Article 12) with international review (Article 4.2, 7). Some commentators note that the obligation to submit Nationally Determined Contributions (NDCs) is procedural, because the Parties would not have a legal obligation to comply with the content of the NDC. In other words, a Party could be held to account under the compliance provisions of the PA for not submitting an NDC, but it could not be held accountable under the compliance provisions should that Party not, for example, achieve a GHG emissions target it specified in its NDC. (See discussion in " Are PA requirements new for some Parties? ") Other commentators argued that the PA is a treaty that should have been submitted to the Senate. Some gave reasons such as historical practice, the potential costs and benefits, or other factors. At least one commentator argued that the PA could, in future decades, result in stronger obligations for the United States than the Senate anticipated when it gave its consent to ratifying the UNFCCC. <3.3. Can a Party withdraw from the PA?> The PA typical of modern international agreements, including the UNFCCC includes provisions for Parties to withdraw if they choose to do so. Article 28 spells out a procedure by which a Party may give written notice of withdrawal to the U.N. depositary after three years from the date on which the agreement has entered into force for that Party. The soonest date the United States may submit that intent would be November 4, 2019. The withdrawal would take effect after one year, as soon as November 4, 2020 for the United States, or later if so specified in the notification of withdrawal. On June 1, 2017, President Donald Trump announced his intent to withdraw the United States from the PA. As the PA is an executive agreement, U.S. historical practice suggests that the President may withdraw from the PA, without prior approval by Congress, by submitting notification of withdrawal from the PA to the U.N. Depositary. Some have suggested that the United States could withdraw more quickly by exercising the right to withdraw from the UNFCCC under its Article 25. Article 28(3) of the PA specifies: "Any Party that withdraws from the Convention shall be considered as also having withdrawn from this Agreement." Because the UNFCCC received the Senate's advice and consent in 1992, an effort by the executive to terminate that treaty unilaterally could invoke the historical and largely unresolved debate over the role of Congress in treaty termination. The Constitution sets forth a definite procedure for the President to make treaties with the advice and consent of the Senate, but it does not describe how they should be terminated. There are proponents on both sides of the debate over the executive's power of unilateral treaty determination. On the one hand, the Restatement of the Foreign Relations Law of the United States (Third) concludes that the President has the power to terminate or suspend a treaty by virtue of the executive's powers related to foreign affairs. On the other hand, some contend that the Founders could not have intended the executive to be the "sole organ" of treaty powers, because the Treaty Clause expressly provides a role for the Senate formation of treaties. The Senate must, by this reasoning, also approve the termination of a treaty that it previously ratified. Given the diverse past practices and the unsettled state of the law relating to Congress's role in this process, it is unclear whether the executive would be required to receive congressional or senatorial approval should it decide to withdraw from the UNFCCC. It is also unclear whether the courts would resolve a dispute between the legislative and executive branches over termination of the UNFCCC should a disagreement arise. <3.4. What are the roles of Congress with respect to the UNFCCC and the PA?> Congress has power to influence U.S. commitments and performance under the UNFCCC and the PA. As with other actions of the executive branch, Congress retains its powers of appropriations and oversight, as well as of giving (or withdrawing) authorizations regarding implementation of the PA. Appropriations or prohibition of use of funds for certain purposes have been used on numerous occasions in the context of the UNFCCC with regard to supporting the UNFCCC processes, providing technical or financial assistance to lower capacity countries in furtherance of the treaties, and cooperative activities of particular interest, such as enhancing monitoring of compliance with treaty obligations or promotion of key technologies, such as carbon capture and sequestration. Members of Congress and their staff routinely consult with the executive branch and conduct oversight with respect to the UNFCCC before and after multilateral sessions and while attending as part of congressional delegations. Letters to executive officials may convey views or request specific information, and legislative resolutions may express majority views more strongly. Congressional hearings provide more public settings for receiving testimony and exchanges of views with the Administration. Committee chairs have requested reviews of particular issues by the Government Accountability Office and others. All of these may continue under the UNFCCC and the PA. Some key issues that may attract oversight, should the United States proceed with the President's intent to withdraw from the agreement include: Options for withdrawing from the PA; The degree and content of U.S. participation in the PA activities while the United States is a Party and after withdrawal occurs; Objectives and options for renegotiation of the PA, or of a new "transaction," should other Parties be willing to engage; The possible implications for the United States of decisions Parties make following U.S. withdrawal (for example, regarding technology cooperation and trade); or Evaluation of bilateral cooperation in areas such as development of advanced technologies and information-sharing. As long as the United States remains a Party, issues include the following: Development of methods and guidance to which PA Parties will be expected to conform concerning reporting on and achievement of NDCs; Protection of intellectual property and opportunities for market access in technology-related provisions; Balancing and evaluating outcomes of appropriations, partnership programs, regulations, and other federal activities to advance technologies, inform the public, and influence GHG emissions and adaptation to climate change; Use and outcomes of any appropriated funding, such as for operations of the Secretariat, bilateral cooperation with other Parties, or the GCF; and Overall outcomes of Parties' actions in light of the objectives of the UNFCCC and PA and in view of domestic concerns about potential economic and trade implications and climate effectiveness of the agreement. <4. Countries' Pledges to Contribute to GHG Emission Mitigation> <4.1. What did the United States pledge as its Nationally Determined Contribution (NDC) to global GHG mitigation?> Intended NDCs (INDCs) and, now for Parties, Nationally Determined Contributions (NDCs) embody the pledges of countries to abate their GHG emissions, and, in some, to adapt to climate change. They are thus critical to considering the overall effect of the PA. To support the negotiations, most UNFCCC Parties submitted statements or INDCs of the contributions they intended to make to the global effort to mitigate GHG emissions and, in some cases, adapt to climate change. The PA requires formal, country-driven pledges from its Parties as NDCs, though Parties are not bound to achieve the targets or take the actions the NDCs contain. On March 31, 2015, the State Department communicated its INDC, a U.S. pledge to reduce U.S. GHG emissions by 26-28% by 2025 compared to 2005 levels ( Figure 1 ). The United States stated that it will "make best efforts to reduce its emissions by 28%." The U.S. INDC was not explicitly conditional on other countries' actions, as some other Parties' were. The United States noted that its INDC was supported by domestic policy actions that placed the nation on a course to reduce GHG emissions by 17% by 2020 below 2005 levels. The INDC also stated that the U.S. 2025 target is consistent with a straight-line emission reduction path to "deep decarbonization" of 80% or more by 2050. Having communicated the U.S. INDC to the UNFCCC Secretariat in 2015 before joining the PA, the United States is considered, in accordance with paragraph 22 of the Decision, to have satisfied the PA's requirement to submit a first NCD under PA Article 4.2. The Secretariat has now registered the U.S. pledge in the interim NDC Registry in accordance with PA Article 4.12 and Decision paragraph 30. <4.2. Could a Party rescind its NDC and submit a new one?> Once a government becomes a Party to the PA, its INDC may be registered by the Secretariat as the Party's NDC, unless the Party requests otherwise. The question has arisen as to whether, once a Party's NDC has been submitted and registered, that Party may rescind it and submit a new one. This question is pertinent to the United States for several reasons. President Trump, in announcing his intent to withdraw from the PA, stated that "this includes ending the implementation of the nationally determined contribution." In addition, some U.S. stakeholders have expressed concern that the ambition of the U.S. NDC GHG emission reduction target may be too little or too great. Those seeking a less ambitious target may assert that there is not parity in the levels of effort being contributed across countries, especially among competitive nations, or that the costs of achieving the target may harm the U.S. economy or fossil fuel interests. Some have suggested that the United States remain Party to the PA but rescind its NDC and possibly submit a less ambitious substitute. These views and President Trump's statement have raised legal and political questions, including how to interpret related provisions in the PA. The U.S. NDC has been registered by the Secretariat. Unless the United States rescinds its NDC, the NDC presumably remains in effect. Its content is not binding, and, indeed, achievement of its content could not be definitively determined until at least two years after the 2025 target date. Most Parties stated their NDC with a target date of 2030; their GHG emissions data would become available for review by Parties and the public in 2032 or later (depending on the capacity of the country and rules developed under the PA). Formal accounting of actions Parties are taking to achieve their NDCs would probably not be required until the next biennial national report (BNR) under the UNFCCC is due in 2018, and perhaps not even then. This communication is due under the Convention, not the PA, and so will be expected regardless of U.S. intent to withdraw from the PA. The United States may expect that other Parties will pay particular attention to U.S. explanation of its policies, actions, and GHG trajectories, as required in such reports, when the BNR is published. The United States may have an interest in supporting rigorous reporting and transparency under the UNFCCC and PA and generally to be viewed as compliant with its international procedural obligations. The United States may therefore have broader considerations than strictly the legal terms of the PA and the UNFCCC. There are no provisions in the PA permitting a Party to rescind its NDC or express prohibitions. Possible withdrawal of the existing U.S. NDC raises two aspects of compliance with the PA: (1) the requirement that each Party must submit a NDC; and (2) provisions suggesting that each NDC must include a more ambitious pledge, a ratcheting mechanism for ambition in GHG emission reductions. As noted above, the U.S. NDC has already been registered. Should the United States withdraw its NDC without submitting another, it would arguably no longer be in compliance with PA Article 4.2 as long as the United States' withdrawal has not taken effect (in late 2020 or later). There is no clear time by which a Party must have an initial NDC in place. Deadlines may be decided by the PA Parties as they develop rules under the PA. Subsequent NDCs must be submitted every five years. In light of President Trump's stated intent to withdraw, Parties may or may not pursue non-compliance processes should the United States rescind its NDC and not submit a new one. Article 4.3 states that "each Party's successive nationally determined contribution will represent a progression beyond the Party's then current nationally determined contribution and reflect its highest possible ambition." Article 4.11 of the PA states that "a Party may at any time adjust its existing nationally determined contribution with a view to enhancing its level of ambition, in accordance with guidance adopted by the [CMA]." Various legal advisers and diplomatic officials, in the United States and other countries, have asserted differing opinions regarding whether the "ratcheting" mechanism is legally obligatory. The language appears permissive and not prohibitive. During the negotiations, countries disagreed regarding whether Parties should be obligated to submit NDCs that are progressively more ambitious. As is often the case in difficult negotiations, the differences were resolved by language that may be ambiguous. Whether a less ambitious NDC would be noncompliant would entail further legal interpretation and diplomatic discussion among Parties. The provisions' uses of the words will and may , rather than shall , may undermine the argument that they could be legally mandatory. Nonetheless, a less ambitious NDC would likely be inconsistent with the express intent in multiple provisions aimed at peaking global emissions with reductions thereafter and could be seen as undermining the intent of the agreement overall. The advantages and disadvantages for the United States of invoking a compliance question may depend on expectations of diplomatic repercussions in light of President Trump's stated intention to withdraw from the PA. It may also be influenced by the possibility that the United States might meet the existing NDC target under expected market conditions and public policies, including those at state and local levels, as a few observers suggest. <4.3. Can the United States meet its 2025 GHG reduction pledge?> Whether the United States will meet the GHG reduction targets in its NDC is uncertain but does not appear likely. A Party's achievement of its GHG emissions target is not a legal obligation but likely has broader diplomatic and public opinion implications in the PA's "name and shame" compliance system. President Trump announced on June 1, 2017, that the United States would, as of that date, "cease all implementation" of the U.S. NDC. The likelihood that the United States would meet its target would be further reduced should the Administration's review of regulations (such as the Clean Power Plan [CPP] ) by agencies result in rescissions or more permissive standards than those promulgated under the Obama Administration. One dozen states along with hundreds of localities, businesses, universities, and other U.S. entities have stated, nonetheless, their intentions to continue efforts to reduce their GHG emissions and, in many cases, to achieve a reduction proportionate to their shares of the U.S. NDC target. Through 2016, several analyses indicated that the United States could meet its NDC pledge to reduce GHG emissions to 26-28% below their 2005 levels by 2025, relying on optimistic assumptions and additional policies. Other analyses, or less optimistic assumptions, suggested that the United States would fall short of its NDC target. At the end of 2015, the United States submitted its second biennial report to the UNFCCC and itemized actions that the United States was implementing or intended to take that would assist in reducing GHG emissions. The State Department reported that, under then-current measures only, the United States could reduce GHG emissions (net of removals by sinks) by 12-16% below 2005 levels by 2025. This would be well short of the U.S. NDC target. Analyses by non-governmental sources produced similar results. New policies and actions of the Trump Administration could decrease the likelihood that the United States could meet the NDC GHG target. President Trump's Executive Order 13783, "Promoting Energy Independence and Economic Growth," directed the U.S. Environmental Protection Agency (EPA) Administrator to review and, if appropriate, suspend, revise, or rescind, "as appropriate and consistent with law," the CPP and other rules that "unduly burden the development or use of domestically produced energy resources beyond the degree necessary to protect the public interest or otherwise comply with the law." E.O. 13783 also withdrew President Obama's Climate Action Plan (CAP), among other policies. One measure in the CAP considered important to achieving the US NDC target was EPA's CPP, promulgated in 2015. It set standards limiting CO 2 emissions from existing fossil-fuel-fired electric generating facilities, which emitted 33% of U.S. net GHG emissions in 2015. Already, the Supreme Court had stayed the rule on February 10, 2016, under litigation challenging the rule. EPA published notice in April 2017 that it was reviewing the CPP and, if appropriate, would initiate proceedings, consistent with the law, to suspend, revise, or rescind the regulation. The court paused the CPP litigation for 60 days to allow EPA time for that review. Regarding GHG emissions from the transportation sector, the Trump Administration announced on March 15, 2017 a reconsideration of vehicle GHG standards for the Model Years 2017-2025 that could ease or delay the emissions limits. The evaluation is due by April 2018. Other new policies designed to encourage greater fossil energy production and consumption could increase associated GHG emissions. The outcomes on U.S. GHG emissions of the ordered regulatory reviews and other changes in policy remain to be seen. Many factors outside of federal policy could increase or decrease the likelihood of meeting the target, and it is not possible to predict future emissions precisely. Some analysts suggest that economic and technological factors may continue to reduce U.S. GHG emissions through 2025, with a few suggesting that the NDC targets could be met through continuing market forces along with state, local, and philanthropic programs. Plentiful natural gas supplies have continued to offer an attractive alternative to coal-fired electricity, and falling costs of electricity from wind and solar along with federal tax incentives have expanded investment in these more advanced technologies. Any projection of future emissions is contingent on assumptions about future economic conditions and consumer preference, the size and structure of the energy sector, the influence of existing and new policy measures, and the modeling methods. Strategies being undertaken by states and localities and many in the private sector could also limit GHG emissions. Rapid technological change in the energy sector may have an even greater influence. Many state and local policies already constrain GHG emissions, and they will continue to influence the U.S. emissions trajectory even under new federal policy. California proceeds with its Advanced Clean Car Program, which included an EPA waiver to use the MY2017-2025 vehicles standards; 12 additional states have adopted the California standards. California has also enacted laws to reduce its GHG emissions to 1990 levels by 2020 and has set a goal to reduce GHG emissions to 40% below 1990 levels by 2030. This will require GHG reductions beyond what was counted in earlier projections of California's Climate Action Plan. Ten northeastern states continue to implement the Regional Greenhouse Gas Initiative limiting CO 2 emissions, allowing emissions trading and reinvestment of associated revenues. Many states have renewable energy portfolio requirements, and many have stated that they will continue to pursue GHG reduction policies, as have a number of localities and major corporations. More than 130 U.S. cities have joined the Global Covenant of Mayors for Climate and Energy, pledging to abate GHG emissions locally. A number of electric utilities reliant on fossil fuels are hedging with investments in renewable energy generation or finding them economically competitive with the alternatives. Many experts expect expanding deployment of advanced technologies to continue to reduce costs and increase availability of less GHG-emitting energy systems. Some potentially countervailing factors include the relatively low prices of motor fuels and impacts on consumer choices and use of vehicles, relatively low operating costs of existing coal-fired plants, electricity grid constraints, and intermittency and storage challenges of renewable energy technologies. If natural gas prices rise significantly, or the CPP is remanded, rescinded, or weakened, the NDC targets could be especially challenging to achieve. Under most scenarios, fossil fuels remain strongly present in the U.S. energy economy through 2030 and beyond. <4.4. What did other major GHG-emitting countries pledge as their INDCs?> More than 190 Parties to the UNFCCC submitted INDCs now NDCs for Parties to the PA that included pledges to address national GHG emissions. Nearly all announced specific GHG targets or actions to contribute to the evolving post-2020 regime. Some included pledges to prepare to adapt to forecasted climate change as well. The UNFCCC Secretariat synthesized and assessed the pledges of the 189 UNFCCC Parties representing about 99% of 2010 global emissions that had submitted INDCs as of April 4, 2016. The Secretariat estimated that implementation of the INDCs would result in aggregate global emissions of 55.0 (51.4 to 57.3) gigatons (Gt) CO 2 e in 2025 and 56.2 (52.0 to 59.3) Gt CO 2 e in 2030. These estimates would be higher than the 2010 global emissions by 7-19% in 2025 and 8-23% in 2030. While these estimates indicate that GHG emissions would continue to rise to 2030, the rate of growth would be 8-23% in the period 2010-2030, perhaps cutting by 4-67%, the 24% rate of growth in 1990-2010. (The ranges of uncertainty capture a number of questions, including how to characterize INDC pledges made conditional on, for example, financial assistance.) Below is a sampling of countries' NDC pledges, mostly from large emitting nations: China's NDC included myriad policies, existing and intended, and targets for 2030: Achieve peaking of CO 2 emissions around 2030 and make best efforts to peak earlier; Increase the share of non-fossil-fuel energy sources to around 20% of primary energy supply; Lower CO 2 emitted per unit of GDP by 60-65% compared with 2005 levels; Expand forest stock volume by around 4.5 billion cubic meters compared with 2005 levels; Gradually establish a nationwide carbon emission trading system; and "Proactively" adapt to climate change. The EU pledged to reduce its GHG emissions by at least 40% below 1990 levels by 2030. India stated its intention to reduce the GHG emissions intensity by 33-35% below 2005 levels by 2030, reach a 40% share of non-fossil installed electric capacity by 2030 with help and financing, increase carbon sinks by 2.5-3 billon tons CO 2 e by 2030, and set qualitative goals to mitigate GHG and adapt to climate change. Mexico pledged a NDC to "peak" its GHG emissions by 2026. Canada's NDC stated its intention to reduce its GHG emissions by 30% below 2005 levels by 2030. Russia offered an "indicator" of limiting GHG to 25-30% below 1990 levels by 2030, subject to "maximum possible account of absorbing capacity of forests." For more information, see CRS Report R44092, Greenhouse Gas Pledges by Parties to the United Nations Framework Convention on Climate Change , by [author name scrubbed]. <4.5. What if a Party does not meet its pledge?> The effect of the PA will depend both on the nonbinding pledges that Parties to it make and their achievement of those pledges. The PA relies on good faith, transparency, accountability, and peer and public pressure to motivate Parties' compliance with both binding and nonbinding provisions rather than enforcement mechanisms with mandatory sanctions. Also, Article 15 of the PA establishes a mechanism to facilitate implementation of and promote compliance with the provisions of the PA. The compliance mechanism "shall be expert-based and facilitative in nature and function in a manner that is transparent, non-adversarial and non-punitive." The mechanisms that best promote compliance can be difficult to predict. One treaty expert has argued that "transparency, accountability, and precision can also make a significant difference" in gaining compliance with a treaty. It is unclear whether formal sanctions promote greater compliance or result in less ambitious commitments. Even legally binding treaties or provisions and provisions for non-compliance consequences may not succeed in gaining compliance. Some analysts have looked at experience under the Kyoto Protocol as an example: It had provisions for enforcement, with possible punitive consequences for Parties that did not comply with their obligations; according to some, those provisions did not visibly encourage compliance from some Parties. However, reviews and compliance proceedings raised questions about reporting or other implementation actions of several Kyoto Protocol Parties, and those issues were corrected or resolved during the compliance procedures. These experiences of compliance procedures may be one indication that the process may promote compliance with procedural and technical matters. Many states comply with treaty obligations even when there are not enforcement mechanisms. Hence, it is difficult to conclude that the legal format of particular provisions, or inclusion of penalties for non-compliance, would be requisite for the effectiveness of the PA. As a senior State Department official stated, "At the end of the day, what applies in a country are the rules and the laws that it has to implement its obligations, its commitments." The Senate Environment and Public Works Committee majority staff, however, expressed doubts about future compliance with the PA: Just because a country signs a UNFCCC agreement does not mean the agreement has any legal effect in the country. Countries that have signed and ratified an agreement have the freedom to act in their best interest and withdraw . Kyoto was legally binding and countries still failed to comply. Non-binding targets in the Paris Agreement will not produce any greater confidence that countries will comply. Processes are taking shape to decide detailed rules to achieve the transparency and facilitative provisions of the PA under UNFCCC and PA bodies. Government officials and public stakeholders will likely be closely monitoring the effectiveness of those mechanisms by for the duration of the agreement. <4.6. What effect might full compliance with the PA have on climate change?> There are two aspects to understanding the effects of the PA on the climate system: (1) compliance with the long-term aspects of the agreement, and (2) compliance with the pledges made by countries only to 2025 or 2030; reporting of studies on effects of the PA often do not distinguish between the long-term PA and the near-term GHG pledges. According to scientific models of GHG-induced climate change, significant reductions of cumulative GHG emissions would reduce the induced temperature increase. There is wide scientific agreement that the more significant and earlier the GHG emission reductions, the greater the expected effect. If all countries were to comply fully with the vision and obligations of the PA, they would reduce their aggregate net GHG emissions nearly to net zero emissions in the second half of this century (Article 4.1), thereby stabilizing GHG concentrations in the atmosphere. Scientists expect that near-zero GHG emissions could curtail GHG-induced global warming and other climate changes on a multicentury timescale. Article 2 spelled out a goal of holding the increase in global average temperature to "well below" 2 o C above pre-industrial levels and to pursue efforts to limit the increase to 1.5 o C. In principle, Parties could achieve the PA's long-term temperature limits but only if they ratchet their GHG reductions at a faster rate than was reflected on average in the INDCs. The UNFCCC Secretariat assessed that full compliance with the INDCs (mostly set to 2025 or 2030, including the conditional pledges) would show global GHG emission trajectories still rising in 2030, though the curve could be bending significantly toward a plateau. A few Parties submitted INDCs that envisioned continued downward GHG emission trajectories to 2050, but none pledged to achieve net zero emissions by mid-century. The UNFCCC Secretariat presented an analysis comparing the INDCs with externally developed GHG scenarios illustrating least-cost paths to a 2 o C temperature limit. (See Figure 2 .) The assessment concluded that the INDCs would reduce GHG emission below the pre-INDC paths (which included policies to which countries had previously committed) and that full compliance with INDCs would result in emission levels well above many identified least-cost paths to achieving the temperature target: [G]lobal GHG emissions resulting from the implementation of the communicated INDCs are generally expected to be lower than the emission levels according to pre-INDC trajectories, by 2.8 (0.0 to 6.0) Gt CO 2 eq in 2025 and 3.3 (0.3 to 8.2) Gt CO 2 eq in 2030. If all conditional components of the INDCs are implemented, the resulting global total emissions are expected to be even lower, by 3.7 (1.2 to 6.0) Gt CO 2 eq in 2025 and 5.3 (0.9 to 8.2) Gt CO 2 eq in 2030 compared with emissions consistent with pre-INDC trajectories, while considering only the unconditional components of the INDCs reduces the emission difference from pre-INDC trajectories to 2.1 ( 0.4 to 4.3) Gt CO 2 eq in 2025 and 2.8 ( 0.4 to 5.9) Gt CO 2 eq in 2030. (paragraph 208 and footnote 65) The gap between INDCs and least-cost paths to temperature targets well below 2 o C or 1.5 o C would presumably be larger. <5. Next Steps for the PA> <5.1. Tasks for all Parties> The PA and the COP Decision to give it effect identified numerous tasks to bring the PA into force and help it function effectively according to Parties' intentions. Some tasks have already begun. The "Ad Hoc Working Group on the PA" (APA) met for the first time in May 2016 in Bonn, Germany. The first session of the COP, serving as the meeting of the Parties to the PA (CMA 1), was also held in Marrakech, Morocco, in November 2016, a few days after the agreement entered into force on November 4, 2016. (See question above, " How did the PA enter into force? ") Many Parties advocate for quick decisions by the CMA on numerous topics identified in the work program decided in November 2016. The main elements include: NDCs Adaptation communications Transparency framework for action and support The Global Stocktake The mechanism to facilitate implementation and compliance The Adaptation Fund The public registry/registries for NDCs and adaptation communications Periodic assessments of the Technology Mechanism Cooperative approaches under PA Article 6; and Accounting for financial resources provided and mobilized. (See Appendix , "Schedule for Some Key Tasks Under the PA.") Many of those activities will require sensitive negotiations over issues that were controversial in the lead-up to the PA. A complete list of tasks arising from the Decision to adopt the PA is available from the UNFCCC Secretariat. Some highlights of the tasks: The CMA is to develop guidance on the information to be submitted in NDCs so that they are clear, transparent, and comparable. The Secretariat established a public, interim NDC Registry containing NDCs communicated by Parties. The CMA is tasked with agreeing on guidance to ensure measurement of PA Parties' performance on their NDCs. Elements of this guidance may consider criteria in the PA that NDCs should promote environmental integrity, transparency, accuracy, completeness, comparability, and consistency and avoid double counting. Countries were invited to communicate, by 2020, their mid-century, long-term low GHG emission development strategies. The Executive Committee of the Warsaw Mechanism was charged with reviewing work in September 2016 to develop recommendations for integrated approaches to avert, minimize, and address displacement of people related to the adverse impacts of climate, and for a repository for information on insurance and risk transfer to help Parties develop and implement comprehensive risk management strategies. Associated with "cooperative approaches," the Subsidiary Body for Scientific and Technological Advice under the UNFCCC is tasked with developing guidance for market-based systems that the PA recognizes will be used by Parties to meet their NDCs. The bodies will also develop a work program for considering other cooperative approaches, including non-market-based approaches, to GHG emissions reductions. The Adaptation Committee under the COP must develop methods to recognize the adaptation efforts of developing countries and for communication of Parties' priorities, implementation, support needs, plans, and actions and for recording them in a registry maintained by the Secretariat. The CMA will, in the 2020s, negotiate to set a new collective, quantified goal for climate finance by 2025. In addition, there will be many requests for submissions of Parties' views, development of rules and guidance, and reviews of existing approaches and mechanisms in the period to 2020. The topics will include capacity building, technology cooperation, adaptation, and more. <5.2. Questions About Next Steps for the United States> President Trump's announcement on June 1, 2017, of his intent to withdraw the United States from the PA raises several issues regarding next steps under the PA, including: What procedure might the United States follow to withdraw from the PA? Might the United States request that the PA Parties allow it an early exit from the agreement, following customary international law, rather than the four-year withdrawal process under PA Article 28? Will the United States continue to participate in meetings and decisions of the PA until withdrawal occurs, pursuant to the President's statement that "as of today, the United States will cease all implementation of the non-binding Paris Accord.... This includes ending the implementation of the nationally determined contribution and, very importantly, the Green Climate Fund"? When and how may the Administration follow up on the President's statement that the United States would begin negotiations to reenter either the PA or an entirely new transaction on terms that are fair to the United States"? May this occur within the procedures of the UNFCCC and/or the PA or in a different forum? How may other Parties alter their strategies and positions on implementing the PA in light of the U.S. announcement? Or, how may the balance of influence shift among Parties that have often shared or opposed U.S. views in negotiations? <5.2.1. Appendix. Schedule for Some Key Tasks Under the PA>

The Paris Agreement (PA) to address climate change internationally entered into force on November 4, 2016. The United States is one of 149 Parties to the treaty; President Barack Obama accepted the agreement rather than ratifying it with the advice and consent of the Senate. On June 1, 2017, President Donald J. Trump announced his intent to withdraw the United States from the agreement and that his Administration would seek to reopen negotiations on the PA or on a new "transaction." Following the provisions of the PA, U.S. withdrawal could take effect as early as November 2020. Experts broadly agree that stabilizing greenhouse gas (GHG) concentrations in the atmosphere to avoid dangerous GHG-induced climate change would require concerted efforts by all large emitting nations. The United States is the second largest emitter of GHG globally after China. Toward this purpose, the PA outlines goals and a structure for international cooperation to slow climate change and mitigate its impacts over decades to come. The PA is subsidiary to the United Nations Framework Convention on Climate Change (UNFCCC), which the United States ratified in 1992 with the advice and consent of the Senate and which entered into force in 1994. The PA requires that nations submit pledges to abate their GHG emissions, set goals to adapt to climate change, and cooperate toward these ends, including mobilization of financial and other support. The negotiators intended the PA to be legally binding on its Parties, though not all provisions in it are mandatory. Some are recommendations or collective commitments to which it would be difficult to hold an individual Party accountable. Key aspects of the agreement include: Temperature goal. The PA defines a collective, long-term objective to hold the GHG-induced increase in temperature to well below 2o Celsius (C) and to pursue efforts to limit the temperature increase to 1.5o C above the pre-industrial level. A periodic "global stocktake" will assess progress toward the goals. Single GHG mitigation framework. The PA establishes a process, with a ratchet mechanism in five-year increments, for all countries to set and achieve GHG emission mitigation pledges until the long-term goal is met. For the first time under the UNFCCC, all Parties participate in a common framework with common guidance, though some Parties are allowed flexibility in line with their capacities. This largely supersedes the bifurcated mitigation obligations of developed and developing countries that held the negotiations in often-adversarial stasis for many years. Accountability framework. To promote compliance, the PA balances accountability to build and maintain trust (if not certainty) with the potential for public and international pressure ("name-and-shame"). Also, the PA establishes a compliance mechanism that will be expert-based and facilitative rather than punitive. Many Parties and observers will closely monitor the effectiveness of this strategy. Adaptation. The PA also requires "as appropriate" that Parties prepare and communicate their plans to adapt to climate change. Adaptation communications will be recorded in a public registry. Collective financial obligation. The PA reiterates the collective obligation in the UNFCCC for developed country Parties to provide financial resources—public and private—to assist developing country Parties with mitigation and adaptation efforts. It urges scaling up of financing. The Parties agreed to set, prior to their 2025 meeting, a new collective quantified goal for mobilizing financial resources of not less than $100 billion annually to assist developing country Parties. Obama Administration officials stated that the PA is not a treaty requiring Senate advice and consent to ratification. President Obama signed an instrument of acceptance on behalf of the United States on August 29, 2016, without submitting it to Congress. In 2015, Members of the 114th Congress introduced several resolutions (e.g., S.Res. 329, S.Res. 290, H.Res. 544, S.Con.Res. 25) to express the sense that the PA should be submitted for the advice and consent of the Senate. Additionally, resolutions were introduced in the House (H.Con.Res. 97, H.Con.Res. 105,H.Res. 218) to oppose the PA or set conditions on its signature or ratification by the United States. None received further action. In the 115th Congress, a number of resolutions have also been introduced to oppose or support U.S. participation in the PA (e.g., H.Con.Res. 55, H.Res. 85, H.Res. 390, S.Con.Res. 17). Beyond the Senate's role in giving advice and consent to a treaty, Congress continues to exercise its powers through authorizations and appropriations for related federal actions. Additionally, numerous issues may attract congressional oversight, such as: procedures for withdrawal; foreign policy, technological, and economic implications of withdrawal; possible objectives and provisions of renegotiation of the PA or of a new "transaction" for cooperation internationally; international rules and guidance to carry out the PA; financial contributions and uses of finances mobilized; and assessment of the effectiveness of other Parties' efforts.

<1. Introduction> Benefits and services for low-income families have received increased attention from policymakers in recent years. This is due in part to elevated federal spending in the wake of the deep recession of 2007-2009. The federal government, sometimes in partnership with state governments and local entities, provides an array of economic assistance to persons and families with low income. There are various ways to identify these "need-tested" programs and the individuals who are eligible for and served by them. However, it is more challenging to identify how these programs interact with each other and how they cumulatively provide benefits to families and individuals. There is no single data source that identifies all need-tested benefits for which individuals and families are eligible or those they actually receive. One way to analyze the interaction of need-tested benefits is to look at case studies, which create hypothetical families and present a suite of benefits and services for which those families would be eligible under program rules. For example, a Congressional Research Service (CRS) analysis estimated that in 2014, a single mother of two children, working all year, full-time at the minimum wage could receive almost $9,000 in combined benefits from the Earned Income Tax Credit (EITC), the Additional Child Tax Credit (ACTC), and the Supplemental Nutrition Assistance Program (SNAP). However, such case study analyses are limited because their hypothetical families do not reflect the wide variation in characteristics and circumstances of actual families. They typically assume that families receive all the benefits for which they are eligible, which is not the case in reality. Further, they sometimes assume that families receive benefits for a full year, though many families are financially needy for only part of a year and receive benefits for only some months as their circumstances change. This report takes a different approach to exploring the interaction of need-tested benefits. It uses data collected by the U.S. Census Bureau, along with microsimulation modeling, to explore individuals' and families' eligibility and benefit receipt. The report uses the same data source as, and methods similar to, a Government Accountability Office (GAO) report released in 2015 (U.S. Government Accountability Office, Federal Low-Income Programs, Multiple Programs Target Diverse Populations and Needs , GAO 15-516, July 2015). The GAO report describes federal programs for people with low incomes, examines selected household characteristics of people in poverty, examines the poverty status and household characteristics of selected programs' recipients, and discusses the research on how selected programs may affect incentives to work. This report complements the information in the GAO report, providing further analysis of benefit receipt from specific need-tested programs. Specifically, this report provides information on eligibility and benefit receipt among individuals and households in 2012 from nine major need-tested programs for which adequate data were available, listed in the order of the amount of their FY2012 federal obligations: Supplemental Nutrition Assistance Program (SNAP); Earned Income Tax Credit (EITC); Supplemental Security Income (SSI); housing assistance provided through the Section 8 Housing Choice Voucher program, the public housing program, and the project-based rental assistance program (collectively referred to as "housing assistance"); Additional Child Tax Credit (ACTC); special supplemental nutrition program for Women, Infants, and Children (WIC); cash assistance from the Temporary Assistance for Needy Families (TANF) block grant; Child Care and Development Fund (CCDF); and Low-Income Home Energy Assistance Program (LIHEAP). This report is organized around and addresses six questions that may help inform policy discussions about the future of selected need-tested benefits. The six questions and key findings related to them are presented below in Table 1 . <2. Data and Caveats> While the federal government supports a number of need-tested benefit programs, uniform data on eligibility, participation, and benefits across programs are generally available only from household surveys. However, respondents from those surveys tend to under-report receipt of need-tested assistance. Thus, this report combines information from a Census household survey with estimates from a microsimulation model, the third version of the Transfer Income Model (TRIM3). The need-tested benefit programs examined in this report are limited to nine cash or in-kind transfer programs and tax provisions for which eligibility, benefit receipt, and benefit amounts are estimated by TRIM3. <2.1. Estimates from the Transfer Income Model Version 3 (TRIM3)> TRIM3 is a microsimulation model for government benefit receipt that is primarily funded by the U.S. Department of Health and Human Services (HHS) and maintained at the Urban Institute. TRIM3 combines administrative data on program rules with survey data from the U.S. Census Bureau's Annual Social and Economic Supplement (ASEC) to the Current Population Survey. Simulations conducted with TRIM3 attempt to correct for some limitations of the underlying survey data, such as under-reporting of certain benefits in the ASEC. TRIM3 uses data from the ASEC to estimate the number of people eligible for benefits from selected need-tested programs. For most programs, TRIM3 estimates actual benefit receipt based on the number of people federal agencies report as receiving benefits and the probabilities that an eligible person receives benefits. An exception to this general method is the refundable tax credits. The information on the ASEC identifies fewer tax filers eligible for the EITC and the ACTC than claimed these credits on their federal income tax returns. Therefore, the TRIM3 estimates of people receiving these tax credits are set equal to the number that are identified as eligible for them on the ASEC. Thus, in these estimates there are fewer tax filers and there is a shortfall in aggregate credits for the EITC and the ACTC compared to what is claimed on federal tax returns. TRIM3, like all models, is subject to its own limitations. Appendix A provides detailed information on the methodology used to develop the estimates in this report, including data limitations and key assumptions. The estimates presented in this report were derived using ASEC and TRIM3 data for calendar year 2012. Readers should be aware that estimates in this report may not match administrative data for several reasons, including the following: The estimates in this report reflect annual measures of income, program participation, and benefit amounts. Thus, the estimates may not match administrative data, which commonly report average monthly, rather than annual, participation and benefit amounts. The estimates measure poverty using the Supplemental Poverty Measure (SPM), rather than the official poverty measures. The SPM differs from the official poverty measures in several ways, including its use of a broader definition of the family unit. It also measures net income available to meet a family's non-medical needs. From gross income (including the value of government "in-kind" benefits), the SPM subtracts taxes paid, work expenses, child support payments for children outside the household, and out-of-pocket medical expenses. The estimates present benefit amounts using a common family unit. TRIM3 estimates benefits based on the filing unit used in each program and, generally, assigns a per-person benefit amount to members of that filing unit or a benefit amount to the head of the filing unit. For this analysis, persons and their benefits are grouped into a family unit based on that used for the SPM. This single definition of "family" allows analysis of eligibility and benefit receipt across all programs in a comparable manner, which would otherwise not be possible. <2.2. The "Value" of Benefits to Individuals and Families> Readers should also be aware that the "benefit amounts" in this report reflect the estimated dollar value of aid received by individuals and families. However, a large share of need-tested benefits is paid in forms other than cash (e.g., medical, food, housing, and child care cost assistance). In theory, a dollar in benefits received as cash is worth a dollar. A recipient who receives cash assistance can choose what goods and services to purchase with that dollar or whether to save all or part of it. On the other hand, a recipient may value a dollar received in noncash form (medical, food, or housing assistance) differently from a dollar in cash. This is because noncash benefits are not "fungible" they must be used for a particular type of good or service. Policy analysts have developed several different methods for determining the value of noncash benefits such as medical, food, and housing assistance. However, it is beyond the scope of this report to analyze the relative value of such benefits to any given family or to assess whether receipt of such benefits measurably improves family well-being. <2.3. The Special Case of Medicaid> Medicaid is the largest need-tested program in terms of federal spending. The $270.9 billion spent on Medicaid in FY2012 exceeded the total amount of federal spending for all of the nonmedical need-tested programs examined in this report. Medicaid is an entitlement program that finances the delivery of primary and acute care health services, as well as long-term services and supports. Medicaid is not included in the central analysis of this report. Rather, it is discussed separately (in Appendix B ) for several reasons: TRIM3 did not include estimates of Medicaid enrollment and the value of benefits for 2012. This report focuses on receipt of need-tested benefits in 2012. However, the Affordable Care Act (ACA) made substantial changes to Medicaid eligibility, which became effective in 2014. Thus, the picture of Medicaid today and in future years might be significantly different from that of 2012. While there are conceptual and technical issues in estimating the "value" to families and individuals of all noncash benefits (including food and housing), the valuation of health care benefits is particularly challenging. Because of these issues, topics discussed in this report, such as eligible population, enrollees, and percentage of eligible individuals actually enrolled in a program, are addressed separately for Medicaid in Appendix B . <3. Programs Examined in this Report> This report examines benefit receipt from nine major need-tested benefit programs; they are listed in the report's introduction and discussed in more detail in Table 2 , below. In some cases, the report considers only a portion of the benefits provided under a program (e.g., only the refundable portion of the child tax credit (known as the ACTC), or only the cash assistance portion of TANF). In other cases, several programs are aggregated and treated as one program (e.g., housing assistance). The nine programs are not necessarily the largest need-tested benefit programs, either in terms of spending or individuals served. As discussed above, the largest need-tested benefit program, Medicaid, is not included in this analysis but is examined separately in Appendix B . Nor do these programs represent the full breadth of assistance potentially available to low-income individuals and families. (For a more comprehensive list, see CRS Report R43863, Federal Benefits and Services for People with Low Income: Programs and Spending, FY2008-FY2013 , by [author name scrubbed] and [author name scrubbed].) Rather, as discussed previously, they represent a subset of need-tested benefit programs those for which sufficient data are available in TRIM3. <3.1. Program Characteristics> Though all nine programs examined here provide benefits based on individual or family financial need, they differ considerably in terms of who is eligible for assistance, the type of assistance provided, the conditions placed on receipt of benefits, and how benefits are funded. These differences in program characteristics are important to consider, as they help to explain some of the findings explored later in the report. Table 2 presents basic characteristics of each of the programs examined in this report, including the following: Income eligibility. Basing eligibility on income and other financial need criteria, such as low levels of assets, is the defining characteristic of a need-tested program. All of the programs examined in this report use explicit income eligibility criteria that individuals, families, or households must meet, but the specific levels and measures of income vary. Some measures are uniform throughout the country (e.g., those in the tax code); others vary by geography and/or are based on relative measures (e.g., state or local median income). Further, some programs use alternative criteria that allow specified groups or categories of people to qualify automatically without having to meet an individual income test. Thus, eligibility for these programs is not necessarily tied to being "poor" by official measures, and many programs consider families with income above the poverty level to be eligible. For example, in the case of WIC the income eligibility threshold is 185% of the poverty line, and for housing assistance it is as high as 331% of poverty in Washington, DC. TANF income eligibility thresholds are set by states, although families typically must have incomes below poverty (in fact, incomes must be less than half of the poverty level in many states) to receive TANF cash assistance. P opulations eligible . For many programs, there are additional requirements beyond income eligibility rules, so that an applicant must be both income-eligible and a member of the program's target population. Of the nine programs considered in this report, four (the ACTC, TANF, CCDF, and WIC) would only be available for families with children (for WIC, and sometimes TANF, this includes families expecting a child). That is, families without a child are ineligible for benefits under these programs regardless of their income. SSI is restricted to aged, blind, or disabled individuals (including children). Other requirements . Some benefits are tied specifically to workers. For example, the EITC and the ACTC are available only to workers with earnings and their families. To receive child care subsidies from the CCDF, parents must be working or in training, in addition to meeting income eligibility criteria. Some programs also impose behavioral requirements as a condition of eligibility. For example, recipients of TANF cash assistance must comply with work and training requirements and able-bodied adults without dependent children must comply with work and training requirements to receive SNAP benefits for more than a limited time. Form of assistance. Some of the programs provide cash to families, such as the refundable tax credits, TANF, and SSI. Others provide in-kind benefits to help families meet their basic needs, such as housing and food. Child care assistance is often considered a work support, providing full or partial reimbursement for an expense associated with employment. Funding category. Another important way in which the programs vary is how they are funded. Some receive mandatory funding, some receive discretionary funding, and one (CCDF) receives both. Mandatory funding may be structured as open-ended or capped. In an open-ended program, no pre-determined ceiling is imposed on federal expenditures; instead, federal payments are made to all eligible beneficiaries for eligible expenditures as defined in law. (SSI is an example of an open-ended mandatory program.) In a capped program, the authorizing law limits the total amount of federal spending that can occur. (TANF is an example of a capped mandatory program.) The amount of federal funding for discretionary programs, on the other hand, is determined by Congress through the annual appropriations process. It is important to note that capped mandatory and discretionary programs may not have sufficient funding to serve all eligible individuals. Refundable tax credits, though administered through the tax code, effectively are financed like open-ended mandatory programs. Size. The programs also vary significantly by size, which may be due in part to a program's eligibility rules or funding category. In terms of federal obligations, SNAP is the largest of the programs considered in this report (accounting for 30% of the combined $261.5 billion in total obligations across all nine programs in FY2012) and LIHEAP is the smallest (accounting for just over 1% of the total obligations). However, the programs rank differently when measuring size by the number of individual recipients, with the largest program being the EITC and the smallest being CCDF. (Note, however, that child care recipients in this report reflect only the children served, not the parents.) Table 2 orders programs based on their size in terms of federal dollars spent on them. <4. How Many People Are Eligible for Need-Tested Benefits, and How Many Actually Receive Them?> The selected need-tested programs examined in this report target different populations and have different eligibility criteria. Some entitle all eligible individuals to benefits; others have limited funding and can only serve a limited number of eligible individuals and families. This section discusses how these rules translated to the population in 2012, quantifying how many individuals were eligible for these programs and how many actually received benefits. <4.1. Eligibility for Selected Need-Tested Benefits> In 2012, the total number of people who were estimated to be eligible for at least one of the need-tested programs examined in this report was 135 million, or more than 4 in 10 persons among the nation's non-institutionalized population. These 135 million people resided in 58 million families. Figure 1 shows the number eligible for any of the nine programs, as well as the number eligible for each of the nine programs. The programs are ranked by the size of their eligible populations. The SNAP program has the largest number of people eligible for benefits. In 2012, an estimated total of 83.3 million were eligible, representing 27% of the total non-institutionalized population. Like several other programs (e.g., LIHEAP, housing assistance), SNAP was available in 2012 to people in eligible households of all family types (aged, disabled, families with children, and childless adults). By contrast, TANF and child care are limited to low-income families with children. WIC is limited to low-income families with a pregnant woman or a young child. SSI is restricted to aged, blind, or disabled individuals. The two tax credits (EITC and ACTC) are administered through a universal system (the federal income tax system) and primarily benefit families with children and earnings; the number of people shown as eligible for the EITC includes childless workers who receive a relatively small benefit, and the ACTC is restricted to families with children. <4.2. Receipt of Selected Need-Tested Benefits> Not all those eligible for a need-tested benefit actually receive one. In 2012, the total number of people who were estimated to have received at least one of the need-tested benefits examined in this report totaled 106 million, out of 135 million estimated to be eligible. The 106 million recipients resided in 42 million families. Figure 2 shows estimates of the number of people who actually received benefits in 2012, both overall and for each of the nine programs. Programs are ranked by the number of recipients. As discussed in " Estimates from the Transfer Income Model Version 3 (TRIM3) ," because of limitations of the data from the ASEC, TRIM3 estimates the number of people receiving benefits from the two refundable tax credits as being equal to the number of people estimated to be eligible for these benefits. For all the other programs, TRIM3 estimates the number of people receiving benefits as a proportion of those who were estimated to be eligible (discussed in the next section). Thus, programs are ranked differently than in Figure 1 , programs varied in the percentage of those eligible who actually received benefits. The EITC was the most widely received benefit in 2012, with an estimated 62.9 million persons (representing 20% of the total U.S. population) benefiting from the refundable tax credit. SNAP was the second largest benefit in terms of recipient population, with an estimated 58 million persons (19% of the total U.S. population) receiving the benefit at some time during 2012. The other refundable tax credit, the ACTC, was the third most widely received benefit in 2012. The number of recipients for each of the remaining programs was well below that of these top three programs. <4.3. Benefit Receipt among Those Eligible> Some programs provide benefits to a large share of their eligible populations, while others serve a relatively small portion of those eligible. Figure 3 shows the estimated percentage of the eligible population served in 2012 by seven of the programs discussed in this report. The two refundable tax credits are not shown as their estimated recipient populations are assumed to be identical to their estimated eligible populations. Programs are ranked by their percentage of eligible populations receiving benefits. Three of the seven programs had relatively high rates of receipt among their eligible populations: the two nutrition programs (SNAP and WIC) and SSI. It should be noted that estimating the eligible population for SSI is somewhat difficult. Estimates of the SSI-eligible population are based, in part, on self-reported information about impairments, functional limitations, and health status. Such information is subjective in nature, because the data reflect the respondent's (or household head's) concept of "disability" at the time the survey was administered. In contrast, in order to actually receive SSI, an adult claimant must be certified by an independent examiner that he or she is unable to perform substantial work due to a severe physical or mental impairment that is expected to last for at least one year or result in death. Although needy individuals who report having a work-limiting disability are potentially eligible for SSI, not all of them would ultimately qualify for benefits if they applied, because their impairment may not meet the program's statutory standards. SNAP was estimated to provide benefits to about 7 in 10 eligible persons in 2012. WIC and SSI were estimated to provide benefits to about two-thirds of eligible persons in that year. The rate of receipt for the remaining four programs was much lower. For example, TANF served about 3 in 10 eligible persons in 2012, and the rate of receipt for housing, LIHEAP, and child care subsidies was even lower. A common feature among these four programs is that funding for each is capped, and states (and localities, in the case of housing) must sometimes ration aid, using mechanisms such as waiting lists for housing and child care benefits. Federal law also explicitly states that TANF is not to be considered an entitlement to individuals. In addition, TANF has work requirements and time limits that might deter some individuals from applying for aid. However, lack of entitlement status does not necessarily mean that a program serves a small number of those eligible. WIC is technically not an entitlement, but it received enough federal funding to serve all those that sought its benefits. <5. What Family Characteristics Are Associated with Receipt of Need-Tested Benefits?> A substantial minority of all individuals and families benefited from at least one of the selected need-tested programs in 2012. However, as discussed earlier in " Programs Examined in this Report ," these programs have different income eligibility rules and provisions that target benefits toward certain populations, such as families with children or the aged and disabled. Thus, some types of families may be more likely to receive need-tested aid than others. <5.1. Pre-welfare Income> As would be expected, families with lower incomes before receipt of need-tested benefits had a greater likelihood of receiving them than families with higher incomes in 2012. However, not all people in poor families receive a need-tested benefit, and conversely, not all need-tested benefits go to people who are poor. This section examines benefit receipt for families based on the ratio of their pre-welfare incomes to poverty thresholds. (See Table 3 , below, for an explanation of "pre-welfare" income.) Figure 4 shows the estimated percentages of families that received any need-tested assistance by their pre-welfare income-to-poverty ratio for 2012. The figure shows that families with pre-welfare incomes below their poverty thresholds (pre-welfare income-to-poverty ratios of 0% to 49% and 50% to 99%) were highly likely to receive a need-tested benefit, with about 8 out of 10 such families estimated as receiving aid. However, families with pre-welfare incomes above the poverty thresholds also received benefits. A little more than half (53.7%) of all families with pre-welfare incomes of between 100% and 150% of their poverty threshold received need-tested benefits, and about 3 in 10 families with pre-welfare incomes between 150% and 200% of their poverty thresholds also were estimated to receive benefits. Table 4 shows the estimated percentage of families, by their pre-welfare income-to-poverty ratio, who received benefits from each of the nine programs examined in this report in 2012. The three most widely received benefits were the two refundable tax credits (ACTC and EITC) and SNAP. SNAP was more widely received than any other benefit for families with pre-welfare incomes below the poverty thresholds. For families with incomes above the poverty thresholds, the most common benefits were the EITC and/or the ACTC. <5.2. Family Characteristics> Some of the programs examined in this report base eligibility on low income alone and do not restrict benefits by family type. Other programs restrict their benefits to families or individuals of a certain type, such as families with children or with aged persons or individuals with disabilities. These restrictions generally are based on societal expectations regarding work participation . According to economic theory, provision of government benefits without a tie to work reduces incentives to work. Empirical studies have generally supported that government benefits that are not tied to work have an effect on reducing work, though studies often differ about whether that effect was large or small. Historically, the aged and individuals with disabilities have not been expected to work. Thus, concerns about providing individuals in these two groups with basic needs have tended to outweigh concerns about the work disincentive inherent in government benefits without work requirements. Social Security retirement and disability benefits are also available to the aged and disabled, based on sufficient past work in covered employment and meeting age or disability criterion. Income from Social Security may be sufficient to raise family incomes above the eligibility thresholds used by need-tested programs. Expectations about work are often at the center of debates about aid to families with able-bodied, non-aged adults. As will be discussed in this section, most aid to such families goes to those with children. The Social Security Act of 1935 established Aid to Dependent Children, later called Aid to Families with Dependent Children (AFDC), with the explicit goal of providing single mothers with assistance so they did not have to work. But given the changing role of women in the workforce, particularly since the 1960s, more recent policies have sought both to require and support work for single mothers. These policies eventually resulted in large expansions of refundable tax credits for families with children, paid only to families with earnings; subsidized child care for working parents; and the replacement of AFDC with TANF in the 1990s. In order to examine benefit receipt by the presence of aged or disabled individuals, children, and earners in the family, for this report CRS classified all families as being in one of six groups: (1) families with an aged member (aged 65 or older); (2) families with an individual with disabilities (3) families with children and no earners; (4) families with children and earners; (5) other families, without a member who was aged, disabled, or a child, with no earners; and (6) other families, without a member who was aged, disabled, or a child, with earners. The classification of families is sequential; for example, if a family has both an aged member and an individual with disabilities it is assigned to the category of a family with an aged member. Only those families without an aged member are considered when the next assignment is made, which would be if the family had an individual with disabilities. Families can be assigned only to one category for the purpose of this classification. However, some families meet the criteria for more than one category. (For a discussion of families that could be classified in more than one category, see Appendix C .) In 2012, there were an estimated 128.8 million "families" identified under the Census Bureau's SPM definition of family. Single persons were classified as a family of one for this purpose. Table 6 shows the number and percentage of families in each category. It shows, for example, that 32.5 million families (25.2% of all families) had an aged member in 2012. Families without an aged member that included an individual with disabilities totaled an estimated 18.6 million (14.5% of all families). Families without an aged person or individual with disabilities were further divided into four groups based on whether they contained at least one child and whether an adult in the family had worked at all during the year. Most of these families had at least one adult worker in 2012. Only an estimated 0.9 million families (0.7% of all families) with children had no adult worker, and 3.5 million families (2.7% of all families) of non-aged, non-disabled adults without children had no adult worker. The table also shows the relative pre-welfare poverty status for families in each category. The poorest category was families with a child and no adult worker. In 2012, 92.3% of all such families were pre-welfare poor. The least poor group was non-disabled childless adults (without an aged member or individual with disabilities) who had at least one worker. The pre-welfare poverty rates for families with an aged member and those without an aged member or individual with disabilities that had children and an adult worker were fairly similar (19.4% for the former, 19.9% for the latter). Families without an aged member that had an individual with disabilities had a relatively high overall pre-welfare poverty rate (42.2%), with 25.1% of these families having pre-welfare incomes of less than 50% of the poverty line. Figure 5 shows the estimated rate of receipt for need-tested benefits by family category in 2012. These rates apply to families by category at all income levels. The highest rates of benefit receipt occurred among families with children with no workers (91.6% received aid) and among families with a disabled member (60.4% received aid). Of families with children with workers, 44.6% received need-tested aid in 2012. It should be noted that families "with workers" represent those with any adult in the family working at any time during the year. About 1 in 4 aged persons received a need-tested benefit in 2012. Families that included a worker and had no members who were aged, disabled, or children had the lowest rate of need-tested benefit receipt among all the family categories shown in Figure 5 , 16.1%. Among families with no workers and no members who were aged, disabled, or children, 37.5% received a need-tested benefit. The differences in benefit receipt among family categories reflect both different economic circumstances and differences in the programs for which each category of family is eligible. Moreover, there are differences in the "take-up" rate of benefits (the rate at which those who are eligible for benefits actually receive them) among eligible categories of families. For example, previous research has indicated that the aged tend to take up benefits at a lower rate than other population groups. As discussed earlier, some categories of families are ineligible for certain benefits, as reflected in the different rate of receipt by families in different categories of each of the nine programs examined in this report. Table 7 shows the estimated percentage of families that received benefits in each of the nine programs by family category in 2012. It shows that SNAP was the most widely received benefit for all family categories with the exception of families with children with workers. A greater percentage of families in that category received benefits from the two refundable tax credits (EITC and ACTC) than received SNAP. The table also shows the effect of policies that restrict receipt of the ACTC, TANF, WIC, and child care subsidies to families with children. (WIC and, at the option of a state TANF, can also be received by pregnant women, which explains the small number recipients from these programs in the childless adult categories.) As discussed above, families with an aged or disabled member may also have children, so some of these families received benefits from the programs restricted to families with children. Figure 6 shows estimated total spending for the selected need-tested benefits by family category in 2012. The two family categories accounting for the largest share of spending were families with children and families with a member with disabilities. Most families with children had workers, and families with children with workers accounted for an estimated $91.6 billion, or 38% of all spending for the selected need-tested assistance. Even though almost 9 in 10 families with children without workers also received need-tested benefits, there were relatively few such families. Need-tested spending for families with children with no worker was $9.4 billion, or about 4% of all spending for the selected need-tested assistance. Families with individuals with disabilities accounted for an estimated $89.5 billion, or 37% of the selected need-tested spending in 2012. On the other hand, families with an aged member accounted for $38.5 billion, or 15.7% of the selected need-tested spending. Families without an aged, disabled, or child member accounted for a small share of need-tested spending. Such families with workers accounted for $9.1 billion; such families without workers accounted for $3.3 billion. The figure also shows spending by category of benefit. A large share of spending for families with children and earners is on refundable tax credits. In 2012, refundable tax credits accounted for 50% of the selected need-tested spending for families with children and earners. These tax credits were also prominent in aid to families with a disabled member. Such families often have earners sometimes the disabled person and sometimes other adults. These families also sometimes have children. As shown in the figure, tax credits are relatively small for families with earnings that do not have an aged, disabled, or child member. Although 10% of these families receive the EITC, the EITC benefits for "childless" workers are relatively small. The bulk of EITC benefits go to families with children. In addition to pre-welfare income and family type two factors explicitly taken into account in determining eligibility for many need-tested programs the rate of need-tested benefit receipt varies by characteristics commonly associated with economic disadvantage, specifically job attachment, educational attainment, and family structure. These factors are discussed in a later section of this report, " What Family Characteristics Are Associated with Receipt of Relatively Large Amounts of Need-Tested Aid? " <6. How Much Do Families Typically Receive in Benefits?> As discussed earlier, the selected programs examined in this report (which exclude the large Medicaid program) provide benefits to more than 1 in 3 persons in the population residing in 42 million families. How does this translate in terms of dollars received ? In 2012, the annual median benefit to families who received at least one need-tested benefit was estimated to be $3,300 (i.e., half the families who received at least $1 in aid received an amount less than or equal to $3,300, the other half received more than $3,300). However, the median does not necessarily reflect the circumstances of most families receiving need-tested aid. Figure 7 shows the estimated number of families receiving selected need-tested benefits by the total dollar amount of annual benefits received from all programs in 2012. The figure shows that many families received a relatively small benefit during the year more than 10 million families received less than $1,000 in benefits. This represents about 1 in 4 families that received need-tested benefits. As noted above, half of all families received less than $3,300 during the year. Relatively few families received large benefits. The figure shows that as the annual benefit amount per family increased, the number of families receiving benefits decreased. The distribution of annual benefits among families in 2012 is what is known as a "skewed" distribution. It is asymmetrical, with many families bunched at one end of the distribution in this case at the lower dollar amounts. However, a few families tend to receive high benefit amounts. A characteristic of this skewed distribution is that the relatively few families that receive high annual need-tested benefit amounts account for a disproportionately large share of all spending. For the purposes of this report, the benefit total received by the 25% of families that received the highest amounts $9,027 or more in 2012 is used as the high benefit amount concentrated among relatively few families. Figure 8 examines total spending for the selected need-tested programs by the amount of annual benefits received by families. It shows that 11% of all spending on the selected need-tested benefits was for families with annual benefits of less than $3,300 (the median). This means that the 50% of all families with annual benefits less than $3,300 accounted for 11% of all spending. On the other hand, families with annual benefits of $9,027 or more accounted for 64% of all spending. <7. Do Families Typically Receive Benefits From One Program or From Multiple Programs?> An earlier section of this report (" How Many People Are Eligible for Need-Tested Benefits, and How Many Actually Receive Them? ") discussed the extent to which individuals received benefits from any and each of the need-tested programs examined in this report. Of additional interest is the extent to which benefits were received from one program only or from more than one. Table 8 shows families that received at least one need-tested benefit in 2012, by the number of programs from which they were estimated to receive benefits and certain benefit combinations. The table shows that an estimated 4 in 10 families that received at least one need-tested benefit received benefits from only one program. The remainder, or a majority of families that received at least one benefit, did so from more than one program. In 2012, an estimated 14% of those who received any benefit received only SNAP and 13% received only the EITC. Other program benefits were received alone less frequently. Among families that received benefits from two programs, the most common combination was simultaneous receipt of the two refundable tax credits, the EITC and the ACTC. The most common combination of three programs was the two tax credits together with SNAP. As would be expected, families that received benefits from more programs tended to receive higher total annual benefits. Figure 9 shows the estimated median total annual benefits for families by the number of programs from which they received benefits. The median annual benefit was $800 for families that received aid from only one program, $3,595 for families that received aid from two programs, and the amounts rise for each additional program. For families that received benefits from five or more programs, the median benefit was $17,180 for the year. Table 9 shows the estimated median benefits received by families and the estimated percentage of families receiving benefits from multiple programs in 2012, by their pre-welfare income-to-poverty ratios. The table shows that median benefits were higher for families with lower pre-welfare income relative to need. The median benefit for the poorest families (pre-welfare incomes less than 50% of the poverty threshold) was $9,262, and fell to $1,000 for the highest income group (pre-welfare incomes of 300% of poverty or more). Additionally, families with lower incomes were more likely to receive benefits from more than one program, while a majority of families in the higher income groups (pre-welfare incomes of 200% of poverty or higher) received benefits from only one program. <8. What Family Characteristics Are Associated with Receipt of Relatively Large Amounts of Need-Tested Aid?> About one-third of all persons were estimated to receive at least some benefit from the selected need-tested programs in 2012, and the rate of benefit receipt among some groups such as those in families with an individual with disabilities or a family with a child was even higher. The median annual benefit for those who received any benefit in 2012 was $3,300, although some families received substantially larger amounts. As discussed earlier, 25% of all families that received any aid received benefits of $9,027 or more. (The $9,027 amount was the 75 th percentile 75% of families received less than that and 25% of families received that or more.) These families, while accounting for 25% of all families receiving benefits, accounted for two-thirds of the selected benefit spending. This section examines the question of how these families differ from families that received less in benefits. <8.1. Pre-welfare Income-to-Poverty Ratios> The rate of receipt of any need-tested aid was related to both a family's pre-welfare income and its family type. Likewise, the rate of receipt of relatively large amounts of need-tested aid ($9,027 or more) was also related to these characteristics. Figure 10 shows the estimated rate of receipt of any need-tested aid and receipt of aid totaling $9,027 (75 th percentile) or more, by pre-welfare income in 2012. It shows that lower income groups were more likely than higher income groups to receive either any benefits or benefits at or above $9,027 for the year. However, 53.7% of families with pre-welfare incomes just above the poverty line (pre-welfare incomes of 100% to 149% of poverty) received some benefit, while only 5.8% of families in that income category received $9,027 or more. Families who received $9,027 or more in annual benefits tended to be concentrated among the lowest income groups in 2012. Likewise, total spending on benefits also tended to be concentrated among the lowest income groups. Table 10 shows the estimated composition of all families, families receiving any of the selected need-tested benefits, and families that received $9,027 or more in annual benefits (i.e., those at or above the 75 th percentile), by their pre-welfare income-to-poverty ratios. It also shows total spending on benefits by pre-welfare income-to-poverty ratios. Families with pre-welfare incomes below the poverty line accounted for 55% of all families who received any of the selected need-tested benefits. Thus, 45% of all families who received a need-tested benefit had pre-welfare incomes above the poverty line. However, examining just those families who received $9,027 or more, 85.8% had pre-welfare incomes below the poverty line and 51.3% had pre-welfare incomes that were less than half of the poverty line. Total spending was also concentrated among lower-income families. While 55% of families who received any benefits had pre-welfare incomes below the poverty line, these same families accounted for 76% of all benefit spending. <8.2. Family Characteristics> Figure 11 shows the estimated rate of receipt of any selected need-tested benefit and benefit amounts at or above the 75 th percentile, by family type in 2012. The three family types with the highest rates of benefit receipt families with children with workers, families with children without workers, and families with an individual with disabilities also were the most likely to receive benefit amounts at or above the 75 th percentile. An estimated 44.4% of families with children without workers received annual benefits equal to or in excess of $9,027, while 13% of families with children with workers received that level of benefits. Almost 1 in 4 families (23.3%) with an individual with disabilities had annual benefits at or above $9,027. Table 11 shows the estimated composition of all families, families receiving any need-tested benefit, and families that received $9,027 or more in benefits during 2012, by family type. It also includes the percentage of total spending accounted for by each family type. The table shows that families receiving benefits at or above the 75 th percentile are more concentrated in the categories of families with children and families containing an individual with disabilities. Families with children and those containing a member with disabilities accounted for more than 8 in 10 (83.2%) of the families that received benefits at or above $9,027 during the year and almost 8 in 10 (78.1%) of all selected need-tested dollars. Families with an aged individual accounted for 14.8% of all families with benefits at or above the 75 th percentile. Families without an aged person, an individual with disabilities, or a child accounted for few (2.1%) of all families receiving benefits above the 75 th percentile and for about 6% of all selected need-tested spending. Benefit receipt rates including those at or above the 75 th percentile can also be examined relative to characteristics often associated with economic well-being, such as job attachment, educational attainment, and family structure. Because families who have an individual with disabilities and families with children collectively account for the largest share of all families that receive relatively large benefits and also account for a large share of total spending they are the focus in the next sections of this report of detailed examination of characteristics associated with economic well-being. <8.2.1. Families with an Individual with Disabilities> Historically, individuals with disabilities have been viewed as a population in need of assistance because their impairments often limit them from working enough to be economically self-sufficient. Need-tested benefits provide an income supplement for working-age individuals with disabilities who are unable to meet their basic needs for food, clothing, and shelter. For families with a severely disabled child, need-tested benefits are used to defray costs associated with taking care of someone with a severe disability. Disability-related costs can include (1) out-of-pocket medical expenses not covered by Medicaid or private health insurance and (2) lost wages of family members who reduce their attachment to the workforce in order to provide caregiving services for individuals with disabilities. In 2012, an estimated 6 in 10 families who had an individual with disabilities received at least one of the selected need-tested benefits. Families with an individual with disabilities represented 41.8% of all families who received benefits at or above $9,027 a year and accounted for 36.7% of all spending from the selected need-tested programs. Among families with an individual with disabilities that received a selected need-tested benefit, the median benefit amount was $6,236 in 2012, higher than the median benefit for all families that received aid. Thus, these families represent a relatively expensive group, even without taking into account medical costs. Table 12 shows selected characteristics of families with individuals with disabilities and their estimated rate of receipt of any selected need-tested benefit and of benefits at or above the 75 th percentile. Family characteristics are typically used in analyses of need-based benefits because most programs consider family rather than individual circumstances. Thus, the indicator used in the table (e.g., work attachment) might not reflect the circumstances of the individual with disabilities, but might reflect those of another family member. Overall, 60% of families with an individual with disabilities received some need-tested benefits and 23.3% received benefits of $9,027 or more in 2012. These are relatively high rates of receipt, and occur even for those families that do not have characteristics typically associated with economic disadvantage. Only the families with the highest pre-welfare income relative to poverty had low rates of receipt. A substantial share of this population also received benefits at or above the 75 th percentile. The table shows one characteristic specific to the individual with disabilities: their age. It demonstrates that rates of receipt of need-tested benefits decline somewhat with increases in the age of a disabled person. One possible reason for the higher incidence of need-tested benefit receipt among younger individuals with disabilities is that they often lack a sufficient work history to qualify for social insurance benefits such as Social Security. As noted earlier, Social Security income may disqualify an individual or family from receiving a need-tested benefit. Another potential reason is that later onset of disability might allow a family or individual to build up assets and some savings, which also might disqualify a family or individual from need-tested aid. Table 13 shows the estimated age composition of all individuals with disabilities, those who received benefits from the selected need-tested programs, and those who received Social Security Disability Insurance benefits (SSDI). SSDI coverage is earned through work in covered employment, and provides cash benefits to workers who become disabled after working a sufficient period of time. Younger individuals with disabilities are more likely to receive need-tested aid than older individuals with disabilities ( Table 12 ); thus, younger individuals with disabilities disproportionately received need-tested benefits. In 2012, an estimated 14.2% of individuals with disabilities who received need-tested benefits were children (under age 18) and 6 out of 10 individuals with disabilities who received benefits were under age 50. In contrast, those who were reported on the ASEC as receiving SSDI payments (which are not need-tested) tended to be older. In 2012, an estimated 63% of SSDI recipients identified on the ASEC were aged 50 and older. Some disabilities are present at birth, such as intellectual and developmental disabilities. On the other hand, some disabilities result from accident, injury, or a chronic disabling condition such as diabetes. Severe mental illness might also be a chronic disabling condition. Information from the need-tested SSI program indicates that the nature of impairments tends to differ among younger versus older persons with disabilities. In 2012, almost 7 in 10 SSI recipients who were under the age of 50 had primary impairments such as intellectual disabilities, developmental disabilities, and mental impairments. In contrast, 42% of those age 50 and older had such disabilities as their primary impairments. In 2012, 22% of those age 50 and older had primary impairments related to muscular-skeletal and connective tissue systems, compared to 6% for individuals under 50. Since younger individuals with disabilities are more likely than older individuals with disabilities to receive need-tested aid, the impairments of individuals with disabilities who receive need-tested aid are often intellectual and developmental disabilities or mental illness. <8.2.2. Families with Children> Families with children have been a focal point of policy for low-income individuals for decades. The Social Security Act of 1935 established grants to states to help them aid families with children who had been deprived of support because of the death, disability, or absence of one parent. Aid was provided so that the remaining parent (usually the mother) did not have to work and could care for the family's children. This policy became increasing controversial over time, leading to a series of changes that culminated with a major expansion of aid to low-income, working parents (including two-parent families) through the EITC in the 1980s and 1990s, and later the establishment and expansion of the ACTC; and the 1996 welfare reform law that changed the terms of cash assistance for needy families with children and provided additional support for state programs that subsidize child care for low-income families. Thus, low-income assistance policy for families with children was transformed from providing support for a relatively narrow population (needy families headed by a non-working single mother) to supporting a much wider population, with a focus on requiring and supporting parental work. The broader reach of need-based aid to families with children is reflected in the 2012 data. Table 14 shows the characteristics of families with children that were estimated to receive at least one of the selected need-tested benefits and were estimated to receive total benefits at or above the 75 th percentile in 2012. In general, receipt rates for any need-tested benefits were high for families with children, even for those with characteristics not often associated with economic disadvantage. For example, an estimated 38% of families with children that included a full-time, full-year worker received at least some benefit from a need-tested program. Among families where the highest level of educational attainment for the adults was a college associate's degree, almost half received a need-tested benefit. On the other hand, those families that had characteristics usually associated with economic disadvantage had a high rate of receipt of relatively large total benefit amounts. Key takeaways from the table include the following: Families with children that lacked an adult worker almost always received a selected need-tested benefit. These families were also likely to receive a large benefit. In 2012, 44.4% of families with children that lacked an adult worker received benefits equal to or above $9,027. Additionally, 55.2% of families that had relatively weak job attachment (part-time work for part of the year) received a benefit equal to or above $9,027. While some families with relatively high levels of educational attainment (e.g., college credential) received selected need-tested benefits, receipt of relatively large benefit amounts (at or above the 75 th percentile) was concentrated among those with at most a high school diploma or those that lacked a high school diploma. Families with children headed by a single woman had higher rates of receipt of selected need-tested benefits and total benefits at or above the 75 th percentile than did families headed by married couples or men. However, close to 1 in 4 (38.7%) families headed by married couples or men received at least some selected need-tested aid, although such families were unlikely to receive benefits at or above the 75 th percentile. In 2012, 9.6% of families with children headed by a married couple or man received benefits at or above the 75 th percentile, compared to 33.8% of families with children headed by a woman. Families with children headed by racial and ethnic minorities except Asian-Americans were more likely than non-Hispanic whites to receive need-tested benefits and benefits at or above the 75 th percentile. Large families with children were much more likely than smaller families with children to receive selected need-tested benefits at or above the 75 th percentile of total benefit receipt. <8.3. Benefit Receipt by Program> Total need-tested benefit amounts are typically higher for families that combine benefits from multiple programs than they are for families that receive benefits from only one program. Moreover, families that receive benefits from certain programs are more likely to receive benefits from multiple programs. Thus, the percentage of families who are in the top 25% of need-tested benefit receipt varies by program. Table 15 shows for families that received benefits from each of the nine programs, estimates of the median benefit total received from all programs and the median benefit from that specific program. The table also shows the percentage of families receiving benefits from each program that were in the top 25% of need-tested benefit receipt in 2012. Finally, the table shows the number of programs from which these families received benefits. Programs are ranked by the percentage of recipient families that received total benefits at or above the 75 th percentile ($9,027). The top-ranked programs in the table subsidized child care and TANF are intended for families with children. For families receiving subsidized child care, the median total need-tested benefit (from all programs) was $14,810. Families receiving TANF had median total need-tested benefits of $13,937. Families participating in both programs were very likely to combine benefits from multiple programs, and a large share of the total benefits for those families came from programs other than child care or TANF. Families receiving subsidized child care were also very likely to receive benefits from the two refundable tax credits, SNAP, and sometimes TANF. The benefit packages for TANF families were more varied, though most TANF families also received SNAP. The third-ranked program was subsidized housing. The median total need-tested benefit for families in subsidized housing was $11,349. However, the housing assistance benefit itself accounted for a large share of this total benefit. While more than 8 in 10 families in assisted housing received benefits from more than one program, only 14% received benefits from five or more programs. This compares with 4 in 10 TANF families receiving benefits from five or more programs and half of families receiving subsidized child care getting benefits from five or more programs. The programs that ranked lowest in the table in terms of their percentage of families with total need-tested benefits in the top 25% (at or above $9,027) were families receiving the two refundable tax credits, LIHEAP, and SNAP. <9. Conclusion> Many people in the United States were eligible for need-tested benefits in 2012. Four in ten people were estimated to be eligible for benefits from at least one of the nine need-tested programs examined in this report. However, not all persons eligible for need-tested benefits actually received them. Among the programs examined in this report, an estimated 70% of eligible families actually received SNAP and 65% of eligible families received WIC in 2012. However, the estimated rate of benefit receipt among eligible persons was 28% for TANF cash assistance, 22% for LIHEAP, 18% for subsidized housing, and 17% for CCDF (based on eligible children). In 2012, one in three people were estimated to have actually receive d benefits from at least one of these programs. Many of these families had characteristics not typically associated with economic disadvantage; a substantial portion of families that received aid had pre-welfare incomes above the poverty line in 2012. However, many of these families received relatively small benefits. Benefit receipt differed considerably depending on family characteristics. Families with an aged member and those comprising non-aged, non-disabled childless adults represented a disproportionately small share of all families receiving assistance and total benefit dollars spent. For the aged, this partially reflects the role Social Security plays in providing income and Medicare plays in providing health care coverage. The aged also have a relatively low rate of take-up of the need-tested benefits for which they are eligible. This report focuses on nonmedical need-tested benefits: it does not reflect the protection that Medicaid offers in providing expensive long-term care services to the aged should they exhaust their income and assets to obtain them. Families containing non-aged, non-disabled childless adults also received relatively small amounts of need-tested benefits. They are ineligible for benefits from the programs that are available only to families with children (ACTC, TANF, child care, and WIC). This group is also eligible for a relatively small EITC. In 2012, a single childless adult could receive a maximum EITC of $475 for the year, while a tax filer with three children was eligible for a credit of up to $5,891. The wide reach of need-tested benefits is attributable to two major groups of families: those that contain an individual with disabilities and those with children. Families with a non-aged, disabled member totaled 18.6 million (14% of all families), and 60% of them received benefits from at least one need-tested program in 2012. Individuals are typically considered disabled if they have a physical or non-physical impairment that prevents work. Moreover, the presence of an individual with disabilities might also limit the ability of other family members to work. Families with a non-aged disabled member accounted for $89.5 billion, or 37% of total spending, for the nine need-tested benefit programs examined in this report. Families with children accounted for the greatest amount and share of need-tested spending (41%). Many policy debates about low-income people focus on families with children and reflect the tension between trying to alleviate high levels of financial need while not undercutting expectations that non-disabled parents work. Both goals can be expensive. The large share of families with children that received need-tested aid is attributable to assistance provided to families with a working adult member. These families totaled 29.8 million (23.2% of all families), and 45% of them received benefits from at least one need-tested benefit program in 2012. Many of these families did not have characteristics that are often associated with economic disadvantage. Families with children who have working adults accounted for $91.6 billion, or 48%, of total spending for the nine need-tested benefit programs examined in this report. Families with children without an aged or disabled member who also lacked an adult worker were a relatively small group in 2012 (fewer than 1 million families). However, they were the most likely group to be in the top 25% of families in terms of benefit amounts received, with 44% of such families having benefits of $9,027 or more. Though only 25% of families receiving need-tested benefits had benefits of $9,027 or more, they accounted for 64% of total spending for the nine need-tested programs discussed in this report. Families that received large benefits tend to have characteristics that traditionally have been associated with economic disadvantage and discussed in past policy debates: being in poverty or even "deep poverty" (pre-welfare incomes under 50% of the poverty line), disabilities, weak or no job attachment, low levels of educational attainment, and headed by single mothers. Data and Methods Data Sources and Limitations This report examines eligibility, participation, and benefit receipt in calendar year 2012. Estimates in this report were derived using data from the March 2013 Annual Social and Economic Supplement (ASEC) to the Current Population Survey (CPS), augmented by information from the Transfer Income Model, version 3 (TRIM3), funded by the U.S. Department of Health and Human Services (HHS) and maintained at the U.S. Census Bureau. ASEC The ASEC is a household survey of the non-institutionalized population conducted by the Census Bureau in March of each year. The non-institutionalized population excludes those persons residing in institutional group quarters such as adult correctional facilities, juvenile facilities, skilled-nursing facilities, and other institutional facilities such as mental (psychiatric) hospitals and in-patient hospice facilities. The non-institutionalized population includes members of the Armed Forces living in civilian housing units on a military base or in a household not on a military base. The ASEC asks respondents to report on household members' demographic characteristics, work experience, and earnings in the prior year. In addition, the ASEC asks respondents about receipt of certain government benefits in the prior year, including six of the need-tested programs examined in this report: SSI, TANF, SNAP, WIC, housing assistance, and LIHEAP. While the ASEC does not directly ask questions about federal taxes, the Census Bureau provides its own estimates of the ACTC and the EITC (based on data provided by respondents about their household's economic and demographic circumstances) for inclusion in ASEC estimates of after-tax income. Data on CCDF benefits, however, are neither collected nor estimated by the Census Bureau in conjunction with the ASEC. As with any household survey, ASEC data are subject to sampling error, as well as error from respondents misreporting household members' circumstances. Research has found that need-tested benefits are commonly under-reported on the ASEC. Respondents report fewer household members receiving need-tested benefits than are recorded by federal or state administering agencies. For example, in 2005 it was estimated that the ASEC captured 57% of SNAP recipients, 59% of TANF recipients, and 74% of SSI recipients. In the case of housing assistance, it appears that there is under-reporting of benefits by families receiving federal housing assistance, and over-reporting of receipt of assistance by families who are not receiving federal housing assistance, perhaps because they are receiving some form of state or local assistance. In addition, benefit amounts reported by ASEC respondents typically fall below the benefit amounts recorded in agency expenditure data. TRIM3 TRIM3 is a microsimulation model for government benefit receipt that is primarily funded by the U.S. Department of Health and Human Services (HHS) and maintained at the Urban Institute. Microsimulation models apply a set of program rules to individual or family units to simulate various elements in this case, eligibility for certain need-tested benefit programs, likelihood of receiving one or more benefits, and the amount of any benefits received. Simulations at the individual or family level are then aggregated to allow for comparisons across families and programs. Estimates in this report were generally derived from the TRIM3 microsimulation model using administrative data on program rules and survey data on individuals and families from the March 2013 ASEC. This report used TRIM3 to adjust ASEC survey responses for under-reporting of applicable need-tested benefits. This was done by using family characteristics and likelihoods of benefit receipt to "assign" benefits to a portion of the families estimated to be eligible for benefits but not reported as receiving them on the ASEC. In addition to using TRIM3 to adjust ASEC data for certain programs, this report also relied on TRIM3 estimates, rather than Census Bureau estimates, of federal tax benefits from the ACTC and the EITC. This was done so that the assumptions and methods underlying the estimates of the refundable tax credits were aligned with those of the government spending benefit programs. Finally, this report used TRIM3 to estimate the receipt and amount of CCDF subsidies for families. The ASEC does not collect information on CCDF benefits, but the TRIM3 child care estimates were derived using data on income, work, and age of children, as reported on the CPS. The TRIM3 microsimulation model generally brings recipient counts and total benefits (in dollars) in line with aggregate administrative totals for the need-tested benefit programs examined in this report. However, TRIM3 is a model and all models have limitations. For instance, TRIM3 makes a number of simplifying assumptions in order to estimate monthly income (often necessary for eligibility establishment under program rules) because the ASEC only asks respondents about annual income. To do this, TRIM3 "allocates" annual income amounts for individuals across the months of the year based on a variety of factors (e.g., number of weeks of employment). However, such allocations of income may not always be perfect, meaning that there is some margin of error in TRIM3 estimates of eligibility, participation, and benefits. Additionally, housing assistance estimates from TRIM3 rely on weighted statewide averages for fair market rents and income eligibility thresholds, rather than the local area data that are actually used for program administration purposes. While TRIM3 corrects for under-reporting of benefit receipt on the ASEC, it generally does this on a program-by-program basis. Because of a lack of administrative data on multiple program participation, TRIM3 is only able to specifically target real-world overlap for a subset of program combinations when correcting for under-reporting. Table A-1 summarizes some key estimation issues, by program, for the data used in this report. Key Assumptions Annual Estimates of Income and Benefit Receipt The estimates of eligibility, receipt, and benefits in this report are based on program rules. Many of the need-tested programs examined here determine eligibility and benefits on a monthly basis. As a result, the number of people who received benefits at any point over the course of the year tends to be greater than the number of people receiving benefits in any one month. The estimates in this report reflect receipt of one or more benefits at any point during 2012 (i.e., total recipients includes people who were estimated to receive one or more benefits for only part of the year). As such, this report's estimated number of recipients tends to be greater than the number of recipients reported by administrative data, which often show monthly or monthly average participation. In addition, benefit amounts in this report are estimated annual benefits received by a family over the course of the entire year. The information on refundable tax credits from the EITC and the ACTC represents the amounts earned during the year, which are actually paid to families once a year when they receive their tax refunds, generally in the following year. For example, tax credits earned in 2012 would generally be received in early 2013 when taxpayers filed their 2012 federal income tax returns. This also comports to the way the refundable tax credits are considered in analyses of family income and poverty. Definition of "Family" This report presents estimates of benefits received at the family level. The family level is used because it best represents an economic unit people who pool together financial resources, consume goods and services, and make economic decisions together. For purposes of this report, the family unit includes all those in a household who are related by blood, marriage, or adoption, as well as cohabiting couples, relatives of cohabiters, and unrelated children who are cared for by the family (e.g., foster children). This family construct is consistent with the family unit used for the Supplemental Poverty Measure (SPM), but differs from the family unit used for the official poverty measure, which excludes cohabitating couples, relatives of cohabiters, and unrelated children. The family unit used in this report may also differ from the unit used by programs for eligibility determination purposes (e.g., the EITC and the ACTC use tax filing units, which may be different than the family unit used for benefit estimates in this report). However, use of a common family unit allows this report to examine receipt of benefits across all programs in a comparable manner that would not otherwise be possible. Supplemental Poverty Measure The SPM is an alternative poverty measure developed by the U.S. Census Bureau and the Bureau of Labor Statistics that is based on a broader range of income sources and costs than the official poverty measure. The official poverty measure counts only earnings and cash benefits (e.g., Social Security and unemployment benefits). In addition to these, the SPM counts certain in-kind benefits (e.g., SNAP, WIC, housing assistance, LIHEAP) and tax credits (e.g., the EITC, the ACTC) and subtracts a number of necessary expenses (e.g., taxes, work-related child care, commuting costs, and medical out-of-pocket expenses) from a family's total resources to arrive at a measure of disposable income available to meet the family's basic needs. The SPM also sets separate income/resource thresholds for homeowners with a mortgage, homeowners without a mortgage, and renters; these thresholds are adjusted for variations in housing costs by geographic area (metropolitan and nonmetropolitan areas in a state). CRS used the SPM for contextual purposes when considering the economic circumstances of families who are eligible for or receiving need-tested benefits. TRIM3 uses each program's family unit, income eligibility, and benefit computation rules for determining its estimates for eligibility and benefit receipt of need-tested programs. Benefit Levels Readers should be aware of additional considerations regarding the benefit levels presented in this report. One consideration is that all in-kind benefits were monetized for the purpose of this analysis and several assumptions were made in that process. For example, in the case of housing assistance, the benefits provided by the Section 8 Housing Choice Voucher (HCV) program, the project-based Section 8 rental assistance programs, and the public housing program were all calculated the same way, using an approximation of the method used for calculating the maximum benefit a family could receive under the Section 8 HCV program. This approach is tied to the market cost of housing and is commonly used by researchers and policy analysts. However, the public housing and project-based Section 8 rental assistance programs provide affordable rental units to families rather than the vouchers provided by the Section 8 HCV program for use in the private market. While the dollar value of a voucher is fairly clear, the dollar value of an affordable rental unit is less clear; thus, this approach may over- or under-estimate the dollar value of the benefit received by a resident of public housing or project-based Section 8 rental assistance housing. Estimates of the Refundable Tax Credits In conducting the ASEC, the Census Bureau does not ask survey respondents about their federal tax liabilities or whether they benefit from tax credits. Therefore, estimates must be made in order to incorporate tax liabilities and estimates into analyses based on the ASEC. TRIM3 applies the federal tax rules in effect during the year to the population for that year. This involves taking the ASEC's information on individuals and families and family structure and creating a "tax filing" unit (i.e., the tax filer and their spouse and dependents, if applicable). TRIM3 then applies the rules for counting income, deductions and exemptions, eligibility for tax credits, and tax rates to determine the unit's tax liabilities and/or tax credits. It is well known in the research community that estimates of the total dollars and number of filers receiving refundable tax credits based on information from the ASEC is well below the true dollar amount and number of filers who actually claim these credits. For 2012, the TRIM3 estimate of the total dollars of the EITC is $46.4 billion. This is compared to Statistics of Income (SOI) data, based on tax returns that showed a total $64.1 billion. Note that this is not a function of using TRIM3 estimates; the Census Bureau's own estimates of the EITC using the ASEC were similar to those made by TRIM3. Research has been done on why EITC estimates from the ASEC differ from those reported on the SOI, but the reasons for the different estimates have not been conclusively explained. Factors that have been raised as potentially explaining this discrepancy include EITC "compliance" issues, where taxpayers claim an EITC or higher EITC amount that they are not eligible for; misclassification of tax units from ASEC family structure information; or under-reporting of earnings on the ASEC that are used to estimate the EITC. Similar shortfalls and results are also observed for the ACTC. Medicaid This report uses data from the TRIM3 microsimulation model for 2012 to provide information about who is eligible for and receiving benefits through need-tested programs and the value of these benefits. Medicaid is the largest need-tested program, but it was not included in most of the analysis provided throughout the report because (1) TRIM3 does not provide information on enrollment and benefit values of Medicaid; (2) using the 2012 information would miss the major expansion of Medicaid eligibility under the Patient Protection and Affordable Care Act (ACA, P.L. 111-148 as amended); and (3) there are issues with valuing Medicaid. This appendix provides a brief overview of the Medicaid program followed by sections about TRIM3 and Medicaid, Medicaid participation rates, and the value of Medicaid coverage. Medicaid Overview Medicaid is a means-tested entitlement program that finances the delivery of primary and acute medical services as well as long-term services and supports (LTSS). In FY2014, Medicaid is estimated to have provided health care services to 63 million individuals at a total cost of $494 billion, with the federal government paying $299 billion (about 61%) of that total. Medicaid coverage includes a wide variety of preventive, primary, and acute care services as well as LTSS. Not everyone enrolled in Medicaid has access to the same set of services. Different eligibility classifications determine available benefits. To be eligible for Medicaid individuals must meet both categorical (e.g., aged, individuals with disabilities, children, pregnant women, parents, certain non-aged childless adults) and financial (i.e., income and sometimes assets limits) criteria. Historically, Medicaid eligibility had generally been limited to certain low-income children, pregnant women, parents of dependent children, the aged, and individuals with disabilities; however, as of January 1, 2014, states have the option to extend Medicaid coverage to most non-aged, low-income individuals through the Medicaid expansion enacted as part of the ACA. Medicaid spending per full-year equivalent enrollee was $7,236 in FY2011. However, Medicaid spending per enrollee varies significantly by population group. The following are per-enrollee spending amounts by major population group: Children = $2,854 Adults = $4,368 Aged = $16,236 Disabled = $19,031. One reason the aged and disabled populations have higher per-enrollee expenditures is because these populations consume most of LTSS. The Medicaid per-enrollee spending amount for enrollees with no LTSS was $4,332 in FY2011, while per-enrollee spending for enrollees with LTSS was $44,719. Among the enrollees with LTSS, the Medicaid per-enrollee spending ranged from $25,837 for those with no institutional or home- and community-based service waiver services to $66,006 for those with LTSS consisting of only institutional services. TRIM3 and Medicaid For 2012, the TRIM3 microsimulation model only estimates which individuals are likely eligible for Medicaid coverage. In that year, TRIM3 estimated that 65 million persons (21% of the total U.S. population) were eligible for Medicaid. It ranked third only to SNAP and LIHEAP in terms of number of people eligible in the non-institutional population. The Medicaid eligibility information in TRIM3 has a few limitations. First, TRIM3 only includes data for non-institutionalized individuals, but some Medicaid enrollees receive institutional services. Second, TRIM3 simulates Medicaid eligibility for full Medicaid coverage, but some states provide limited benefit coverage (e.g., inpatient hospital-only coverage or preventative care-only coverage) to certain populations. Third, the eligibility information in TRIM3 is for 2012, and therefore doesn't take into account the ACA Medicaid expansion. For the states that have implemented the ACA Medicaid expansion (30 states and the District of Columbia), Medicaid eligibility looks significantly different in 2015 than it did in 2012, with substantially more parents, individuals with disabilities, and nonaged adults without dependent children being eligible. Additionally, for 2012 TRIM3 did not include information about Medicaid enrollment (i.e., who is receiving Medicaid coverage) and the value of Medicaid coverage. Thus, it is not possible to treat Medicaid in the same manner as the other need-tested programs discussed in this report. Instead, the following sections summarize other research about Medicaid participation rates and the value of Medicaid coverage. Participation Rate The participation rate (or take-up rate) of Medicaid refers to the percentage of people eligible for the program that choose to enroll in Medicaid. Research indicates the Medicaid participation rates for adults tend to be lower than the participation rates for children. The average estimates of Medicaid participation rates for adults from a number of studies from 1999 through 2010 range from 52% to 81%. However, the participation rates vary significantly by state. For instance, a study of the Medicaid participation rate in 2009 estimated a national participation rate of 68%, with state Medicaid participation rate estimates ranging from 51% in Nevada to 94% in Massachusetts. Research suggests that participation rates among children in Medicaid and the State Children's Health Insurance Program (CHIP) tend to be greater than the Medicaid participation rate for adults, and the rate has grown significantly in recent years. The Medicaid and CHIP participation rate for children was 82% in 2008 and increased to 88% in 2012. As with adults, these participation rates vary by state, ranging from 80% or lower in two states to 90% and higher in 21 states and the District of Columbia in 2012. Research has also found that Medicaid participation rates are higher among non-whites, individuals in families with lower incomes, and people with health-related limitations (such as SSI recipients). Also, Medicaid participation rates were found to be lower for older children (ages 13 to 18) relative to younger children, and for nonaged, childless adults without functional limitations relative to all non-aged adults. It is important to note that participation rates provide the number of people eligible for the program that choose to enroll. However, not all Medicaid enrollees access services. Value of Medicaid As noted previously in this report, estimating the dollar value of health benefits to families and individuals is particularly difficult. A seminal National Academy of Sciences report issued in 1995 examining potential changes in the measurement of family well-being for poverty analysis stated: The issue of how to treat medical care needs and resources in the poverty measure has bedeviled analysts since the mid-1970s, when rapid growth in the Medicare and Medicaid programs (and in private health insurance) led to a concern that the official measure was overstating the extent of poverty among beneficiaries because it did not value their medical insurance benefits. Yet after two decades of experimentation, there is still no agreement on the best approach to use. For most of the cash, food, and housing benefits discussed in this report, the amount a family receives in benefits can be estimated based on their circumstances as reported on the ASEC. That is, a dollar value of what is spent on benefits for the family can be estimated based on available data. This is not so for Medicaid. Actual Medicaid spending for a family is determined by the amount and type of medical services it consumes. Moreover, the medical services consumed by a family are related to the health of family members. Medicaid is also paid to the provider of services. For these reasons, Medicaid benefits do not simply add to other family income to determine the family's well-being. That is, more dollars are spent on an individual when an individual is less healthy; those extra dollars spent do not mean that the individual or the individual's family is "wealthier." However, Medicaid does have economic value to families that receive benefits. Historically, the valuation methods have relied on per-enrollee Medicaid spending for individuals in a given demographic group. There are two major approaches that have been used to value Medicaid: a method that uses its "average cost" to the government and another that attempts to measure its "fungible value." Average Cost Method The first method uses the average cost of Medicaid to the government. This is the valuation method used most recently by the Congressional Budget Office (CBO) in its analysis of the distribution of income. It was also historically used as the "market value" of Medicaid by the U.S. Census Bureau. Usually, the average cost is estimated based on the person's state, age (aged or child), and disability status. It is not clear that the average cost of coverage represents the value of that coverage to an individual. If the individual would prefer that the average cost of coverage be paid in cash instead, the average cost of coverage would overstate the value health insurance has to the individual. The 2008 Oregon Health Insurance Experiment examined enrollees' willingness to pay for coverage. It found that enrollees would not be willing to cover the cost to the government of Medicaid coverage, but they would be willing to pay $0.2 to $0.4 per dollar of government spending on their Medicaid coverage. However, it is also possible that the bundle of health care services covered by Medicaid could not be purchased without coverage at the average cost of coverage. If this is the case, the value of coverage could be understated. Additionally, Medicaid coverage has spillover effects to other people, and thus its value to society may be greater than its value to individual recipients. The 2008 Oregon Health Insurance Experiment found that Medicaid coverage for low-income, uninsured adults increased health care use (i.e., outpatient care, preventive care, prescription drugs, hospital admissions, and emergency room visits); improved self-reported health; and reduced depression. Medicaid coverage also has benefits to health care providers, who otherwise might be required to provide uncompensated services. Fungible Value of Medicaid The second method historically used to value Medicaid benefits attempts to measure its "fungible value." The fungible value is supposed to represent the amount of resources of Medicaid enrollees' families that are freed up for other uses by Medicaid coverage. That is, Medicaid coverage does not directly increase a household's income, but it can increase an individual's (or family's) ability to consume other goods and services because the individual (and family) does not have to use income to pay for health care services. Fungible values were based on the "average cost" of Medicaid per enrollee in a person's demographic group, adjusted for food and housing costs and family incomes. CBO has also used the fungible value of Medicaid in its estimates on the distribution of household income. The nature of medical coverage means that Medicaid is not a relatively fungible benefit. Medicaid coverage for relatively low-cost services (e.g., a doctor's visit) might free up money for the purchase of other goods and services. However, Medicaid coverage for a very expensive benefit (e.g., a surgery) is unlikely to affect a family budget in a similar way. Such expenses would likely overwhelm a low-income family's current income and potentially their assets. Medical Care Expenses and Economic Burden and Risk As discussed above, in 1995 a National Academy of Sciences panel recommended revising poverty measurement. It recommended not placing a dollar value on either private health insurance or publically provided health care from programs such as Medicaid when computing poverty statistics. Rather, it recommended subtracting out-of-pocket medical expenses from family resources, so that the new poverty measure would consider a family's disposable income available to purchase non-medical goods and services. The SPM implemented by the U.S. Census Bureau followed the recommendation of not including the value of medical insurance as a family financial resource and deducting out-of-pocket medical care expenditures. Beginning with the release of the 2014 poverty data, the Census Bureau discontinued providing the average cost and the fungible value of benefits from Medicaid and Medicare. In the fall of 2010, the Department of Health and Human Services (HHS) asked the National Academy to convene a panel to examine "the state of the science in the development and implementation of a new measure of medical care risk as a companion measure to the new Supplemental Poverty Measure." That panel recommended developing measures of medical care economic burden and medical care risk, separate from poverty, to capture effects on family finances and economic risk to families of having no or inadequate health insurance coverage. In terms of actual burden, the panel recommended that the Census Bureau provide information that would compare a family's or individual's out-of-pocket medical expenses with its resources available for medical care. These resources would include both current income and a portion of the family's or individual's liquid assets. Under the recommendation, the medical economic burden would be used to measure how medical out-of-pocket expenses affect a person's or family's poverty status how much they reduce the resources available to the family to purchase non-medical goods and services relative to poverty. Measuring medical care economic risk would entail measuring the likelihood that a family would incur a specified level of medical out-of-pocket expenses. The panel did not make a specific recommendation on the medical care economic risk, though it did recommend that the relevant federal agencies undertake research to develop that measure. The medical care burden and risk measure has yet to be implemented. Family Categories in this Report This report divides families into six categories: (1) families with an aged member (65 or older); (2) families with an individual with disabilities; (3) families with children and no earners; (4) families with children and earners; (5) other families, without a member who is aged, disabled, or a child, with no earners; and (6) other families, without a member who is aged, disabled, or a child, with earners. As discussed previously in this report, any individual family is placed into only one category even if it may meet the criteria of another category. Families are assigned sequentially to a category based on the ordering of families listed above. For example, if a family had any aged member, it is placed in the first category (families with an aged member). This is the case even if the family also has an individual with disabilities or a child. The method described above creates mutually exclusive categories of families that sum to the total number of families in the population. However, it fails to reflect the complexity of families and family structures present in the population. Table C-1 shows families with an aged member by the presence of individuals with disabilities and children. The table shows that of the 32.5 million families with an aged member, 14.1% of them had either an individual with disabilities or a child. Moreover, these families also had higher poverty rates based on pre-welfare income and higher rates of need-tested benefit receipt than did families with an aged member who did not have an individual with disabilities or a child. Table C-2 shows how many families without an aged member but with an individual with disabilities include a child. Of the total 18.6 million families with a non-aged disabled member, close to one-third (32.3%) also had a child. Almost 8 in 10 families with a non-aged disabled member and a child received a need-tested benefit compared with about half of families with a non-aged disabled member but no children.

Need-tested benefits have received increased attention from policymakers in recent years, as spending levels for these programs remain elevated well into the economic expansion that followed the 2007-2009 recession. While information is available on the number of people who receive benefits from individual programs, it is more challenging to examine how these programs interact and the cumulative benefits families receive from them. Case studies based on hypothetical families often show how much in benefits a family may potentially receive from multiple programs under federal and state policies. However, these case studies assume families receive all the benefits they are eligible for and receive them all year. This is often not true. This report examines estimated benefit receipt by families from nine major need-tested benefit programs in 2012. The nine programs are the Supplemental Nutrition Assistance Program (SNAP); the Earned Income Tax Credit (EITC); Supplemental Security Income (SSI); subsidized housing assistance; the Additional Child Tax Credit (ACTC); the special supplemental nutrition program for Women, Infants, and Children (WIC); Temporary Assistance for Needy Families (TANF) cash assistance; the Child Care and Development Fund (CCDF); and the Low-Income Home Energy Assistance Program (LIHEAP). The estimates are derived from a combination of information from a Census Bureau household survey and a model that estimates program eligibility and participation based on information from that survey. An estimated 135 million persons, 4 in 10 persons in the noninstitutionalized population, were eligible for benefits from at least one of these programs in 2012. However, not all persons eligible for need-tested benefits actually received them. Among the programs examined in this report, an estimated 70% of eligible families actually received SNAP and 65% of eligible families received WIC in 2012. However, the estimated rate of benefit receipt among eligible persons was 28% for TANF cash assistance, 22% for LIHEAP, 18% for subsidized housing, and 17% for CCDF (based on eligible children). An estimated 106 million persons (1 in 3 persons in the population) actually received benefits from one of these programs in 2012. Benefits were concentrated among people in families with children and families with an individual with disabilities with those two groups accounting for an estimated 78% of total benefit dollars from the selected programs. Many families that received need-tested benefits had characteristics not typically associated with economic disadvantage; a substantial portion of families that received aid had pre-welfare incomes above the poverty line in 2012. Among families with children in 2012, an estimated 45% of those who had a worker and 38% with at least one adult working full-time all year received at least one need-tested benefit. The estimated median annual benefit amount from the nine programs in 2012 was $3,300 (i.e., half the families that received benefits received less than $3,300 and half received more). About 40% of families that received need-tested aid did so from only one of the nine selected programs. Some families received relatively large amounts of need-tested aid. In 2012, an estimated 25% of families that received benefits from one or more of the selected programs received a total of $9,027 or more. These families accounted for two-thirds of all spending for these programs in 2012. Families with children who received $9,027 or more had characteristics indicative of a more disadvantaged population: working less than full-time all year, lacking a high school diploma, being in a family headed by a single woman, being of a racial/ethnic minority (other than Asian-American), and being in a large family.

Beyond the Internet content that many can easily access online lies another layer indeed a much larger layer of material that is not accessed through a traditional online search. As experts have noted, "[s]earching on the Internet today can be compared to dragging a net across the surface of the ocean. While a great deal may be caught in the net, there is still a wealth of information that is deep, and therefore, missed." This deep area of the Internet, or the Deep Web, is characterized by the unknown unknown breadth, depth, content, and users. The furthest corners of the Deep Web, known as the Dark Web, contain content that has been intentionally concealed. The Dark Web may be accessed both for legitimate purposes and to conceal criminal or otherwise malicious activities. It is the exploitation of the Dark Web for illegal practices that has garnered the interest of officials and policy makers. Take for instance the Silk Road one of the most notorious sites formerly located on the Dark Web. The Silk Road was an online global bazaar for illicit services and contraband, mainly drugs. Vendors of these illegal substances were located in more than 10 countries around the world, and contraband goods and services were provided to more than 100,000 buyers. It has been estimated that the Silk Road generated about $1.2 billion in sales between January 2011 and September 2013, after which it was dismantled by federal agents. The use of the Internet, and in particular the Dark Web, for malicious activities has led policy makers to question whether law enforcement and other officials have sufficient tools to combat the illicit activities that might flow through this underworld. This report illuminates information on the various layers of the Internet, with a particular focus on the Dark Web. It discusses both legitimate and illicit uses of the Dark Web, including how the government may rely upon it. Throughout, the report raises issues that policy makers may consider as they explore means to curb malicious activity online. <1. Layers of the Internet> Many may consider the Internet and World Wide Web (web) to be synonymous; they are not. Rather, the web is one portion of the Internet, and a medium through which information may be accessed. In conceptualizing the web, some may view it as consisting solely of the websites accessible through a traditional search engine such as Google. However, this content known as the "Surface Web" is only one portion of the web. The Deep Web refers to "a class of content on the Internet that, for various technical reasons, is not indexed by search engines," and thus would not be accessible through a traditional search engine. Information on the Deep Web includes content on private intranets (internal networks such as those at corporations, government agencies, or universities), commercial databases like Lexis Nexis or Westlaw, or sites that produce content via search queries or forms. Going even further into the web, the Dark Web is the segment of the Deep Web that has been intentionally hidden. The Dark Web is a general term that describes hidden Internet sites that users cannot access without using special software. While the content of these sites may be accessed, the publishers of these sites are concealed. Users access the Dark Web with the expectation of being able to share information and/or files with little risk of detection. In 2005, the number of Internet users reached 1 billion worldwide. This number surpassed 2 billion in 2010 and crested over 3 billion in 2014. As of July 2016, more than 46% of the world population was connected to the Internet. While data exist on the number of Internet users, data on the number of users accessing the various layers of the web and on the breadth of these layers are less clear. Surface Web. The magnitude of the web is growing. According to one estimate, there were 334.6 million Internet top-level domain names registered globally during the second quarter of 2016. This is a 12.9% increase from the number of domain names registered during the same period in 2015. As of February 2017, there were estimated to be more than 1.154 billion websites. As researchers have noted, however, these numbers "only hint at the size of the Web," as numbers of users and websites are constantly fluctuating. Deep Web. The Deep Web, as noted, cannot be accessed by traditional search engines because the content in this layer of the web is not indexed. Information here is not "static and linked to other pages" as is information on the Surface Web. As researchers have noted, "[i]t's almost impossible to measure the size of the Deep Web. While some early estimates put the size of the Deep Web at 4,000 5,000 times larger than the surface web, the changing dynamic of how information is accessed and presented means that the Deep Web is growing exponentially and at a rate that defies quantification." Dark Web. Within the Deep Web, the Dark Web is also growing as new tools make it easier to navigate. Because individuals may access the Dark Web assuming little risk of detection, they may use this arena for a variety of legal and illegal activities. It is unclear, however, how much of the Deep Web is taken up by Dark Web content and how much of the Dark Web is used for legal or illegal activities. <2. Accessing and Navigating the Dark Web> The Dark Web can be reached through decentralized, anonymized nodes on a number of networks including Tor (short for The Onion Router) or I2P (Invisible Internet Project) . Tor, which was initially released as The Onion Routing project in 2002, was originally created by the U.S. Naval Research Laboratory as a tool for anonymously communicating online. Tor "refers both to the software that you install on your computer to run Tor and the network of computers that manages Tor connections." Tor's users connect to websites "through a series of virtual tunnels rather than making a direct connection, thus allowing both organizations and individuals to share information over public networks without compromising their privacy." Users route their web traffic through other users' computers such that the traffic cannot be traced to the original user. Tor essentially establishes layers (like layers of an onion) and routes traffic through those layers to conceal users' identities. To get from layer to layer, Tor has established "relays" on computers around the world through which information passes. Information is encrypted between relays, and "all Tor traffic passes through at least three relays before it reaches its destination." The final relay is called the "exit relay," and the IP address of this relay is viewed as the source of the Tor traffic. When using Tor software, users' IP addresses remain hidden. As such, it appears that the connection to any given website "is coming from the IP address of a Tor exit relay, which can be anywhere in the world." While data on the magnitude of the Deep Web and Dark Web and how they relate to the Surface Web are not clear, data on Tor users do exist. According to metrics from the Tor Project, the mean number of daily Tor users in the United States across the first two months of 2017 was 353,753 or 19.2% of total mean daily Tor users. The United States has the largest number of mean daily Tor users, followed by Russia (11.9%), Germany (9.9%), and United Arab Emirates (9.2%). <2.1. Communicating On (and About) the Dark Web> There are several different ways to communicate about the Dark Web. One of the first places individuals may turn is Reddit. There are several subreddits pertaining to the Dark Web, such as DarkNetMarkets, DeepWeb, or Tor. These forums often provide links to sites within the Dark Web. Reddit provides a public platform for Dark Web users to discuss different aspects of the Tor. It is not encrypted or anonymous, as users who wish to engage in forum discussion must create an account. Individuals who wish to use a more secure form of communication may choose to utilize email, web chats, or personal messaging hosted on Tor: Email service providers, for instance, typically only require users to input a username and password to sign up. In addition, email service providers generally offer anonymous messaging and encrypted storage. A number of anonymous, real-time chat rooms such as The Hub and OnionChat are hosted on Tor. Feeds are organized by topic. While some sites do not require any information from users before participating in chats, others require a user to register with an email address. Personal messaging, through Tor Messenger, is another option for Tor users who wish to communicate with an added layer of anonymity. Bitmessage is a popular messaging system which offers encryption and strong authentication. Decentralized, peer-to-peer instant messaging systems, such as Ricochet, also run on Tor and allow for anonymized communication. Specific vendor sites may host private messaging as well. <2.2. Navigating the Deep Web and Dark Web> Traditional search engines often use "web crawlers" to access websites on the Surface Web. This process of crawling searches the web and gathers websites that the search engines can then catalog and index. Content on the Deep (and Dark) Web, however, may not be caught by web crawlers (and subsequently indexed by traditional search engines) for a number of reasons, including that it may be unstructured, unlinked, or temporary content. As such, there are different mechanisms for navigating the Deep Web than there are for the Surface Web. Users often navigate Dark Web sites through directories such as the "Hidden Wiki," which organizes sites by category, similar to Wikipedia. In addition to the wikis, individuals can also search the Dark Web with search engines. These search engines may be broad, searching across the Deep Web, or they may be more specific. For instance, Ahmia, an example of a broader search engine, is one "that indexes, searches and catalogs content published on Tor Hidden Services." In contrast, Grams is a more specific search engine "patterned after Google" where users can find illicit drugs, guns, counterfeit money, and other contraband. When using Tor, website URLs change formats. Instead of websites ending in .com, .org, .net, etc., domains usually end with an "onion" suffix, identifying a "hidden service." Notably, when searching the web using Tor, an onion icon displays in the Tor browser. Tor is notoriously slow, and this has been cited as one drawback to using the service. This is because all Tor traffic is routed through at least three relays, and there can be delays anywhere along its path. In addition, speed is reduced when more users are simultaneously on the Tor network. On the other hand, increasing the number of users who agree to use their computers as relays can increase the speed on Tor. Tor and similar networks are not the only means to reach hidden content on the web. Other developers have created tools such as Tor2web that may allow individuals access to Tor-hosted content without downloading and installing the Tor software. Using bridges such as Tor2web, however, does not provide users with the same anonymity that Tor offers. As such, if users of Tor2web or other bridges access sites containing illegal content for instance, those that host child pornography they could more easily be detected by law enforcement than individuals who use anonymizing software such as Tor. <2.3. Is the Dark Web Anonymous?> Guaranteed anonymity is not foolproof. While tools such as Tor aim to anonymize content and activity, researchers and security experts are constantly developing means by which certain hidden services or individuals could be identified or "deanonymized." For example, in October 2011 the "hacktivist" collective Anonymous, through its Operation Darknet, crashed a website hosting service called Freedom Hosting operating on the Tor network which was reportedly home to more than 40 child pornography websites. Among these websites was Lolita City, cited as one of the largest child pornography sites with over 100GB of data. Anonymous had "matched the digital fingerprints of links on [Lolita City] to Freedom Hosting" and then launched a Distributed Denial of Service (DDoS) attack against Freedom Hosting. In addition, through Operation Darknet, Anonymous leaked the user database including username, membership time, and number of images uploaded for over 1,500 Lolita City members. In 2013, the Federal Bureau of Investigation (FBI), reportedly took control of Freedom Hosting and infected it with "custom malware designed to identify visitors." Since 2002, the FBI has supposedly been using some form of a "computer and internet protocol address verifier" consistent with the malware in the Freedom Hosting takeover to "identify suspects who are disguising their location using proxy servers or anonymity services, like Tor." In February 2017, hackers purportedly affiliated with Anonymous took down Freedom Hosting II a website hosting provider on the dark web that was stood up after the original Freedom Hosting was shut down in 2013. Hackers claimed that over 50% of the content on Freedom Hosting was related to child pornography. Website data were dumped, some of which may now identify users of these sites. Of note, security researchers estimated that Freedom Hosting II housed 1,500 2,000 hidden services (about 15-20% of their estimated number of active sites). The FBI conducted an investigation into a child pornography website known as Playpen, which was operating on the Dark Web and had nearly 215,000 members. In 2015, Virginia District Court judge authorized a search warrant allowing law enforcement to employ a network investigative technique to try to identify actual IP addresses of computers used to access Playpen. Through the use of the NIT, the FBI was able to uncover about 1,300 IP addresses and subsequently trace those to individuals. Criminal charges have been filed against more than 185 individuals. <3. Why Anonymize Activity?> A number of reasons have been cited why individuals might use services such as Tor to anonymize online activity. Anonymizing services have been used for legal and illegal activities ranging from keeping sensitive communications private to selling illegal drugs. Of note, while a wide range of legitimate uses of Tor exist, much of the research on and concern surrounding anonymizing services involves their use for illegal activities. As such, the bulk of this section focuses on the illegal activities. <3.1. Online Privacy> Tor is used to secure the privacy of activities and communications in a number of realms. Privacy advocates generally promote the use of Tor and similar software to maintain free speech, privacy, and anonymity. There are several examples of how it might be used for these purposes: Anti-Censorship and Political Activism. Tor may be used as a "censorship circumvention tool, allowing its users to reach otherwise blocked destinations or content." Because individuals may rely upon Tor to access content that may be blocked in certain parts of the world, some governments have reportedly suggested tightening regulations around using Tor. Some have purportedly blocked access to it at times. Political dissidents may also use Tor to secure and anonymize their communications and locations, as they have reportedly done in dissident movements in Iran and Egypt. Sensitive Communication . Tor may also be used by individuals who want to access chat rooms and other forums for sensitive communications both for personal and business uses. Individuals may seek out a safe haven for discussing private issues such as victimization or physical or mental illnesses. They may also use Tor to protect their children online by concealing the IP addresses of children's activities. Businesses may use it to protect their projects and help prevent spies from gaining a competitive advantage. Leaked Information . Journalists may use Tor for communicating "more safely with whistleblowers and dissidents." The New Yorker 's Strongbox, for instance, is accessible through Tor and allows individuals to communicate and share documents anonymously with the publication. In addition, Edward Snowden reportedly used Tails (an "operating system optimized for anonymity") which automatically runs Tor to communicate with journalists and leak classified information on U.S. mass surveillance programs. Among the documents leaked by Snowden was a top-secret presentation outlining National Security Agency (NSA) efforts to exploit the Tor browser and de-anonymize users. <3.2. Illegal Activity and the Dark Web> Just as nefarious activity can occur through the Surface Web, it can also occur on the Deep Web and Dark Web. A range of malicious actors leverage cyberspace, from criminals to terrorists to state-sponsored spies. The web can serve as a forum for conversation, coordination, and action. Specifically, they may rely upon the Dark Web to help carry out their activities with reduced risk of detection. While this section focuses on criminals operating in cyberspace, the issues raised are certainly applicable to other categories of malicious actors. Twenty-first century criminals increasingly rely on the Internet and advanced technologies to further their criminal operations. For instance, criminals can easily leverage the Internet to carry out traditional crimes such as distributing illicit drugs and sex trafficking. In addition, they exploit the digital world to facilitate crimes that are often technology driven, including identity theft, payment card fraud, and intellectual property theft. The FBI considers high-tech crimes to be among the most significant crimes confronting the United States. The Dark Web has been cited as facilitating a wide variety of crimes. Illicit goods such as drugs, weapons, exotic animals, and stolen goods and information are all sold for profit. There are gambling sites, thieves and assassins for hire, and troves of child pornography. Data on the prevalence of these Dark Web sites, however, are lacking. Tor estimates that only about 1.5% of Tor users visit hidden services/Dark Web pages. The actual percentage of these that serve a particular illicit market at any one time is unclear, and it is even less clear how much Tor traffic is going to any given site. One study from the University of Portsmouth examined Tor traffic to hidden services. Researchers "ran 40 'relay' computers in the Tor network ... which allowed them to assemble an unprecedented collection of data about the total number of Tor hidden services online about 45,000 at any given time and how much traffic flowed to them." While about 2% of the Tor hidden service websites identified were sites that researchers deemed related to child abuse, 83% of the visits to hidden services sites were to these child abuse sites "just a small number of pedophilia sites account for the majority of Dark Web http traffic." As has been noted, however, there are a number of variables that may have influenced the results. Another study from King's College London scanned hidden services on the Tor network. Starting with two popular Dark Web search engines, Ahmia and Onion City, they used a web crawler to identify 5,205 live websites. Of these 5,205 websites, researchers identified content on about half (2,723) and classified them by the nature of the content. Researchers determined that 1,547 sites contained illicit content. This is a sample of websites on hidden services in Tor; the researchers' crawler accessed about 300,000 websites (including 205,000 unique pages) on the network of Tor hidden services. Of note, in 2015 Tor estimated that there were about 30,000 hidden services that "announce themselves to the Tor network every day." Further, Tor estimated that "hidden service traffic is about 3.4% of total Tor traffic." More recent data from March 2016 to March 2017 indicate that there were generally between 50,000 and 60,000 hidden services, or unique .onion addresses, daily. The Dark Web can play a number of roles in malicious activity. As noted, it can serve as a forum through chat rooms and communication services for planning and coordinating crimes. For instance, there have been reports that some of those engaged in tax-refund fraud discussed techniques on the Dark Web. The Dark Web can also provide a platform for criminals to sell illegal or stolen goods. Take the role of the Dark Web in data breaches, for example: Malware used in large-scale data breaches to capture unencrypted credit and debit card information has been purchased on the Dark Web. One form of malware, RAM scrapers, can be purchased and remotely installed on point-of-sale systems, as was done in the 2013 Target breach, among others. Thieves can sell stolen information for profit on the Dark Web. For instance, within weeks of the Target breach, the underground black markets were reportedly "flooded" with the stolen credit and debit card account information, "selling in batches of one million cards and going for anywhere from $20 to more than $100 per card." Such "card shops" are just one example of the specialty markets on the Dark Web. Not only can data be stolen and sold through the Dark Web, it can happen quickly . In one experiment by security vendor BitGlass, researchers created a treasure trove of fake "stolen" data including over 1,500 names, social security numbers, credit card numbers, and more. They then planted these data on DropBox and seven well-known black market sites. Within 12 days, the data had been viewed nearly 1,100 times across 22 countries. Cybercriminals can victimize individuals and organizations alike, and they can do so without regard for borders. How criminals exploit borders is a perennial challenge for law enforcement, particularly as the concept of borders and boundaries has evolved. Physical Borders. For law enforcement purposes, jurisdictional boundaries have been drawn between nations, states, and other localities. Within these territories, various enforcement agencies are designated authority to administer justice. When crimes cross boundaries, a given entity may no longer have sole responsibility for criminal enforcement, and the laws across jurisdictions may not be consistent. Criminals have long understood these phenomena and exploited them. Physical Cyber Borders. The relatively clear borders within the physical world are not always replicated in the virtual realm. High-speed Internet communication has not only facilitated the growth of legitimate business, but it has bolstered criminals' abilities to operate in an environment where they can broaden their pool of potential targets and rapidly exploit their victims. Frauds and schemes that were once conducted face-to-face can now be carried out remotely from across the country or even across the world. For instance, criminals can rely upon botnets to target victims across the globe without crossing a single border themselves. Cyber Borders. While cyberspace crosses physical borders, boundaries within cyberspace both jurisdictional and technological still exist. Some web addresses, for instance, are country-specific, and the administration of those websites is controlled by particular nations. Another barrier in cyberspace involves the lines between the Surface Web and the Deep Web. Crossing these boundaries may involve subscriptions or fee-based access to particular website content. Certain businesses news sites, journals, file-sharing sites, and others may require paid access. Other sites may only be accessed through an invitation. Do malicious actors need, or benefit from, the Dark Web to carry out their activities? Researchers have pointed to pros and cons of relying upon the anonymity of the Dark Web. Criminals selling illicit goods may benefit from the Dark Web's added protection of anonymity by being better able to evade law enforcement. However, they may have more trouble getting business. Trend Micro's study of the Dark Web notes that on it, "[s]ellers suffer from lack of reputation caused by increased anonymity. Being untraceable can present drawbacks for a seller who cannot easily establish a trust relationship with customers unless the marketplace allows for it." In other words, anonymity can be a barrier online if one is trying to sell goods and has not been otherwise vetted. <3.3. Payment on the Dark Web> Bitcoin is the currency often used in transactions on the Dark Web. It is a decentralized digital currency that uses anonymous, peer-to-peer transactions. Individuals generally obtain bitcoins by accepting them as payment, exchanging them for traditional currency, or "mining" them. When a bitcoin is used in a financial transaction, the transaction is recorded in a public ledger, called the block chain. The information recorded in the block chain is the bitcoin addresses of the sender and recipient. An address does not uniquely identify any particular bitcoin; rather, the address merely identifies a particular transaction. Users' addresses are associated with and stored in a wallet. The wallet contains an individual's private key, which is a secret number that allows that individual to spend bitcoins from the corresponding wallet, similar to a password. The address for a transaction and a cryptographic signature are used to verify transactions. The wallet and private key are not recorded in the public ledger; this is where Bitcoin usage has heightened privacy. Wallets may be hosted on the web, by software for a desktop or mobile device, or on a hardware device. <4. Government Use of the Dark Web> Because of the anonymity provided by Tor and other software such as I2P, the Dark Web can be a playground for nefarious actors online. As noted, however, there are a number of areas in which the study and use of the Dark Web may provide benefits. This is true not only for citizens and businesses seeking online privacy, but also for certain government sectors namely the law enforcement, military, and intelligence communities. <4.1. Law Enforcement> Just as criminals can leverage the anonymity of the Dark Web, so too can law enforcement. It may use this to conduct online surveillance and sting operations and to maintain anonymous tip lines. While individuals may anonymize activities, some have speculated about means by which law enforcement can still track malicious activity. As noted, the FBI has put resources into developing malware that can compromise servers in an attempt to identify certain users of Tor. Since 2002, the FBI has reportedly used a "computer and internet protocol address verifier" (CIPAV) to "identify suspects who are disguising their location using proxy servers or anonymity services, like Tor." It has been using this program to target "hackers, online sexual predators, extortionists, and others." Law enforcement has also reportedly been working with companies to develop additional technologies to investigate crimes and identify victims on the Dark Web. In addition to developing technology to infiltrate and deanonymize services such as Tor, law enforcement may rely upon more traditional crime fighting techniques; some have suggested that law enforcement can still rely upon mistakes by criminals or flaws in technology to target nefarious actors. For instance, in 2013 the FBI took down the Silk Road, then the "cyber-underworld's largest black market." Reportedly, "missteps" by the site's operator led to its demise; some speculate that "federal agents found weaknesses in the computer code used to operate the Silk Road website and exploited those weaknesses to hack the servers and force them to reveal their unique identifying addresses. Federal investigators could then locate the servers and ask law enforcement in those locations to seize them." Less than one month after federal agents disbanded the Silk Road, another site (Silk Road 2.0) came online. After discovering that the site's proprietor made critical errors, such as using his personal email address to register the servers, federal agents seized the servers and shut down the site. While law enforcement may aim to defeat criminals operating in the Dark Web technologically, some of their strongest tools may be traditional law enforcement crime-fighting means. For example, law enforcement can still request information from entities that collect identifying information on users. In March 2015, federal investigators "sent a subpoena to Reddit demanding that the site turn over a collection of personal data about five users of the r/darknetmarkets forum [a subreddit where users discussed anonymous online sales of drugs, weapons, stolen financial data, and other contraband]." Though, as some have suggested, such law enforcement actions could drive these conversations and activities to anonymous forums such as those on Tor. <4.2. Military and Intelligence> Anonymity in the Dark Web can be used to shield military command and control systems in the field from identification and hacking by adversaries. The military may use the Dark Web to study the environment in which it is operating as well as to discover activities that present an operational risk to troops. For instance, evidence suggests that the Islamic State (IS) and supporting groups seek to use the Dark Web's anonymity for activities beyond information sharing, recruitment, and propaganda dissemination, using Bitcoin to raise money for their operations. In its battle against IS, the Department of Defense (DOD) can monitor these activities and employ a variety of tactics to foil terrorist plots. Tor software can be used by the military to conduct a clandestine or covert computer network operation such as taking down a website or a denial of service attack, or to intercept and inhibit enemy communications. Another use could be a military deception or psychological operation, where the military uses the Dark Web to plant disinformation about troop movements and targets, for counterintelligence, or to spread information to discredit the insurgents' narrative. These activities may be conducted either in support of an ongoing military operation or on a stand-alone basis. DOD's Defense Advanced Research Projects Agency (DARPA) is conducting a research project, called Memex, to develop a new search engine that can uncover patterns and relationships in online data to help law enforcement and other stakeholders track illegal activity. Commercial search engines such as Google and Bing use algorithms to present search results by popularity and ranking, and are only able to capture approximately 5% of the Internet. By sweeping websites that are often ignored by commercial search engines, and capturing thousands of hidden sites on the Dark Web, the Memex project ultimately aims to build a more comprehensive map of Internet content. Specifically, the project is currently developing technologies to "find signals associated with trafficking in prostitution ads on popular websites." This is intended to help law enforcement target their human trafficking investigations. Similar to the military's use of the Dark Web, the Intelligence Community's (IC's) use of it as a source of open intelligence is not a secret, though many associated details are classified. According to Admiral Mike Rogers, Director of the National Security Agency (NSA) and Commander of U.S. Cyber Command, they "spend a lot of time looking for people who don't want to be found." Reportedly, an investigation into the NSA's XKeyscore program one of the programs revealed by Edward Snowden's disclosure of classified information demonstrated that any user attempting to download Tor was automatically fingerprinted electronically, allowing the agency to conceivably identify users who believe themselves to be untraceable. While specific IC activities associated with the Deep Web and Dark Web may be classified, at least one program associated with Intelligence Advanced Research Projects Activity (IARPA) may be related to searching data stored on the Deep Web. Reportedly, conventional tools such as signature-based detection don't allow researchers to anticipate cyber threats; as such, officials are responding to rather than anticipating and mitigating these attacks. The Cyber-attack Automated Unconventional Sensor Environment (CAUSE) program seeks to develop and test "new automated methods that forecast and detect cyber-attacks significantly earlier than existing methods." It could use factors such as actor behavior models and black market sales to help forecast and detect cyber events. <5. Going Forward> The Deep Web and Dark Web have been of increasing interest to researchers, law enforcement, and policy makers. However, clear data on the scope and nature of these layers of the Internet are unavailable; anonymity often afforded by services such as Tor for users accessing the deepest corners of the web contributes to this lack of clarity, as does the sometimes temporary nature of the websites hosted there. Individuals, businesses, and governments may all rely upon the digital underground. It may be used for legal and illegal activities ranging from keeping sensitive communications private to selling illegal contraband. Despite some reaching for increased privacy and security online, researchers have questioned whether there will be a corresponding uptick in individuals turning to anonymizing services such as Tor. They've suggested that while there may not be the incentive for individuals to migrate their browsing to these anonymizing platforms, "it is much more likely for technological developments related to the Dark Web to improve the stealthiness of darknets." As such, law enforcement and policy makers may question how best to contend with evolving technology such as encryption and the challenges of attribution in an anonymous environment to effectively combat malicious actors who exploit cyberspace, including the Dark Web.

The layers of the Internet go far beyond the surface content that many can easily access in their daily searches. The other content is that of the Deep Web, content that has not been indexed by traditional search engines such as Google. The furthest corners of the Deep Web, segments known as the Dark Web, contain content that has been intentionally concealed. The Dark Web may be used for legitimate purposes as well as to conceal criminal or otherwise malicious activities. It is the exploitation of the Dark Web for illegal practices that has garnered the interest of officials and policy makers. Individuals can access the Dark Web by using special software such as Tor (short for The Onion Router). Tor relies upon a network of volunteer computers to route users' web traffic through a series of other users' computers such that the traffic cannot be traced to the original user. Some developers have created tools—such as Tor2web—that may allow individuals access to Tor-hosted content without downloading and installing the Tor software, though accessing the Dark Web through these means does not anonymize activity. Once on the Dark Web, users often navigate it through directories such as the "Hidden Wiki," which organizes sites by category, similar to Wikipedia. Individuals can also search the Dark Web with search engines, which may be broad, searching across the Deep Web, or more specific, searching for contraband like illicit drugs, guns, or counterfeit money. While on the Dark Web, individuals may communicate through means such as secure email, web chats, or personal messaging hosted on Tor. Though tools such as Tor aim to anonymize content and activity, researchers and security experts are constantly developing means by which certain hidden services or individuals could be identified or "deanonymized." Anonymizing services such as Tor have been used for legal and illegal activities ranging from maintaining privacy to selling illegal goods—mainly purchased with Bitcoin or other digital currencies. They may be used to circumvent censorship, access blocked content, or maintain the privacy of sensitive communications or business plans. However, a range of malicious actors, from criminals to terrorists to state-sponsored spies, can also leverage cyberspace and the Dark Web can serve as a forum for conversation, coordination, and action. It is unclear how much of the Dark Web is dedicated to serving a particular illicit market at any one time, and, because of the anonymity of services such as Tor, it is even further unclear how much traffic is actually flowing to any given site. Just as criminals can rely upon the anonymity of the Dark Web, so too can the law enforcement, military, and intelligence communities. They may, for example, use it to conduct online surveillance and sting operations and to maintain anonymous tip lines. Anonymity in the Dark Web can be used to shield officials from identification and hacking by adversaries. It can also be used to conduct a clandestine or covert computer network operation such as taking down a website or a denial of service attack, or to intercept communications. Reportedly, officials are continuously working on expanding techniques to deanonymize activity on the Dark Web and identify malicious actors online.

The Commerce Clause provides that "Congress shall have Power ... To regulate Commerce ... among the several States...." The Supreme Court has long held that the Clause prohibits states from unduly burdening interstate commerce even in the absence of federal regulation. This restriction, known as the dormant or negative Commerce Clause, "reflect[s] a central concern of the Framers" that "the new Union would have to avoid the tendencies toward economic Balkanization that had plagued relations among the Colonies and later among the States under the Articles of Confederation." Thus, the dormant Commerce Clause "prevent[s] a State from retreating into economic isolation or jeopardizing the welfare of the Nation as a whole, as it would do if it were free to place burdens on the flow of commerce across its borders that commerce wholly within those borders would not bear." A further rationale is that out-of-state entities subject to any burden are likely not in a position to use the state's political process to seek relief. The dormant Commerce Clause prohibits state laws that discriminate against interstate commerce. Thus, while a state law that "regulates even-handedly to effectuate a legitimate local public interest" and has "only incidental" effect on interstate commerce is constitutionally permissible "unless the burden imposed on such commerce is clearly excessive in relation to the putative local benefits" ("the Pike test"), a discriminatory state law is "virtually per se invalid." Traditionally, such laws have only been permissible if they meet the high standard of "advanc[ing] a legitimate local purpose that cannot be adequately served by reasonable nondiscriminatory alternatives." It would appear, therefore, that the bond taxing schemes used by almost all of the states, which exempt the interest on state-issued bonds while taxing the interest on other states' bonds, are facially discriminatory and should be subject to a high level of scrutiny. However, a wrinkle to this analysis was added in April 2007 when the Supreme Court decided a case, United Haulers Ass ' n, Inc. v. Oneida-Herkimer Solid Waste Mgmt. Authority , in which a plurality of the Court subjected a facially discriminatory state law to a lower standard of scrutiny because it benefitted a public entity, as opposed to an in-state private entity. The challenged law required trash haulers to deliver waste to a processing facility owned by a public entity. The Court had previously struck down a similar law, but distinguished the two cases because the processing facility in the prior case was privately owned while the United Haulers facility was publicly owned. In United Haulers , the Court found "[c]ompelling reasons" for distinguishing between state laws that favor governmental units and those that favor in-state private entities over their competitors. The Court, stating that "any notion of discrimination assumes a comparison of substantially similar entities," reasoned that state and local governments are not substantially similar to private entities due to their public welfare responsibilities. These responsibilities, the Court explained, meant that laws favoring governmental units have "any number of legitimate goals," while laws favoring in-state private entities generally represent "simple economic protectionism." Thus, the Court reasoned, such laws should not be viewed with "equal skepticism." The Court explained that treating them equally "would lead to unprecedented and unbounded interference by the courts with state and local government," which was particularly inappropriate when the challenged law addressed a traditional government function such as waste disposal. A majority of the Court could not agree on the standard under which to examine laws favoring public entities. A plurality of four justices stated that the proper standard was the Pike test that is, whether "the burden imposed on interstate commerce is clearly excessive in relation to the putative local benefits." The plurality did not find the challenged law's burden to be excessive to its benefits, which included providing health and environmental benefits and an effective way to finance waste-disposal services. <1. Market Participant Doctrine> The dormant Commerce Clause is not implicated when a state acts as a market participant as opposed to a market regulator. This is because the "Commerce Clause responds principally to state taxes and regulatory measures impeding free private trade in the national marketplace," and "[t]here is no indication of a constitutional plan to limit the ability of the States themselves to operate freely in the free market." The market participant doctrine does not apply when the state is acting in its governmental capacity by assessing and computing taxes. <2. Court Cases> It appears only two cases have addressed whether state laws taxing interest earned on bonds issued by other states while exempting interest earned on bonds issued by that state violate the Commerce Clause. In 1994, an Ohio appellate court held in Shaper v. Tracy that such treatment was constitutional. In 2006, the Kentucky court of appeals held the opposite in Kentucky Department of Revenue v. Davis . In November 2007, the U.S. Supreme Court heard oral arguments in Davis . <2.1. Shaper v. Tracy> In the Shaper case, an Ohio court of appeals rejected the claim made by an Ohio taxpayer that the state's bond taxing scheme was unconstitutional. The court began by agreeing with the taxpayer that the market participant doctrine did not apply because Ohio was acting as a market regulator, and not participant, when it determined how to tax out-of-state bonds. However, the court then ruled that the taxing scheme did not implicate the Commerce Clause because the scheme benefitted the state. The court based this conclusion on its analysis of the Supreme Court's Commerce Clause jurisprudence, which the court found to only involve challenges to state actions giving in-state private entities a competitive advantage over out-of-state entities, and not challenges to state actions benefitting the state itself. The court, while noting that no Supreme Court decision was directly on point, found two cases to be useful. The first was Bonaparte v. Tax Court, in which the Supreme Court determined that a state law exempting state-issued public debt held by residents, while taxing non-residents, did not violate the Full Faith and Credit Clause. The court placed significance on the Supreme Court's statements in Bonaparte that "the Constitution does not prohibit a State from including in the taxable property of her citizens so much of the registered public debt of another State as they respectively hold, although the debtor State may exempt it from taxation or actually tax it" and "[w]e know of no provision of the Constitution of the United States which prohibits such taxation." The second case was South Carolina v. Baker , in which the Supreme Court held that the federal government could tax state-issued bonds. While noting that the tax in Baker was not challenged under the Commerce Clause, the Shaper court quoted the Supreme Court's statement that "[t]he owners of state bonds have no constitutional entitlement not to pay taxes on income they earn from the bonds and States have no constitutional entitlement to issue bonds paying lower interest rates than other issuers." The court, after noting that Ohio had a "legitimate interest in tapping a major source of tax revenue" and bond purchasers are "major beneficiaries" of the public purposes for which the bond proceeds would be used, concluded by stating it could not hold the Ohio law unconstitutional "given the lack of any precedent to apply the Commerce Clause to this type of taxation scheme." <2.2. Dep't of Revenue of Kentucky v. Davis> In the Davis case, the Kentucky court of appeals held that the state's bond taxing scheme violated the Commerce Clause. The court began by noting that the "'fundamental command' of the Commerce Clause is that 'a State may not tax a transaction or incident more heavily when it crosses state lines than when it occurs entirely within the State,'" and therefore discriminatory state laws were presumptively invalid. Based on this, the court reasoned that "[c]learly, Kentucky's bond taxation system is facially unconstitutional as it obviously affords more favorable taxation treatment to in-state bonds than it does to extraterritorially issued bonds." The court rejected the state's argument that it should adopt the Shaper court's holding, stating that the Shaper analysis was incomplete because "a potentially problematic and constitutionally infirm statute does not become permissible simply because it has not been previously found to be unconstitutional." The court also dismissed the relevance of the Bonaparte decision because it dealt with the Full Faith and Credit Clause and not the Commerce Clause. Finally, the court rejected the argument that Kentucky's taxing scheme did not implicate the dormant Commerce Clause because the state was acting as a market participant, explaining that Kentucy was a market participant when issuing the bonds but a market regulator when choosing how to tax its citizens. The U.S. Supreme Court heard oral arguments in the Davis case on November 5, 2007. A transcript of the oral arguments is available on the Supreme Court's website at http://www.supremecourtus.gov/oral_arguments/argument_transcripts/06-666.pdf . <2.3. Effect of United Haulers on Davis> As discussed, the Supreme Court decided United Haulers just prior to granting certiorari in Davis . Under the Court's jurisprudence prior to United Haulers , it seems there was a significant chance that Kentucky's bond taxing scheme would be unconstitutional because it facially discriminates against out-of-state entities, and the Court's jurisprudence suggested that such laws were impermissible unless the state could show the law served a legitimate state purpose and there were no other reasonable ways to advance that purpose. This high level of scrutiny is generally fatal to the challenged state law. The United Haulers decision suggests a different outcome by indicating that a less stringent analysis applies when the state law benefits state and local governments as opposed to in-state private entities. Questions exist about how the Court may apply United Haulers to Davis , in part because only a plurality in United Haulers agreed it was appropriate to use the Pike test in examining the permissibility of state laws benefitting public entities. Furthermore, it is possible the Court will distinguish Davis from United Haulers . One basis for doing so is that the state law in United Haulers benefitted a publicly owned entity over private entities, while the one in Davis benefits states over other states. The Court's analysis in United Haulers was based on its finding that while "any notion of discrimination assumes a comparison of substantially similar entities," governmental units and private entities are not "substantially similar" because the former have public welfare responsibilities not imposed on the latter. Thus, a key question in Davis seems to be whether Kentucky is "substantially similar" to the other states whose bonds it taxes; if so, that could be constitutionally fatal for Kentucky's bond taxing scheme. On the other hand, if the Court does apply an analysis similar to United Haulers in Davis , this suggests that Kentucky's taxing scheme would be constitutionally permissible. Policy concerns, such as a desire to not upset the state bond market and the expectations of bond purchasers, could provide additional justifications for the Court to find the taxing scheme to be constitutional. <3. Congressional Authority to Address the Issue> Congress's authority under the Commerce Clause has been described as plenary and limited only by other constitutional provisions. Congress may, therefore, regulate by expressly authorizing the states to take an action that would otherwise be an unconstitutional burden on interstate commerce. Thus, if the Court were to hold that Kentucky's taxing scheme violates the dormant Commerce Clause, it appears Congress could authorize such tax treatment so long as it did not violate any other constitutional provision.

Most states exempt from state income taxes the interest earned on bonds issued by that particular state and its political subdivisions, while taxing the interest earned on bonds issued by other states and their political subdivisions. Some argue that these state tax schemes violate the Commerce Clause by discriminating against out-of-state bonds. Courts in two states have examined this issue. On November 5, 2007, the U.S. Supreme Court heard oral arguments in one of these cases, Department of Revenue of Kentucky v. Davis.

<1. Current Program Features> The Section 8 Housing Choice Voucher program has come under increasing criticism from the Administration and Congress for its cost and its complexity. Recent changes in the way the program is funded have largely addressed concerns at the federal level about "spiraling costs"; however, the new funding structure has not reduced budget pressures for the local public housing authorities (PHAs) that administer the program. Noting these concerns, the Administration has argued in each of the past several years that the existing Section 8 voucher program should be dismantled and replaced with a new, broader-purpose grant program. Thus far, low-income housing advocates and PHA groups have generally opposed the Administration's reform initiatives, although both have begun to call for some type of reform to lessen the administrative burdens on PHAs and to help them better administer their voucher programs in a budget-constrained environment. The Administration's reform proposals have changed over the years, and they have differed substantially from the reform proposals supported by PHA groups and low-income housing advocates. Despite their differences, each proposal would alter several key features of the current program, which are discussed below. <1.1. Administration> The current Section 8 Housing Choice Voucher program, and its approximately 2 million vouchers, are administered by more than 2,500 local PHAs across the country. PHAs vary greatly both in their size and their capacity. Some administer as few as 10 vouchers, while one PHA, the New York City Housing Authority, administers almost 90,000. Half of all PHAs administer 250 or fewer vouchers. Some PHAs have a full-time director and a large staff; others have one person serving part-time as director and staff. This heterogeneity has been criticized by some researchers, housing advocates, and the Administration. They argue that housing markets are regional, and thus that housing programs should be administered on a regional level. They point out that most other social service programs serving the low-income population such as Temporary Assistance for Needy Families, Child Care Assistance, and Food Stamps are administered at the state level. If the voucher program were administered at the state level, they contend, it might be easier to coordinate it with other services. The organizations representing PHAs have disagreed, arguing in favor of the current locally driven and focused system. PHAs have important local connections with entities ranging from landlords to local zoning boards, connections that states, they contend, would not have. Furthermore, they have expertise in administering federal housing assistance for the poor both through the voucher program and the federal public housing program. <1.2. Eligible Uses of Funds> Today's voucher program provides a defined subsidy, called a voucher, that a family can use to help pay its housing costs in the private market. That voucher pays roughly the difference between rent and the tenant's contribution. In some cases, families can use their vouchers to help pay for a mortgage, but only if their local PHA chooses to run a homeownership voucher program. The bulk of PHA funding, which comes from HUD, is used to renew vouchers. No funds have been provided for new vouchers since 2002. PHAs earn administrative fees, which they can use for other purposes, such as providing supportive services, downpayment or security deposit assistance, or housing search assistance. This system is governed by hundreds of pages of regulations and guidance that make the program, some argue, overly prescriptive and difficult to administer. The Administration and PHAs agree that the current structure limits the ability to undertake innovative initiatives. Reflecting this concern, the Bush administration has proposed redefining the concept of a voucher by instead providing funds that could be used for rental assistance, homeownership assistance, and supportive services, as defined by the grantee. A "voucher" would no longer have uniform meaning, and PHAs could provide more or less generous assistance to families at their discretion, outside of most current federal rules (i.e., quality standards, portability, income targeting, income-based rent, etc.). Such a reform would be consistent with the 1996 welfare reform law that abolished the Aid to Families with Dependent Children (AFDC) program and replaced it with a broader-purpose Temporary Assistance for Needy Families (TANF) block grant. Critics of this type of administrative flexibility at the PHA level contend that many of the current rules governing the voucher program are designed to protect voucher recipients. They worry that the needs of low-income families could go unmet if federal rules are abandoned, especially if funding is constrained and PHAs are forced to make difficult tradeoffs. Some further contend that without strong oversight, broad block grants could be open to waste, fraud and abuse. <1.3. Tenant Rents> Under the current rules of the voucher program, families are required to pay roughly 30% of their adjusted incomes toward rent. It is generally accepted that housing is affordable for low-income families if it costs no more than 30% of their adjusted gross income, on the assumption that low-income families need the full remaining 70% to meet their other needs. However, this figure is somewhat arbitrary. For some families with little work, transportation, medical, child care, or other outside costs, 40% or even 50% of income might be a reasonable contribution toward housing costs. In fact, the current voucher program allows families to choose to pay up to 40% of their incomes toward housing costs initially, and even greater amounts upon renewal of a lease. For other families, with high expenses for work, transportation, medical, child care, or other outside costs, some percentage lower than 30% might be the most reasonable contribution. Critics of the current rent calculation, including the Bush Administration and some PHA groups, have argued that PHAs should have the flexibility to modify the existing income-based rent system or adopt new systems partially or fully decoupled from income, such as flat or tiered rents. Under flat rents, families pay a PHA-determined, fixed below-market rent, based on unit size, regardless of their incomes. As incomes change, rent would stay the same. Current law permits PHAs to set flat rents for public housing. Families are permitted to choose to pay flat rents, but must be permitted to switch back to income-based rents. Under tiered rents, PHAs set different flat rents for broad tiers of income. Families pay the rent charged for their income tier, and only fluctuations in income that move them from one tier to another would change their rent. Unless flat or tiered rents were set low, the change would generally result in shallower subsidies paid to families. Shallower subsidies would allow PHAs either to save money or serve more people with the same amount of money, depending on the authority provided by HUD and Congress. Another argument in favor of moving from an income-based rent to a flat rent concerns administrative ease. The current complicated rent calculation, paired with the difficulty of verifying the incomes of tenants, has led to high levels of error in the subsidy calculation. According to a HUD 2001 Quality Control study, 60% of all rent and subsidy calculations contained some type of error. HUD has estimated an annual $2 billion in subsidy over- and under-payments in the Section 8 voucher program. These errors have led the Government Accountability Office (GAO) to designate the Section 8 program a "high risk" program, meaning that it is particularly susceptible to waste, fraud, and abuse. Beginning with the FY2003 Consolidated Appropriations Act ( P.L. 108-7 ), HUD was given access to the National Directory of New Hires, a database that may allow PHAs to better verify income data. There has been some improvement. A 2003 Quality Control study released in 2004 found a 37% reduction in erroneous payments from 2001, although 40% of subsidies were still erroneously calculated. Adopting flat or tiered rents could substantially reduce if not eliminate errors in rent calculations. Another argument in favor of a flat rent structure involves the work disincentives inherent in the current calculation. Since rent goes up as income goes up, families have a disincentive to increase earnings and/or an incentive to hide income. Families, therefore, face an effective 30% tax on any increase in earnings. To get around this problem in the Public Housing program, Congress has instituted a mandatory income disregard; however, no such mandatory disregard exists in the voucher program, except in the case of certain disabled recipients. If PHAs choose to disregard increased earnings, they must pay the difference out of their own budgets or face sanctions from HUD for not accurately calculating subsidies. Under flat or tiered rents, families can generally increase their earnings without facing changes in their rents. Low-income housing advocates generally support income-based rents over flat rents. Flat rents are not as responsive to changes in family income as income-based rents, and their adoption could result in some families paying much more toward rent than is generally considered affordable (30% of income). <1.4. Calculation of Income> Under the current voucher program, rent is based on a family's annual adjusted income. The current system for calculating income has been criticized as cumbersome and prone to errors. Annual income, for the purpose of rent determination, is all amounts that are anticipated to be received by all members of a household during the subsequent 12 months, with some exclusions (such as foster care payments). Anticipating low-income families' future incomes can be very difficult, as their employment is often variable. The composition of a family may also be variable, with members joining or leaving the household over the course of a year. Further, PHAs are expected to verify families' incomes using third-party sources, which can be a time-consuming process. Once the total amount of income has been determined, the family may qualify to have certain amounts deducted from total income, such as $480 per dependent, $400 for elderly and disabled households, and reasonable child care expenses, disability expenses, and certain medical expenses of the elderly or disabled. The complexity of the income determination system is a major factor behind the high rates of error in rent determination. Many of the current requirements are regulatory, rather than statutory, and PHA groups have called on HUD to simplify the process. HUD has stated that it is looking at ways to improve the income calculation process, although no major administrative changes have been made. <1.5. Eligibility> The current voucher program sets initial eligibility for assistance at the very low-income level (50% or below of area median income (AMI)), with a requirement that 75% of all vouchers be targeted to extremely low-income families (30%, or below AMI). The Administration has advocated raising eligibility levels and loosening targeting requirements. They argue that both penalize working families by limiting their eligibility for assistance. Further, serving higher income families could result either in cost savings or the ability to serve more families with the same amount of money. Low-income housing advocates generally support retaining current income eligibility and targeting requirements. They argue that the lowest-income households face the heaviest rent burdens and are the most in need of assistance. <1.6. Work Requirements and Time Limits> The voucher program does not currently have time limits or work requirements. Families that receive voucher assistance can retain that assistance until either they choose to leave the program; they are forced to leave the program (due to non-compliance with program rules or insufficient funding); or their income rises to the point that 30% of their income equals their housing costs, at which point their subsidy is zero. The Public Housing program does have a mandatory eight-hour work or community service requirement for non-elderly, non-disabled tenants; however, most public housing residents are exempted, and it is unclear how thoroughly the provision has been implemented. Some have advocated setting time limits for receipt of voucher assistance and making work a requirement for ongoing eligibility. They argue that under the current system, families have no incentive to increase their incomes or work efforts and leave the program. This concern is exacerbated by the fact that many communities have long waiting lists for assistance, and since new vouchers have not been funded for several years, turnover in the current program is the only way to bring in new families. Adopting a work requirement in the voucher program may help encourage non-elderly, non-disabled households that are not currently working to go to work, although it may not increase their incomes. Research based on the 1996 welfare reform changes ( P.L. 104-193 ) indicates that for many poor families, increases in work do not necessarily translate into greater total income, and most households need work supports (such as child care and transportation assistance) in order to make them successful in becoming financially self-sufficient. Such supportive services are not currently part of the voucher program, and would require additional funding. Furthermore, there is evidence that families with children, those most likely to be affected by work requirements and time limits, leave the program relatively quickly. According to HUD research from 2003, the median length of stay for families with children is two and a half years. Further, it is unclear how low-income families would meet their housing costs after leaving the program if their incomes had not risen significantly. HUD conducted research looking at families with children who left the voucher program over a five-year period, and found that less than 1% of them had incomes sufficient to afford an apartment at the fair market rent in their community. Another option would give incentives to families to increase their work efforts and therefore their incomes. Non-elderly, non-disabled families could be encouraged to find and increase work through expansions in the Family Self-Sufficiency program, which provides work supports and deposits tenant rent increases resulting from work into escrow accounts on their behalf. Low-income housing advocates generally support expanding the FSS program, which encourages work and increases in earnings. However, expanding FSS would not result in cost savings, since as families' incomes rise, their rent increases are deposited in an escrow account. <1.7. Funding Allocation> Prior to FY2003, HUD reimbursed PHAs for the actual cost of their vouchers. The cost of a voucher is equal to roughly the difference between the rent (capped by a maximum set by the PHA and called the payment standard) and the tenant's contribution toward the rent (30% of the tenant's income). PHAs' costs fluctuate as tenants' incomes and market rents increased or decreased, and each year, HUD would ask Congress for funding sufficient to cover what HUD anticipated it would take to fund PHAs' costs. Due partly to changes in the rental market and partly to changes in the rules of the voucher program (such as increases in the payment standard), PHAs' actual costs began rising rapidly in 2002 and 2003. This raised concerns for both the Administration and Congress. Partly in response to these cost increases, the Administration proposed potentially cost-saving changes in both the way that PHAs received funds and in the underlying factors that led to the cost growth, including the amount tenants were asked to contribute toward rent and the maximum payment standard as a part of each of their reform proposals. Congress reacted by changing only the way that PHAs receive their funding. Rather than being reimbursed for their actual costs, PHAs in recent years have received a budget based on what they received in the previous year. This new funding formula has led to problems for many PHAs, whose actual costs are still driven by the difference between rents and incomes in their communities while their funding is capped. As a result, some PHA groups have called for either a change back to an actual cost funding formula or changes to the structure of the voucher program that would allow them to better control their costs. <2. Reform Proposals> Every year since 2003, the President has proposed eliminating the Section 8 voucher program and replacing it with a new initiative. Bills to enact the President's reform have been introduced in Congress, although no further action has been taken. In 2006, a bipartisan voucher reform bill, which would have modified the voucher program but largely retained its current structure, was approved by the House Financial Services Committee, but no further action was taken before the close of the 109 th Congress. Proposals from the 108 th and 109 th Congresses are discussed briefly below; a comparison of bills from the 109 th Congress to current law can be found in Table 1 . <2.1. Proposals from the 108th Congress> <2.1.1. Housing Assistance for Needy Families (HANF)> The 2003 HANF program ( H.R. 1841 and S. 947 , 108 th Congress) was a Bush Administration initiative that would have replaced the existing tenant-based voucher program that is administered by local PHAs with a formula grant to states. Rather than receiving funding for a fixed number of units, states would have received a fixed budget, proportional to the amount of funds the state was receiving under the Housing Choice Voucher program. States would have had broad discretion in how they used their funds, including for homeownership purposes. The Secretary of HUD would have been permitted to lower the 75% targeting requirement to 55%, impose minimum rents, increase eligibility to 80% of area median income, and reduce the frequency of housing quality inspections from annually to every three years. Low-income housing advocates opposed HANF out of concern that it could lead to an erosion of funding and that it would not serve low-income families adequately. PHA groups opposed the proposal to transfer administration to states and also voiced concerns about erosion in funding levels. Although multiple hearings were held, no further action was taken, and HANF was not enacted in the 108 th Congress. <2.1.2. The FY2005 Flexible Voucher Program> The President's Flexible Voucher Program (FVP), was first recommended in the second session of the 108 th Congress in the Administrative Provisions section of the FY2005 HUD budget request. The HUD Secretary testified that the Department did not plan to pursue authorizing legislation. Rather, officials stated during a hearing before the VA, HUD and Independent Agencies Appropriations Subcommittee on March 4, 2004, that they appreciated the leadership of the Appropriations Committees and were asking them to include the provision in the FY2005 appropriations bill. The proposal, like HANF, would have replaced the voucher program with a broader-purpose grant program. Unlike HANF, PHAs would be asked to administer the FVP. They would have received a fixed number of dollars that they could have used to serve as many families as they chose, providing a broad range of assistance ranging from cash grants to ongoing rental assistance. Adoption of FVP would have eliminated caps on how much families could be required to contribute towards rent, increased income eligibility to 80% or below of AMI, and eliminated any targeting requirements. The House Financial Services Committee, in their Views and Estimates of the President's FY2005 Budget, was critical of the President's FVP proposal. The Chairman of the Senate VA, HUD and Independent Agencies Appropriations Subcommittee stated in a hearing on April 1, 2004, that the Flexible Voucher proposal was "a poor substitute for flaws in the program" and that the Committee would not have the "luxury of time to consider fully" the proposal. The FVP was not enacted before the end of the 108 th Congress. <2.2. Proposals from the 109th Congress> <2.2.1. The State and Local Housing Flexibility Act of 2005> The Administration's State and Local Housing Flexibility Act of 2005 (SLHFA) was introduced in the first session of the 109 th Congress by Senator Allard on April 13, 2005, and by Representative Gary Miller on April 28, 2005, as S. 771 and H.R. 1999 , respectively. The bill consisted of three titles. Title I, The Flexible Voucher Act, is discussed further below. Title II, Public Housing Rent Flexibility and Simplification, would have permitted PHAs to alter income and rent calculations for public housing in the same ways as under Title I. Title III, the Moving To Work Program, would have made the current Moving to Work demonstration a permanent program with expanded eligibility for PHAs, and expanded waiver authority for the Secretary of HUD. Title I of SLHFA was similar to the Flexible Voucher Program proposed by the Administration as part of the FY2005 budget request. It would have replaced the current voucher program with a broader-purpose grant program. PHAs would have continued to administer the program, although if they were not meeting the Secretary's performance standards, their funds could be awarded to other entities selected by the Secretary. Under the bill, Flexible Voucher Program funds could be used for six eligible activities: tenant-based rental assistance; project-based rental assistance; tenant-based homeownership assistance for first-time homebuyers; self-sufficiency activities, including escrow savings accounts; other activities, as specified by the Secretary, in support of tenant-based, project-based, or homeownership assistance; and administrative costs. Income eligibility, targeting, subsidy determination, and quality inspection rules would all have been loosened, while portability and enhanced voucher features would have been restricted. The changes in the bill would have been phased in. The Secretary was directed to develop temporary implementing regulations within 90 days of passage, and final regulations, not including funding formulas, within 18 months. The Secretary was also directed to undertake negotiated rulemaking to develop grant and administrative fee allocation formulas, to be published within 24 months. Hearings were held on the SLHFA in the House on May 11, 2005; hearings were not held in the Senate. The President's FY2007 budget request, introduced on February 6, 2006, reiterated HUD's support for the bill. No further action was taken on SLHFA before the close of the 109 th Congress. <2.2.2. The Section 8 Voucher Reform Act of 2006> On May 22, 2006, the Chairman of the Housing and Community Opportunity Subcommittee of the House Financial Services Committee introduced the Section 8 Voucher Reform Act of 2006 ( H.R. 5443 ), a bipartisan Section 8 reform bill cosponsored by the subcommittee's ranking member. It was approved by the subcommittee on June 8, 2006, and by the full committee on June 14, 2006, although no further action was taken before the close of the 109 th Congress. Unlike the Bush Administration proposals, which sought to eliminate the voucher program and replace it with a new program, H.R. 5443 would have retained the basic structure of the current voucher program while implementing changes primarily designed to make the program easier to administer. Specifically, the bill proposed to modify the current definition of income to exclude imputed income from assets; eliminate or replace many of the deductions and allowances from income; provide PHAs with several methods for calculating income; change the targeting threshold to the greater of 30% of AMI or the poverty level; eliminate the gross income calculation for rent; modify income reexamination requirements; and modify the process and timing for conducting housing inspections. Several of these administrative changes would also have affected the public housing and project-based Section 8 programs. H.R. 5443 would have adopted a new renewal funding formula, authorized the use of vouchers to provide downpayment assistance, required the Secretary to develop performance standards, and expanded and made permanent the Moving to Work demonstration. Amendments added during full committee consideration would have authorized a Manufactured Housing pilot, altered the treatment of certain military pay for purposes of several housing programs, and increased the rent levels for certain project-based vouchers in low-income housing tax credit properties. H.R. 5443 received endorsements from PHA groups and low-income housing advocates. As noted earlier, the bill was not enacted before the close of the 109 th Congress.

The Bush Administration has proposed eliminating the Section 8 Housing Choice Voucher program and replacing it with a new program in each of the past several years. While the specifics have changed, each proposal would significantly alter key features of the current program, including its administration, funding distribution, tenant contributions toward rent, initial and ongoing eligibility of families, and the eligible uses of program funds. The first proposal was referenced in the President's FY2004 budget request and was later introduced in the 108th Congress (H.R. 1841/S. 947). Called the Housing Assistance for Needy Families Act of 2003, it would have created a new block grant administered by states—rather than the local public housing authorities (PHAs) that administer the current program—and eliminated many of the current rules governing the program. Hearings were held on the legislation, although no further action was taken. Language to enact the second proposal, called the Flexible Voucher Program (FVP), was included in the Administrative Provisions section of the President's FY2005 budget request. Under the FVP, PHAs would have retained administration of the new grant program, although most of the federal Section 8 voucher rules and regulations would have been eliminated. The Appropriations Committees did not include the language in their versions, nor the final version, of the FY2005 HUD budget, and authorizing legislation was not introduced before the close of the 108th Congress. The President's FY2006 budget request again called for enactment of a Flexible Voucher Program. During the first session of the 109th Congress, a modified version of the FVP was included as Title I of the State and Local Housing Flexibility Act of 2005 (H.R. 1999/S. 771). The President's FY2007 budget request reiterated the Administration's support for the bill. The House Financial Services Committee held hearings on the bill, although no further action was taken before the close of the 109th Congress. In the second session of the 109th Congress, the House Financial Services Committee approved a bipartisan Section 8 voucher reform bill, the Section 8 Voucher Reform Act of 2006 (H.R. 5443). While notably narrower in scope than the President's reform proposals, it would have represented the first major reform of the program since the Quality Housing and Work Opportunity Reconciliation Act of 1998 (P.L. 105-276). It was not enacted before the close of the 109th Congress. This report includes a table comparing the key features of the reform proposals from the 109th Congress. It will not be updated.

Wildfire (or wildland fire), an unplanned and unwanted fire, can have beneficial and harmful impacts on human, historical, cultural, and ecological resources. Wildfires can reduce fuel loads, increase ecosystem health and functioning, and restore fire-adapted ecosystems. At the same time, wildfires can damage timber resources and soils and degrade water quality and watershed functions. Wildfires also can damage communities, destroy homes, and lead to loss of human life. Wildfire management is a series of coordinated activities undertaken by federal, state, and local authorities to prepare for, resolve, and recover from wildfire events. These activities generally are categorized as fuel reduction, preparedness, suppression, and site rehabilitation. A number of federal, state, and local agencies can and do respond to wildfires. States are responsible for responding to wildfires that begin on nonfederal (state, local, and private) lands, except for lands protected by federal agencies under cooperative agreements. The federal government is responsible for responding to wildfires that begin on federal lands. The U.S. Department of Agriculture's Forest Service (FS) carries out wildfire response and management across the 193 million acres of national forests and national grasslands. The Department of the Interior (DOI) carries out wildfire management and response on more than 400 million acres of national parks, wildlife refuges and preserves, Indian reservations, and other public lands. Sometimes more than one agency may respond, depending on where the fire occurs and spreads, the potential threats, and the expertise required. In these cases, the National Interagency Fire Center (NIFC) coordinates the national mobilization of resources for wildfire and other incidents throughout the United States. Both FS and DOI receive annual discretionary appropriations for wildfire management activities through the Interior, Environment, and Related Agencies appropriations bills. Wildfire management funding for DOI is provided to the Office of Wildland Fire (a department-level office), which then allocates the funding to four DOI agencies Bureau of Land Management (BLM), Bureau of Indian Affairs (BIA), National Park Service (NPS), and U.S. Fish and Wildlife Service (FWS). Congress also provides funding for wildfire-related activities through the Federal Emergency Management Agency, such as emergency financial assistance for some nonfederal wildfires through Fire Management Assistance Grants and the Disaster Relief Fund; those funds and activities are discussed in other CRS products. <1. Funding History> Wildfire management appropriations began to increase in the late 1990s and rose significantly after FY2000, beginning with the severe 2000 fire season (see Figure 1 ). Since then, wildfire appropriations have varied between a low of $2.9 billion in FY2012 and a high of $5.2 billion in FY2008 (as measured in constant FY2017 dollars). The majority of wildfire management appropriations go to FS. From FY1994 to FY2017, FS received around 71% of the total wildfire management appropriations annually on average and DOI received 29%. FS has received a slightly larger share more recently, though, receiving 76% annually on average over the past 10 years (while DOI's share has decreased to 24% over that time period). FS wildfire management appropriations constitute a relatively large portion of total FS discretionary funding. For example, over the past 10 years, wildfire appropriations have made up approximately 50% of the agency's discretionary funds, on average (see Figure 2 ), although not all of those funds counted against discretionary spending limits. In comparison, wildfire appropriations account for about 8% of DOI's total discretionary appropriations, on average. Table 1 displays annual total wildfire management appropriations for the past 10 years, from FY2008 to FY2017. Over that time period, combined FS and DOI wildfire management appropriations have averaged $3.7 billion. <2. Appropriations Accounts, Programs, and Activities> DOI and FS each have two similarly structured accounts for wildfire funding: a Wildland Fire Management (WFM) account and a Federal Land Assistance, Management, and Enhancement Act (FLAME) account. FLAME is a reserve fund for wildfire suppression that requires certain conditions to be met to transfer funding from the FLAME account to the WFM account. Programs within these accounts generally correspond to the different categories of wildland fire management activities. The WFM appropriation is distributed among two programs: Fire Operations and Other Fire Operations . The Fire Operations program receives the bulk of the WFM appropriation and funds two activities: preparedness and suppression. The Other Fire Operations program funds hazardous fuels reduction activities, joint fire research and science programs (e.g., NIFC operations), and programs to provide financial and technical assistance for state and volunteer wildfire management. Prior to FY2017, appropriations to FS and DOI wildfire accounts typically were designated by Congress to remain available until expended, meaning those funds were "no-year" appropriations (i.e., appropriations without fiscal year limitations) available in future years. The FY2017 appropriations law ( P.L. 115-31 ) specified that funds in many FS accounts including the WFM account but excluding the FLAME account were to remain available through the end of FY2020. DOI's WFM and FLAME accounts were designated as no-year appropriations. <2.1. Wildland Fire Management Account> Of the two programs funded by both agencies' WFM accounts, Fire Operations receives the largest share of the funding, accounting for 64% of the combined WFM appropriation on average over the last 10 years. Within FS's and DOI's respective WFM accounts, the Fire Operations programs fund similar activities for both agencies: preparedness and suppression. FS also uses suppression funds for emergency stabilization and initial site rehabilitation activities (called burned area emergency response). DOI also uses some suppression funds for emergency stabilization, but DOI also receives funds for burned area response within its Other Fire Operations program. In addition, DOI's Other Fire Operations program includes appropriations for fuels management, joint fire science activities, and funds for facilities construction and maintenance. For FS, the Other Fire Operations program also includes appropriations for joint fire science activities and fuels management, albeit under a different name: Hazardous Fuels Management. FS appropriations for facilities and construction activities are funded in other agency accounts. <2.1.1. Fire Operations: Preparedness> Preparedness is defined to include any activity that leads to safe, efficient, and cost-effective fire management, and it includes the range of tasks necessary to protect against, respond to, and recover from incidents. Appropriations for preparedness are used to support efforts that assist with fire prevention and detection, equipment, training, and baseline personnel. FS uses preparedness funds to establish and maintain web-based decision support tools; manage and modernize aviation assets; and conduct predictive services analysis, among other things. DOI uses preparedness funds to prepare and execute fire management plans and cooperative agreements; provide infrastructure support; manage firefighting assets; support NIFC; and more. Congress appropriated a combined total of $1.42 billion for preparedness activities in FY2017 ($1.08 billion for FS; $333 million for DOI), nearly level to the $1.41 billion appropriated in FY2016. Over the past 10 years (FY2008-FY2017), funding for the DOI preparedness activity has been $294 million on average annually. Funding fluctuated at or below $290 million until FY2015 and has increased annually for the past three fiscal years. Appropriations for FS preparedness has averaged $901 million annually over the past 10 years, although FS preparedness funding increased by close to 50% from FY2011 ($674 million) to FY2012 ($1.0 billion). This increase was mostly due to a restructuring of the preparedness and suppression activities, which included shifting aviation and other changes to the preparedness activity. Since the budget restructuring, FS preparedness appropriations have averaged $1.05 billion annually (FY2012-FY2017). <2.1.2. Fire Operations: Suppression> Suppression is the work associated with extinguishing or confining a fire. Resolution of an active wildfire may include activities ranging from immediate and aggressive measures to suppress a wildfire (e.g., personnel and large air tanker response for a wildfire moving quickly toward a populated area), to immediate but less intense measures (e.g., monitoring a grassland wildfire where there is no immediate threat to humans). Funds for suppression typically are provided through two accounts in annual Interior appropriations laws: the WFM account and the FLAME account. If the funding in the WFM suppression activity and the FLAME account is exhausted during any given fiscal year, FS and DOI are authorized to transfer funds from their other accounts to pay for continued suppression activities. This practice is sometimes referred to as fire borrowing or fire transfers . Congress also may provide additional funds for suppression activities through emergency or supplemental appropriations. Suppression funding data are thus presented in this report in three different sections corresponding to the three different funding sources: WFM suppression, FLAME, and supplemental appropriations. They are collectively discussed in the " Total Suppression Appropriations " section of this report. WFM suppression appropriations are used primarily for wildfire response. Some items covered by the FS suppression activity are firefighter salaries, aviation asset operations, and incident support functions. The FS suppression activity also covers personnel and resources for the Burned Area Emergency Response (BAER) program. Items covered by the DOI suppression activity include selected personnel expenses above what is covered by the preparedness subaccount, temporary emergency firefighters, aircraft flight operations and support, and initial emergency stabilization activities. FS and DOI also may assist each other with suppression activities, on a reciprocal non-reimbursement basis up to $50 million annually. Both FS and DOI typically request and receive appropriations for suppression funds based on the average of the previous 10 years of suppression obligations. The suppression activity received $1.64 billion in FY2017 ($1.25 billion for FS; $395 million for DOI), an increase of more than $540 million from FY2016 levels ($1.10 billion combined). This nearly 50% increase was primarily because Congress appropriated the full 10-year suppression obligation average entirely in the WFM suppression activity in FY2017. Previously, Congress had appropriated about 70% of the 10-year obligation average in the WFM suppression activity, and the remaining 30% was appropriated in the FLAME account. <2.1.3. Other Fire Operations: Hazardous Fuels Management> Fuel reduction is the manipulation (including combustion) or removal of fuels to reduce the likelihood of ignition and/or to lessen potential damage and resistance to control. FS's Hazardous Fuels Management appropriation and DOI's Fuels Management appropriation are used for fuel reduction projects, or treatments , on federal lands and in high-priority areas in the wildland-urban interface, the area where structures are intermingled with or adjacent to vegetated wildlands such as forests or rangelands. In FY2017, Congress appropriated $570.0 million for hazardous fuels reduction activities to both FS ($390.0 million) and DOI ($180.0 million), a 5% increase over the total FY2016 level ($545.0 million). On average, the combined hazardous fuels reduction appropriation has been $516.1 million annually over the last 10 years (FY2008-FY2017). Since becoming a stand-alone budget item in FY2001, the Hazardous Fuels subaccount has received the third-largest share of WFM appropriations for both agencies (after suppression and preparedness). <2.1.4. Other Fire Operations: Miscellaneous Activities> FS and DOI also receive appropriations for several other activities within their respective Other Fire Operations subaccounts. In FY2017, Congress appropriated $148 million combined for all of these activities ($113 million for FS; $35 million for DOI), a 1% decrease from the total FY2016 level ($149 million). Over the past 10 years, Congress appropriated $159 million annually on average ($125 million for FS; $34 million for DOI). For both FS and DOI, this includes appropriations for the joint fire science program, an interagency partnership that works with and competitively funds other government and private institutions to conduct, promote, and disseminate wildfire science research. For FS, this also includes appropriations to conduct research for the National Fire Plan and to provide technical and financial assistance to state and volunteer fire departments. DOI also receives appropriations for burned area response within its Other Fire Operations program, as well as for facilities construction and maintenance. These funds are competitively allocated among the DOI bureaus. <2.2. FLAME> In enacted appropriations for FY2010, Congress established the FLAME accounts to cover the costs of large or complex fires and to be used when amounts provided in the FS and DOI WFM accounts for suppression are exhausted. Both the Secretary of Agriculture and the Secretary of the Interior may transfer funds from their respective agency's FLAME account into their agency's WFM account for suppression activities, upon a secretarial declaration. The declaration may be issued if a fire covers at least 300 acres or threatens lives, property, or resources, among other criteria. In establishing FLAME, the conferees on the FY2010 Interior appropriations bill stated their intent that the funding in the FLAME account, together with appropriations to the WFM account, should fully fund anticipated wildfire suppression needs and prevent future borrowing of funds from non-fire programs. From the FLAME accounts' establishment in FY2010 through FY2015, Congress appropriated $370.9 million on average annually to both FLAME accounts. In FY2016, Congress appropriated significantly more to the FLAME accounts, $1.0 billion in total ($823.0 million to FS; $177.0 million to DOI). This increase was largely in response to the severity and cost of the 2015 fire season. In FY2017, Congress appropriated $407.0 million to the FLAME accounts ($342.0 million to FS; $65.0 million to DOI). Congress designated the FY2017 FLAME funds as emergency requirements, consistent with the direction in Section 502(d) of the FLAME Act. This means the FY2017 FLAME funds were not subject to procedural or statutory budgetary enforcement, such as discretionary spending limits established by the Budget Control Act of 2011. <2.3. Supplemental Appropriations> Congress also has provided additional funds for suppression activities through supplemental legislation, including in the following fiscal year's annual appropriations law for the agencies. These appropriations have been requested to fund not only fire transfer reimbursements but also current suppression and rehabilitation costs, among other things. Bill or report language typically specifies how the additional funds are to be used. Congress has, at times, designated the supplemental funds as emergency funding, not subject to certain discretionary spending limits. For example, $700 million in wildfire suppression appropriations was provided for FS in FY2016 and designated as emergency spending. By contrast, the supplemental appropriations provided in FY2013 and FY2014 for wildfire suppression were not similarly designated. Congress has provided additional appropriations for suppression in 5 of the 10 fiscal years since FY2008 (see Table 1 ). Since the establishment of the FLAME accounts in FY2010, Congress has provided additional funds in three fiscal years (FY2013, FY2014, and FY2016). <2.4. Total Suppression Appropriations> For any given fiscal year, total suppression appropriations to DOI and FS may be a combination of three sources: the WFM suppression activity, the FLAME account, and supplemental appropriations (see Figure 3 ). In FY2017, the total combined suppression appropriation was $2.1 billion ($1.59 billion for FS; $460 million for DOI). Over the past 10 years, the total combined suppression appropriation has averaged $1.98 billion ($1.39 billion for FS; $381 million for DOI). The largest combined appropriation was in FY2008, when Congress provided $2.85 billion ($3.31 billion in FY2017 dollars) in total suppression appropriations. The FY2008 total appropriation included a total of $1.71 billion in nominal dollars provided in three supplemental laws to cover suppression costs incurred in both FY2007 and FY2008. <3. FY2018 Wildfire Appropriations> <3.1. Continuing Appropriations> Because no full-year appropriations law was enacted before October 1, 2018, Congress has provided continuing appropriations in four continuing resolutions (CRs) for FY2018. The CRs generally have provided funding at the FY2017 levels through February 8, 2018, minus an across-the-board rescission of 0.6791%. The first CR ( P.L. 115-56 ) continued the FY2017 emergency requirements spending designation for both FS's and DOI's FLAME accounts, and it exempted those funds from the rescission. In addition, P.L. 115-56 authorized DOI and the Department of Agriculture (through the FS) to transfer funds from their respective FLAME accounts to repay funds previously transferred from other accounts and used for wildfire suppression purposes. <3.2. Supplemental Appropriations> On October 12, 2017, the House passed H.R. 2266 , the Additional Supplemental Appropriations for Disaster Relief Requirements Act. The Senate passed the bill on October 24, 2017, and the President signed the bill into law on October 26, 2017 ( P.L. 115-72 ). P.L. 115-72 provided a combined $576.5 million for wildfire suppression purposes to both FS and DOI ($526.5 million for FS; $50.0 million for DOI). These funds were all designated as emergency spending. The funds for DOI were appropriated entirely to DOI's WFM suppression activity. The funds for FS were split between the WFM suppression activity ($184.5 million) and the FLAME account ($342.0 million). The funds provided to the FS were to repay transfers made in FY2017. DOI's funds did not come with that specification. In Section 307, P.L. 115-72 essentially repealed the FLAME funds provided in the first FY2018 CR ( P.L. 115-56 ). <3.3. Annual Appropriations> The Administration requested a total of $3.72 billion for wildfire management for FY2018 ($2.85 billion for FS and $874 million for DOI). This figure was a $460 million (12%) decrease from the FY2017 enacted level of $4.18 billion (see Table 2 ). The Administration also proposed several structural changes to both the FS and DOI's wildfire appropriations accounts. For example, the Administration did not request appropriations for either agency's FLAME accounts; instead, the Administration requested all suppression monies through each agency's WFM suppression activity. The Administration also included some changes to DOI's WFM account, specifically the Other Fire Operations subaccount. The request proposed eliminating the Facilities and Construction activity and funding those projects through each bureau's Deferred Maintenance or Base Construction account. This activity received $8.4 million in FY2017 appropriations. The request also proposed establishing Fuels Management as its own budget subaccount and moving it out of Other Fire Operations. In addition, the Administration proposed changes to FS's appropriations structure. One change would move Hazardous Fuels Management out of the WFM account and into the National Forest System (NFS) account, for efficiency and efficacy reasons, according to the Administration. Another change would shift some personnel activities from Suppression to Preparedness, to conform with DOI's budget practices. This change also would require FS to re-baseline the calculation of the 10-year suppression obligation average. On September 14, 2017, the Housed passed H.R. 3354 , an omnibus measure covering all 12 appropriations bills, including the FY2018 Interior, Environment, and Related Agencies bill. H.R. 3354 would provide $3.85 billion for combined wildfire appropriations ($2.911 billion for FS and $936 million for DOI), $336 million below FY2017 enacted levels but $124 million above the FY2018 request (see Table 2 ). H.R. 3554 would accept nearly all of the Administration's proposed structural changes to the FS's and DOI's wildfire appropriations, including fully funding the Administration's suppression request in their respective WFM suppression activities and not appropriating any funds to their respective FLAME accounts. The bill also would accept the Administration's proposal to fund FS's Hazardous Fuels activity through its NFS account but would keep DOI's Fuels Management activity within WFM Other Fire Operations (see Table 3 for wildfire funding by activity). The bill would specify that appropriations to the FS wildfire accounts are to remain available through the end of FY2021 and appropriations to DOI's wildfire accounts are to remain available until expended. <4. Issues> Congress is debating several issues related to federal funding for wildfire management. Issues under debate include the level of federal spending on wildfire management as well as the effectiveness of that spending (e.g., whether the funding is allowing agencies to meet wildfire management targets). Wildfire spending has increased considerably since the 1990s (see Figure 1 ). A significant portion of that increase is related to rising suppression costs, even during years of relatively mild wildfire activity, although the costs vary and are difficult to predict in advance. Congress also is debating the level of appropriations dedicated for certain wildfire management activities. Questions include whether the rising cost of suppression should compete with funding other agency programs and activities and whether investing more in hazardous fuel reduction activities may help to reduce wildfire costs in the future. In the past, when wildfire suppression funding was exhausted during a fiscal year, the agencies sometimes have had to transfer funds from non-wildfire management suppression accounts. This practice may impact the performance of the activities under those other accounts. In such cases, Congress faces a decision as to whether to reimburse the accounts from which funding was transferred or to otherwise provide supplemental appropriations. The reimbursement or supplemental appropriation often is provided in the following fiscal year. Fire transfers often may disrupt the regular budget cycle and complicate discussions about how much suppression funding is needed for the current fiscal year. After providing funds for wildland fire management for each fiscal year, Congress has enacted additional funds in 5 of the last 10 years. Three of the five occasions occurred after the establishment of the FLAME accounts (FY2013, FY2014, and FY2016). This may lead to questions regarding the structure of wildfire funding and wildfire suppression budgeting methods. Wildfire suppression funding estimates depend on multiple factors (e.g., weather, fuel load, nearby dwellings, access to wildfire site). Various reasons have been given as to why suppression estimates have at times not accurately forecasted suppression expenses, with estimates typically underestimating suppression spending. Wildfire suppression is complicated, and both the efficiency of resources used for wildfire suppression and the federal protocol for wildfire management have an impact on wildfire suppression costs. Analyzing trends in wildfire management funding could provide insights useful to Congress during these debates. However, analyzing wildfire funding trends over time particularly prior to FY2001 is challenging for many reasons. The agencies' account structures have changed over time, with different activities funded through different programs and new accounts created. For example, after the establishment of the FLAME account in FY2010, appropriations that previously had gone entirely to WFM suppression were dispersed between two different accounts. A further complication is that costs for one wildfire season (i.e., a calendar year) often extend into appropriations for two fiscal years, and sometimes appropriations are enacted in one fiscal year to cover costs incurred in previous fiscal years.

The federal government's wildfire (or wildland fire) management responsibilities are fulfilled primarily by the Forest Service (FS, in the U.S. Department of Agriculture) and the Department of the Interior (DOI). These responsibilities include prevention, detection, response, and recovery related to fires that begin on federal lands. These responsibilities are accomplished through activities such as preparedness, suppression, fuel reduction, and site rehabilitation, among others. There are several ongoing concerns regarding federal wildfire management. These concerns include the total federal costs of wildfire management, the strategies and resources used for wildfire management, and the impact of wildfire on both the quality of life and the economy of communities surrounding wildfire activity. Many of these issues are of perennial interest to Congress, with annual wildfire management appropriations being one indicator of how Congress prioritizes and addresses certain wildfire management concerns. Congress provides annual appropriations to both FS and DOI for these activities through the Interior, Environment, and Related Agencies appropriations bill, although the bulk of the appropriations go to FS. Wildfire activities are funded in two accounts for each agency: Wildland Fire Management (WFM) and Federal Land Assistance, Management, and Enhancement Act (FLAME) reserve accounts. Over the past 10 years (FY2008-FY2017), Congress has appropriated an average of $3.72 billion annually, with $4.18 billion combined to both FS and DOI in FY2017. The Administration requested a combined $3.72 billion in FY2018, a 12% decrease from FY2017 enacted levels. On September 14, 2017, the Housed passed H.R. 3354, an omnibus measure covering all 12 appropriations bills, including the FY2018 Interior, Environment, and Related Agencies bill. This bill would provide $3.85 billion combined for wildfire purposes, an 8% decrease from FY2017 enacted levels and 3% above the Administration's requested levels. The Administration's FY2018 request also proposed restructuring FS and DOI's appropriations accounts, in some identical ways (e.g., eliminating funding for both the FLAME suppression accounts) but also in some different ways (e.g., moving funding for hazardous fuels management). These budget restructuring proposals may provide some benefits for FS or DOI, such as providing agency funds designated for the same activity in one account each instead of across two accounts. Restructuring the budget may have some potential drawbacks as well. For example, changing accounts may complicate analysis to inform future appropriations decisions or hinder the ability to evaluate FS's and DOI's performance. Congress is debating several issues related to federal funding for wildfire management. These issues include the level of federal spending on wildland fire management as well as the effectiveness of that spending (e.g., whether the funding is allowing agencies to meet wildfire management targets). In some years, Congress also faces requests from the agencies for additional appropriations during severe fire activity. Congress has frequently provided additional funding for wildfire management above the level in the annual appropriations bill, usually for suppression purposes. The recurring need for supplemental funds raises questions about the accuracy of the budgeting process for wildfire funding and how the agencies estimate wildfire suppression funding requirements, among other issues. This report provides an overview of the accounts that fund wildfire management activities and historical wildfire management appropriations data, as well as information on FY2018 appropriations.

<1. Most Recent Developments> On December 20, 2010, the Senate Committee on Foreign Relations reported S.Res. 680 (amended) proposing to express support for international tiger conservation efforts. On December 17, 2010, the Senate Committee on Commerce, Science, and Transportation reported S. 3597 (amended), including a provision that would identify critical habitat designated under ESA authority as priority risk areas in which Coast Guard routing or other navigational measures are warranted to reduce the risk of oil spills and potential damage to natural resources. On December 10, 2010, the Senate Committee on Commerce, Science, and Transportation reported S. 1748 (amended), proposing to establish a research program for recovery of the southern sea otter. <2. Introduction> Increasing numbers of animal and plant species face possible extinction. Endangered and threatened species and the law that protects them, the 1973 Endangered Species Act (ESA, P.L. 93-205 , as amended; 16 U.S.C. 1531-1543) are controversial, in part, because dwindling species are often harbingers of resource scarcity. The most common cause of species' decline is habitat loss or alteration. Habitat loss occurs due to development, climate change, changes in land management practices, competition from invasive species, and other factors, nearly all related to economic, political, or social interests. ESA has been among the most contentious environmental laws because of its strict substantive provisions, which can affect the use of both federal and nonfederal lands and resources. Congress faces the issue of how to balance these interests (which may fall on various sides of any given species controversy) with the protection of endangered and threatened species and, as stated in ESA, "the ecosystems upon which endangered species and threatened species depend." Because of strong support and strong opposition, ESA has not been reauthorized since the last authorization expired in 1992. In the 109 th Congress, there were several unsuccessful attempts to enact comprehensive legislation that would have reauthorized ESA. Consequently, congressional efforts in the 110 th and 111 th Congresses focused on addressing specific controversial features of ESA and on oversight of concerns such as the science used for making decisions and designation of critical habitat. <3. Background and Analysis> <3.1. Overview> The 1973 ESA was a comprehensive attempt to protect species at risk of extinction and to consider habitat protection as an integral part of that effort. A stated purpose of ESA is to protect the ecosystems of which listed species are a part. Under ESA, species of plants and animals (both vertebrate and invertebrate) may be listed as either endangered or threatened according to assessments of the risk of their extinction. More flexible management can be provided for species listed as threatened. Distinct population segments of vertebrate species may also be listed as threatened or endangered. Consequently, some populations of Chinook, coho, chum, and sockeye salmon in Washington, Oregon, Idaho, and California have been listed under ESA, even as other healthy populations of these same species in Alaska are not listed and may be commercially harvested. More limited protection is available for plant species under ESA. Once a species is listed, powerful legal tools, including penalties and citizen suits, are available to aid species recovery and protect habitat. Use of these tools, or the failure to use them, has led to conflict. ESA is administered by the U.S. Fish and Wildlife Service (FWS, Department of the Interior) for terrestrial and freshwater species and some marine mammals, and by the National Marine Fisheries Service (NMFS; also referred to as NOAA Fisheries) in the Department of Commerce's National Oceanic and Atmospheric Administration for the remaining marine and anadromous species. The U.S. Geological Survey's Biological Resources Division conducts research on species for which FWS has management authority; NMFS conducts research on the species for which it is responsible. As of November 16, 2010, a total of 1,163 species of animals and 796 species of plants were listed as either endangered or threatened under the ESA, of which the majority (578 species of animals and 793 species of plants) occur in the United States and its territories; the remainder occur only in other countries. Of the 1,371 U.S. species, 1,138 (83%) are covered in active recovery plans. Of the U.S. species, 600 (43.8%) have designated critical habitat (CH) in some portion of their range. In the most recent data available, FY2009 federal and state expenditures on endangered and threatened species totaled $1,470,755,607, of which $1,391,246,409 was reported by federal agencies and $79,509,198 was reported by the states. The top 10 species with the most total FY2009 expenditures (excluding land acquisition costs) included seven subpopulations of steelhead and Pacific salmon (altogether, more than $317 million), pallid sturgeon (more than $41 million), bull trout (almost $35 million), and the red-cockaded woodpecker (more than $25 million). However, species do not exist in isolation, but evolve and fluctuate in abundance because of their relationships with other species and the physical environment. Conservationists increasingly are talking about ecosystems as the units of interest, rather than species. At times, efforts to protect and recover listed species are controversial; declining species often function like the proverbial canary in the coal mine, by flagging larger issues of resource scarcity and altered ecosystems. Past resource debates in which ESA-listed species were part of larger issues include Tennessee's Tellico Dam (water storage and construction jobs versus farmland protection and tribal graves, as well as snail darters); Pacific Northwest timber harvest (protection of logging jobs and communities versus commercial and sport fishing, recreation, and ecosystem protection, including salmon and spotted owls); and the management of the Apalachicola Basin in Alabama, Florida, and Georgia (allocation of water among metropolitan, agricultural, and industrial users along with commercial and recreational fishing interests, as well as one listed fish and three mussel species). <3.2. Major Provisions of Domestic Law> <3.2.1. Listing> Species may be listed on the initiative of the appropriate Secretary or by petition from an individual, group, or state agency. By law, the Secretary must decide whether to list the species based only on the best available scientific and commercial information, after an extensive series of procedural steps to ensure public participation and the collection of scientific information. In deciding whether a species warrants the protections of ESA, the Secretary may not take into account the economic effects that listing may have; economic and other considerations may be taken into account in structuring alternatives for assisting the species after listing. In addition, FWS and NMFS may identify selected species by adding them to a list of candidate species that are believed to be at sufficient risk to warrant protection, but whose protection is precluded by work to protect species already listed. As of November 16, 2010, there were 252 species on the list of candidate species. <3.2.2. Critical Habitat> With certain exceptions, if a species is listed, the Secretary must designate critical habitat (CH) in areas where the species is currently found or which might provide additional habitat for the species' recovery. However, if the publication of this information is not prudent (e.g., might encourage vandals or collectors), the Secretary may decide not to designate CH. In addition, the Secretary may postpone designation for up to one year after listing, if the information is not determinable (16 U.S.C. 1533). As of November 16, 2010, FWS had designated CH for almost 44% of listed domestic species. As a practical matter, CH has not been designated for most listed species largely because FWS prefers to allocate its resources to listing new species, based on its regulation (50 C.F.R. 402.02) that takes away much of the legal value of designating CH for the recovery of the species. Yet FWS consistently loses legal challenges for failure to designate CH, and several courts have found the regulation in question to be an erroneous interpretation of the law because it does not take into account the duty to avoid adverse modification of CH. Others have asserted the value of CH; for example, scientists with the Center for Biological Diversity published a study in April 2005 concluding that CH designation enhances species recovery. As for timing of the designation, the Keystone Center's ESA Working Group on Habitat released a report on April 28, 2006, on habitat protection and ESA. One conclusion of this study was that identifying the habitat that species require to recover is better done in the context of recovery planning, after more rigorous analysis and deliberation have been completed, rather than at the time of listing. Although recovery plans are not enforceable, preventing adverse modification of CH is enforceable. CH is frequently misunderstood by the public as posing a significant direct restriction on private landowners' authority to manage their land. While a landowner may experience some additional procedures and possible restrictions on land management because of the presence of an ESA-listed species (through ESA's prohibitions on taking a listed species), and the presence of CH may shed light on whether "harm" has occurred, the duty to avoid adverse modification of CH is an express obligation only for federal agencies and actions, and may affect private (nonfederal) actors only where and when actions involve a federal nexus (i.e., involve any federal funding, permit, or license). In the 111 th Congress, Section 208(a)(5) of S. 3597 would have identified CH designated under ESA authority as priority risk areas in which Coast Guard routing or other navigational measures are warranted to reduce the risk of oil spills and potential damage to natural resources ; this bill was reported (amended) by the Senate Committee on Commerce, Science, and Transportation on December 17, 2010. <3.2.3. Prohibitions and Penalties> ESA contains prohibitions on the "take" of endangered animal species; take means to "harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect or attempt to engage in any such conduct" (16 U.S.C. 1532; harassment and harm are further defined by regulation at 50 C.F.R. 17.3). There has been controversy over the extent to which habitat modification is prohibited. A 1995 Supreme Court decision held that significant habitat modification was a reasonable interpretation of the term "harm" in ESA. ESA provides civil and criminal penalties for violations. <3.2.4. Permits and Consultation> FWS and NMFS do not initiate the permitting process agencies and individuals wishing to avoid ESA violations contact FWS or NMFS to initiate consultation that may conclude with permit issuance. Proposed actions that may have adverse impacts on listed species may be permitted in two ways. First, under Section 7 of ESA, if federal agency actions (or actions of a nonfederal party that require an agency's approval, permit, or funding) may affect a listed species, the agency must ensure that those actions are "not likely to jeopardize the continued existence" of any endangered or threatened species, nor to destroy or adversely modify CH. This does not apply in those instances where a law requires a federal agency to take only certain specific actions in order to satisfy the law, according to a 2007 decision by the U.S. Supreme Court. To review the possible effects of their actions on listed species and CH, federal agencies are to consult with the appropriate Secretary. If the Secretary finds that an action would jeopardize a listed species or destroy or adversely modify CH, the Secretary is to suggest any reasonable and prudent alternatives that would avoid these harms. Pending completion of the consultation process, agencies may not make irretrievable commitments of resources that would foreclose any alternatives. The Secretary issues a written statement, called a biological opinion (BiOp), that may allow the agency or the applicant to take individuals of a species incidental to otherwise lawful activities without triggering ESA's penalties, subject to terms and conditions specified in the BiOp (16 U.S.C. 1536), or may conclude that jeopardy cannot be avoided, in which case the agency, a governor, or an affected permit or license applicant may seek an exemption for the action from the Endangered Species Committee. For actions without a federal nexus (i.e., no federal funding, permit, or license), the appropriate Secretary may issue permits under Section 10(a) of ESA to allow the incidental take of species during otherwise lawful actions. An applicant for a permit is to submit a habitat conservation plan (HCP) that shows the likely impact of the planned action; steps taken to minimize and mitigate the impact; funding for the mitigation; alternatives considered and rejected; and any other measures the Secretary may require. The use of this section has been vastly expanded, and streamlined procedures are provided for activities with minimal impacts (50 C.F.R. 17.22). On December 16, 2008, FWS published final regulations allowing federal action agencies, in some circumstances, to decide independently whether agency projects might harm ESA-listed species, eliminating consultation with FWS and/or NMFS scientists. These regulations took effect on January 15, 2009. Critics questioned this regulation, fearing that it provided federal agencies, some with little scientific expertise, with an unacceptable degree of discretion in deciding whether or not to comply with ESA. A lawsuit against these regulations was filed by various interest groups and the state of California. On April 28, 2009, Secretary of Commerce Gary Locke and Secretary of the Interior Ken Salazar jointly announced that the two departments were revoking the December 16, 2008, rule. In the 111 th Congress, Section 106(b) of H.R. 5192 would have declared a biological assessment related to pine beetle prevention to be sufficient for the purposes of Section 7 of ESA, if consultation was not completed by the date on which a decision document was issued. In May 2009, the Government Accountability Office (GAO) released a report on FWS Section 7 consultations, concluding that FWS lacks a systematic means of tracking the monitoring reports it requires in BiOps and does not know the extent of compliance with these requirements. GAO determined that reliance on individual FWS biologists leaves FWS with incomplete institutional knowledge of the extent of action agency compliance with reporting requirements and with incomplete information on species' response to the actions under consultation. GAO also concluded that FWS lacks a systematic method for tracking the cumulative take of most listed species. <3.2.5. Exemptions> Certain proponents of a federal action may apply for an exemption from the prohibition against jeopardy for that action (not for a species). Under ESA, an Endangered Species Committee (ESC, often referred to as the "God Squad") decides whether to allow a federal action project to proceed despite likely jeopardy to a species. The requirement that an exemption applicant must pay for mitigation may deter potential applicants. To date, this process has been little used and only one exemption (Grayrocks Dam, WY) has been granted and carried out. The ESC is required to accept the President's determination (under specified circumstances) on an exemption in declared disaster areas. The committee must also grant an exemption if the Secretary of Defense determines that it is necessary for national security (16 U.S.C. 1536). From time to time, the Department of Defense (DOD) has claimed that requirements under ESA conflict with its readiness activities, but DOD has not requested any exemptions to date. In the 111 th Congress, H.R. 672 would restrict the use of military and national security exemptions to ESA restrictions on the taking of listed species or modification of their habitat. Other statutes may provide for waivers of ESA provisions; for example, Section 102(c) of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 provides for a waiver from ESA and the National Environmental Policy Act (NEPA) to the extent the Attorney General determines necessary to ensure expeditious construction of barriers and roads at borders. Also, the Secretary of Homeland Security has the authority to waive ESA (and other laws) "to ensure expeditious construction of the barriers and roads" at the border. Secretary Chertoff invoked this waiver for different portions of the Mexican border fence once in 2005 and twice in 2007. <3.2.6. Emergencies> ESA has provisions for emergencies; they apply when a species is in danger, not when a project needs to be rushed. In Section 4, which describes the process for listing species, ESA provides shortened timelines for listing species where an emergency poses "a significant risk to the wellbeing of any species." The best available scientific and commercial data must still be used. A shortened period for obtaining an exemption or permit is also available, "where the health or life of an endangered animal is threatened and no reasonable alternative is available to the applicant." According to FWS, any hurricane-related federal activities in presidentially declared disaster areas would trigger the emergency consultation provisions of ESA. Specifically, for the 2005 Gulf of Mexico hurricanes, FWS stated that "restoring any infrastructure damaged or lost due to the hurricane back into the original footprint does not require consultation with the Service" (emphasis in the original). In the 111 th Congress, Section 1(b) of H.R. 996 , Section 306(a) of H.R. 1431 / S. 570 , and Section 503(a) of S. 1333 would have, on the declaration of an emergency by a state governor, required the Secretary of the Interior and the Secretary of Commerce, for the duration of the emergency, to temporarily exempt actions necessary to address the impact of the emergency from the ESA's prohibitions against taking and adverse modification of critical habitat. H.R. 1914 would have amended ESA to provide for suspension of ESA provisions during droughts for federal and state agencies that manage river basins within regions affected by drought. <3.2.7. Recovery Plans> The appropriate Secretary generally must develop a recovery plan for the survival and conservation (defined in Section 3(3) of ESA as "to bring any endangered species or threatened species to the point at which the measures provided pursuant to this Act are no longer necessary" i.e., recovery) of a listed species. These plans are not binding on federal agencies or others, but rather serve as guidelines. Species with recovery plans are reported to Congress every two years. At first, recovery plans tended to cover popular species, like birds or mammals, but a 1988 amendment forbade the Secretary from favoring particular taxonomic groups (16 U.S.C. 1533). On July 31, 2008, FWS published guidance on the use of a crediting framework in carrying out recovery measures, allowing federal agencies to offset adverse effects on listed species on federal lands by beneficial actions taken elsewhere. Under this guidance, federal agencies would create conservation "banks" by paying private landowners to conserve species, allowing federal agencies to offset activities (e.g., military training exercises, oil and gas exploration and development, federal timber sales) on public land that could harm species. Critics of this guidance question whether the trade (conservation damage in one federal area offset by conservation benefit in another area) would still maintain the same level of accountability and enforcement. Actions on private land to protect listed species might not achieve the level federal agencies are required to provide on public lands. <3.2.8. Land Acquisition and Cooperation> The federal government may acquire land to conserve or recover listed species, and ESA authorizes money from the Land and Water Conservation Fund for land acquisition (16 U.S.C. 1534). By law, the appropriate Secretary must cooperate with the states in conserving protected species and must enter into cooperative agreements to assist states in their endangered species programs, if the programs meet certain specified standards. If there is a cooperative agreement, the states may receive federal funds to implement the program, but must normally provide a minimum 25% match. Under the 1988 amendments, the Cooperative Endangered Species Conservation Fund was created to provide state grants. While the annual authorization level for this fund is set by a formula (16 U.S.C. 1535(i)(1)), spending from the fund requires annual appropriation. <3.2.9. Miscellaneous> Other provisions specify exemptions for certain captive raptors and their progeny, regulate subsistence activities by Alaskan Natives, prohibit interstate transport and sale of listed species and parts, control trade in parts or products of endangered species owned before ESA went into effect, and specify rules for establishing experimental populations (16 U.S.C. 1539). <3.3. Implementation of Wildlife Treaties> ESA is the domestic implementing legislation for the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES; TIAS 8249), signed by the United States on March 3, 1973; and the Convention on Nature Protection and Wildlife Preservation in the Western Hemisphere (the Western Hemisphere Convention; 50 Stat. 1354; TS 981), signed by the United States on October 12, 1940. CITES parallels ESA by dividing its listed species into groups according to the estimated risk of extinction, but uses three major categories (called appendices), rather than two. In contrast to ESA, CITES classifies species based solely on the risk that trade poses to their survival. ESA makes violations of CITES violations of U.S. law if committed within U.S. jurisdiction (16 U.S.C. 1538). ESA also regulates import and export of controlled products and provides some exceptions. ESA and CITES also address the illegal trade in wildlife. International illegal wildlife trade is estimated to be worth more than $10 billion annually and has been associated with the decline of species, spread of disease, and proliferation of invasive species, among other things. In the 110 th Congress, the House Committee on Natural Resources held hearings on the effects of illegal wildlife trade on endangered and threatened species. In addition, FWS's Multinational Species Conservation Fund (MSCF) benefits tigers, the six species of rhinoceroses, Asian and African elephants, marine turtles, and great apes (gorillas, chimpanzees, bonobos, orangutans, and the various species of gibbons). This fund supports conservation efforts benefitting these species, often in conjunction with efforts under CITES. Enacted by the 111 th Congress, P.L. 111-241 authorized the issuance of a Multinational Species Conservation Fund semi-postal stamp. The 111 th Congress considered but did not enact several bills related to international aspects of endangered species: H.R. 509 would have reauthorized the Marine Turtle Conservation Act of 2004 through FY2014; the House Natural Resources Subcommittee on Insular Affairs, Oceans, and Wildlife held a hearing on this bill on May 5, 2009, and on July 10, 2009, the House Committee on Natural Resources reported this measure, amended ( H.Rept. 111-200 ). The House passed H.R. 509 (amended) on July 28, 2009. On December 3, 2009, the Senate Environment and Public Works Subcommittee on Water and Wildlife held a hearing on this measure. On April 26, 2010, the Senate Committee on Environment and Public Works reported H.R. 509 ( S.Rept. 111-173 ). Several bills would have expanded species eligible for assistance from the MSCF by creating a Great Cats and Rare Canids Conservation Fund ( H.R. 411 and S. 529 ) and a Crane Conservation Fund ( H.R. 388 and S. 197 ). The House passed H.R. 411 , as amended, and H.R. 388 on April 21, 2009. On July 20, 2009, the Senate Committee on Environment and Public Works reported S. 529 ( S.Rept. 111-52 ) and H.R. 388 ( S.Rept. 111-54 ). H.Res. 1180 would have expressed the sense of the House of Representatives regarding the policy of the United States at the 2010 Conference of the Parties of CITES. H.Res. 1420 would have recognized CITES on its 35 th anniversary. H.Res. 1722 and S.Res. 680 would have expressed support for international tiger conservation efforts. On December 20, 2010, the Senate Committee on Foreign Relations reported S.Res. 680 (amended). <3.4. Are Species Protection and Restoration Working?> The answer to this question depends on what is measured. Since a major goal of ESA is the recovery of species to the point at which ESA protection is no longer necessary, this may be a useful starting point. In the 37 years since the ESA was enacted, 47 U.S. and foreign species or distinct population segments thereof have been delisted. The reasons cited by FWS are (1) recovery (20 species); (2) extinction (9 species; however, some may have been extinct when listed); and (3) original data in error (18 species). Recovered species include the American alligator, bald eagle, brown pelican, peregrine falcon (two subspecies), and three species of kangaroo. Extinct species include the dusky seaside sparrow, Guam broadbill (a bird), and two small fish living in desert springs. However, it can be quite difficult to prove whether extraordinarily rare species are simply that or, in fact, are already extinct. For example, the ivory-billed woodpecker, thought by many to be extinct, may have been rediscovered in a remote area of Arkansas a few years ago. Rare species are, by definition, hard to find. Some have asserted that ESA is a failure since only 20 species have been delisted as recovered; however, only 9 species have been delisted because of extinction. Others note that full recoveries are relatively few because the two principal causes of extinction habitat loss and invasive non-native species continue to increase. In addition, "only those species whose situations are known to be the most desperate will receive priority," thereby making recovery difficult. Another measure of "success" might be the number of species that have stabilized or increased their populations, even if the species are not actually delisted; for example, 35 species have been reclassified (downlisted) from endangered to threatened. Under this standard, ESA could be considered a success, since a large number (41%, according to one study) of listed species have improved or stabilized their population levels after listing. Other species (e.g., red wolves and California condors) might not exist at all without ESA protection, and this too might be considered a measure of success, although these species are still rare. On May 17, 2005, the Majority Staff of the House Committee on Resources released an oversight report entitled Implementation of the Endangered Species Act of 1973 . It reviewed and critiqued various ways that recovery might be measured. One approach is to look at what proportion of the recovery objectives identified in species recovery plans have been achieved. Table 1 indicates how the rate of achievement of recovery objectives changes with the increasing length of time after species are listed. An April 2005 study by the Government Accountability Office (GAO) found that, although FWS spends almost half of its recovery funds on the highest-priority species, in practice factors other than a species' priority ranking (e.g., regional office workload and opportunities for partnerships to maximize scarce recovery funds) determine how funding is allocated. GAO found that FWS does not have a process to routinely assess funding decisions to ensure that they are appropriate. In 2006, GAO examined federal efforts to recover 31 selected species. GAO determined that, while many factors affected the recovery of species, recovery plans played an important role in the recovery of all but one of the species examined. Critics claimed the GAO study was biased to reflect positively on the recovery planning process by the selection of species examined. A December 2008 study by the Government Accountability Office (GAO) found that, although FWS, NMFS, and other federal agencies had implemented a majority of GAO recommendations to strengthen ESA implementation during the previous 10 years, almost one-third of GAO recommendations had not been implemented. For example: FWS has not clarified the role of critical habitat and how and when it should be designated; FWS has not periodically assessed expenditures on species in relation to their relative priority; and FWS and NMFS are not tracking the amount of time spent by federal agencies preparing for consultation before the process officially begins. <4. Issues in the 111th Congress> ESA reauthorization has been on the legislative agenda since the funding authorization expired in 1992, and bills have been introduced in each subsequent Congress to address various aspects of endangered species protection. Below are descriptions of some of the issues that received attention in the 111 th Congress. <4.1. Revised Regulations for Consultation> On August 15, 2008, FWS and NMFS (i.e., services) issued proposed revisions to the Section 7 consultation regulations. The final version was published December 16, 2008, and took effect January 15, 2009. However, Section 429 of P.L. 111-8 authorized withdrawal of the regulations, which was done May 4, 2009. The regulations would have revised the consultation process by (1) allowing already prepared documents to be used as a BA; (2) allowing action agencies greater discretion to determine whether consultation applies; (3) clarifying certain definitions; and (4) making procedural changes to informal consultations. The revised regulations also addressed climate change. The services said that the modifications would "reinforce the Services' current view that there is no requirement to consult on [greenhouse gas] emissions' contribution to global warming and its associated impacts on listed species." <4.2. Critical Habitat Designation> With limited exceptions, by law FWS or NMFS must designate CH at the time a species is listed. However, some critics argue that CH designation places undue burdens on landowners or that it has little conservation benefit. Others argue (and the courts have largely agreed) that FWS and NMFS have misinterpreted and failed to enforce the current statute. There are also disagreements over the value and timing of CH designation. (See " Critical Habitat " above.) <4.3. "Sound Science" and ESA> ESA requires that determinations of a species' status be made "solely on the basis of the best scientific and commercial data available." In several recent situations, legal, economic, and social disputes have resulted from actions under ESA. Examples of these controversies include the Florida panther, Klamath River Basin suckers and coho salmon, gray wolf, and Sonoran Desert bald eagles. Critics in some of these disputes suggest that the science supporting ESA action has been insufficiently rigorous or mishandled by the agencies. Many rare and endangered species are little studied because they are hard to find or because it is difficult to locate enough of them to support definitive scientific research. There may be little information on many species facing extinction, and only limited personnel or funds available to conduct studies on many of the less charismatic species, or those of little known economic import. What should be done in such instances? Some suggest that considerations other than species conservation should prevail; others seek to change the current posture of the law by changing the role of science. These considerations are complicated by the cost and time required to acquire more complete data, particularly in connection with many lesser-known species. ESA does not elaborate on this question, but some assert that, given the protective purpose of ESA to save and recover species and the wording of "best scientific ... data available," species that may be dwindling are to be given the benefit of the doubt and a margin of safety. This is the position taken on pages 1-7 of the joint FWS/NMFS Endangered Species Consultation Handbook, which states that efforts should be made to develop information, but if a BiOp must be rendered promptly, it should be based on the available information, "giving the benefit of the doubt to the species," with consultation possibly being reinitiated if additional information becomes available. This phrase is drawn from H.Rept. 96-697, p. 12 (1979), which states that the "best information available" language was intended to allow FWS or NMFS to issue BiOps even when information was incomplete, rather than being forced to issue negative BiOps for lack of data. The report also states that if a BiOp is rendered on the basis of inadequate information, the federal agency proposing an action has the duty to show that its actions will not jeopardize a species and a continuing obligation to make a reasonable effort to develop information, and that the statutory language "continues to give the benefit of the doubt to the species." <4.3.1. Information Quality> Section 515 of P.L. 106-554 , known as the Information Quality Act or the Data Quality Act, directs the Office of Management and Budget (OMB) to issue government-wide guidelines to federal agencies to ensure and maximize the quality, objectivity, utility, and integrity of information disseminated by federal agencies. OMB published final guidelines on February 22, 2002. The Department of the Interior and FWS have both issued additional guidelines that are available through their websites, and have established a process for interested persons to seek correction of information. Even before these latest guidelines were issued, FWS had promulgated guidance on information quality and peer review procedures issues that also have been addressed in recent legislation. FWS and NMFS developed an Interagency Cooperative Policy on Information Standards Under the Endangered Species Act. Under this policy, FWS and NMFS are to receive and use information from a wide variety of sources, including individuals. Submitted information may range from the informal oral, traditional, or anecdotal to peer-reviewed scientific studies, and hence the reliability of the information can vary widely. Agency biologists are to review and evaluate all information impartially for purposes of listing, CH designation, consultation, recovery, and permitting actions, and to ensure that any information used by the agencies to implement ESA is "reliable, credible, and represents the best scientific and commercial data available." Agency biologists are to document their evaluations of all information and, to the extent consistent with the use of the best scientific and commercial data available, use primary and original sources of information as the basis for recommendations. In addition, agency managers are to review the work of FWS and NMFS biologists to "verify and assure the quality of the science used to establish official positions, decisions, and actions." Additionally, a companion document, the Interagency Cooperative Policy for Peer Review in Endangered Species Act Activities, notes that, in addition to the public comments received on proposed listing rules and draft recovery plans, the services are also to formally solicit expert opinions and peer review to ensure the best biological and commercial information. For listing decisions, the agencies are to solicit the expert opinions of at least three specialists and summarize these in the record of final decision. Special independent peer review can also be used when it is likely to reduce or resolve an unacceptable level of scientific uncertainty. <4.3.2. Court Cases on ESA and Science63> Courts, in considering the "best data available" language, have held that an agency is not obliged to conduct studies to obtain missing data, but cannot ignore available biological information, especially if the ignored information is the most current. Nor may an agency treat one species differently from other similarly situated species, or decline to list a dwindling species and wait until it is on the brink of extinction in relying on possible but uncertain future actions of an agency. "Best scientific and commercial data available" is not a standard of absolute certainty, reflecting Congress's intent that FWS take conservation measures before a species is conclusively headed for extinction. If FWS does not base its listings on speculation or surmise or disregard superior data, the imperfections of the studies upon which it relies do not undermine those studies as the best scientific data available "the Service must utilize the best scientific ... data available, not the best scientific data possible." Judicial review can also help ensure that agency decisions and their use of scientific data are not arbitrary or capricious and that regulations are rationally related to the problems causing the decline of a species, especially when other interests are adversely affected. In Arizona Cattle Growers Association v. United States Fish and Wildlife Service , the court stated that the evidentiary bar FWS must clear is very low, but it must at least clear it. In the context of issuing incidental take permits under Section 10(a), this ruling means the agency must demonstrate that a species is or could be in an area before regulating it, and must establish the causal connection between the land use being regulated and harm to the species in question. Mere speculation as to the potential for harm is not sufficient. An agency must consider the relevant facts and articulate a rational connection between these facts and the choices made. <4.4. Endangered Species and Climate Change> In the absence of federal regulatory action on climate change, environmental groups are eyeing use of the Endangered Species Act (among other approaches) as a means of restricting greenhouse gas emissions. This approach is still in the embryonic stage. The idea, as spearheaded by the Center for Biological Diversity (CBD), is to petition FWS and NMFS to list as endangered or threatened various animals whose habitat is or will be adversely affected by climate change. (CBD has already done so for several species, including the polar bear.) Once the species is listed, the argument would be made that sources of substantial greenhouse gas emissions, such as coal-fired power plants, cause an unlawful "take" of these species under ESA Section 9 by the effect such emissions have, via climate change, on the species' habitat. This could force negotiation of an incidental take permit for the source with greenhouse gas-limiting terms and conditions. Note that "take" is defined in the ESA to include "harm" to a member of a listed species, and "harm," in turn, is defined by regulation to include certain "significant habitat modification[s] or degradation[s]." As a result, federal agencies proposing to issue permits for the construction or modification of greenhouse gas sources would be required, the argument runs, to initiate Section 7 consultation. Any effort to address climate change through the ESA will encounter several obstacles, chief among them whether the causal link between greenhouse gas emissions and habitat harm is too attenuated to fall within the ESA's prohibitions and requirements. The ESA also provides federal agencies with various tools to minimize ESA/climate change conflicts, such as Section 4(d) "special rules" for threatened species. In May 2008, FWS listed the polar bear as threatened, catapulting the above Section 7, Section 9, and 4(d)-rule mechanisms to the fore. In connection with the listing, FWS opposed using the ESA to address climate change. First, it issued a 4(d) rule for the polar bear specifically excluding from the Section 9 take prohibition "any taking of polar bears that is incidental to, but not the purpose of ... an otherwise lawful activity." An effect of the exclusion appears to be that a coal-fired power plant could not be deemed to "take" polar bears through its greenhouse gas (GHG) emissions. Second, FWS argued in the listing preamble that current scientific understanding has not established a causal connection between specific sources of GHG emissions and specific impacts to polar bears or their habitat, concluding that the Section 7 consultation mechanism would not be triggered by federal actions leading to greater GHG emissions (e.g., permitting of fossil-fuel-fired power plants). On October 22, 2009, the U.S. Fish and Wildlife Service proposed protecting more than 200,000 square miles of critical habitat for polar bear along the Alaska coast. In the 111 th Congress, Section 429 of P.L. 111-8 authorized the Secretary of the Interior to withdraw or reissue the December 2008 special rule that outlined protections afforded polar bears within 60 days of this measure's enactment; the Obama Administration took this action on May 4, 2009. The 111 th Congress considered, but did not enact, several additional bills related to climate change and endangered species: Section 11 of H.R. 2192 ; Title IV, Subtitle E, Part 1, Subpart C, Section 480, of H.R. 2454 / H.R. 2998 ; Division A, Title III, Subpart C, Section 370, of S. 1733 ; and S. 1933 would have allocated funds to endangered species programs and to related funds to assist species' adaptation to climate change. On May 18-21, 2009, the House Committee on Energy and Commerce held hearings on H.R. 2454 and, on June 5, 2009, the House Committee on Energy and Commerce reported (amended) H.R. 2454 ( H.Rept. 111-137 , Part I). The House passed H.R. 2454 (amended) on June 26, 2009. On October 27-29, 2009, the Senate Committee on Environment and Public Works held a hearing on S. 1733 . On February 2, 2010, the Senate Committee on Environment and Public Works reported (amended) S. 1733 ( S.Rept. 111-121 ). H.R. 1054 / S. 1395 would have amended the Marine Mammal Protection Act to allow imports of polar bear trophies taken in sport hunts in Canada before the polar bear was listed as a threatened species under ESA; on September 22, 2009, the House Natural Resources Subcommittee on Insular Affairs, Oceans, and Wildlife held a hearing on H.R. 1054 . H.R. 5379 would have delisted the polar bear as a threatened species. S. 724 would have amended ESA to temporarily prohibit the Secretary of the Interior from considering global climate change as a natural or manmade factor in determining whether a species is threatened or endangered. Section 306(b) of H.R. 1431 / S. 570 , Section 503 of H.R. 2846 , and Section 503(b) of S. 1333 would have prohibited the impacts of greenhouse gases to be considered in ESA implementation. <4.5. Regional Resource Conflicts> One express purpose of ESA is to "provide a means whereby the ecosystems upon which endangered species and threatened species depend may be conserved" (16 U.S.C. 1531(b)). As open space dwindles and increasing human populations put pressures on wildlands and natural resources, efforts to conserve species and their habitats may highlight underlying resource crises and economic conflicts. Public values and affected economic interests may be complex and sometimes at odds. The situations described below have been the subject of recent congressional oversight and legislative interest. <4.5.1. Klamath River Basin> Controversy erupted in 2001 when the Bureau of Reclamation announced it would not release water from part of its Klamath irrigation project to approximately 200,000 acres of farm and pasture lands within the roughly 235,000-acre project service area. The operational change sought to make more water available for three fish species under ESA protection two endangered sucker species, and a threatened coho salmon population. The Klamath Project straddles the Oregon/California border and has been the site of increasingly complex water management conflicts involving several tribes, fishermen, farmers, environmentalists, and recreationists. Upstream farmers point to their contractual rights to water from the Klamath Project and to hardships for their families if water is cut off. Others assert that the downstream salmon fishery is more valuable and that farmers could be provided temporary economic assistance, while salmon extinction would be permanent. Still others assert that there are ways to serve all interests, or that the science underlying agency determinations is simply wrong. Specifically at issue is how to operate the Bureau's project facilities to meet irrigation contract obligations without jeopardizing the three listed fish. The Trinity River diversion from the Klamath basin to central California also has ramifications for the Bureau's role in the Central Valley Project (CVP). Ten-year and annual operation plans, and associated biological assessments (by the Bureau) and BiOps (by FWS and NMFS) have been variously criticized and defended. On July 31, 2007, the House Natural Resources Committee held an oversight hearing on allegations of political intervention influencing scientific and policy decisions at the Department of the Interior, with respect to Klamath River salmon. A draft agreement was negotiated by 29 Klamath River stakeholders and signed on September 30, 2009, to address conflicting water management objectives, including removal of four dams that block salmon and steelhead from historic spawning areas. The parties to this agreement have indicated that they will seek legislative support from Congress. <4.5.2. Pacific Salmon Restoration> Salmon protection in the Pacific Northwest presents many difficult choices, especially because of recent droughts and the connection between regional hydropower facilities and fishery management decisions. NMFS officials have listed a total of 26 distinct population segments (called evolutionarily significant units or ESUs) of Pacific salmon and steelhead trout as either threatened or endangered, and are working with state, local, and tribal officials, as well as the public, to implement recovery measures addressing habitat restoration and other concerns. Recent controversies and litigation have focused on three issues: (1) BiOps on operation of the many dams on the Columbia and Snake Rivers (Federal Columbia River Power System), including the decision to retain (or remove) four dams on the lower Snake River, and how properly to factor the presence of the dams into evaluations of jeopardy; (2) whether salmon produced in hatcheries should be included in listed ESUs of Pacific salmon; and (3) the role and extent of CH designation in the recovery of Pacific salmon. In 2007, the hatchery listing policy of NMFS was ruled invalid by a federal court, in part because the court found it scientifically questionable to include hatchery-raised fish under an act designed to protect wild fish. Decisions of the federal district court for Oregon have invalidated NMFS's approach to evaluating jeopardy to salmon from dam operations on the Columbia and Snake Rivers, and ordered increased spills of water to assist transit of juvenile salmon to the sea. The Obama Administration is currently reviewing federal salmon and water management options for the Columbia River Basin before the federal court makes a decision on the most recent BiOp. On October 7, 2009, NMFS announced availability of its Draft Central Valley Salmon and Steelhead Recovery Plan for public comment. In the 111 th Congress, Title X, Subtitle A, of P.L. 111-11 authorized the implementation of the San Joaquin River Restoration Settlement, providing for the reintroduction of Chinook salmon. On March 31, 2009, the House Committee on Natural Resources held an oversight hearing on the California drought and actions by federal and state agencies to address impacts on lands, fisheries, and water users. Several additional measures were introduced but not enacted: H.R. 1672 and S. 668 would have directed county marine resources committees to assist in identifying local implications, needs, and strategies associated with the recovery of Puget Sound salmon; on October 21, 2009, the Senate Committee on Commerce, Science, and Transportation reported (amended) S. 668 ( S.Rept. 111-90 ). On December 7, 2009, the House Committee on Natural Resources reported (amended) H.R. 1672 ( H.Rept. 111-354 ), and the House subsequently passed this measure (amended). S. 817 and H.R. 2055 would have established a Salmon Stronghold Partnership program to protect wild Pacific salmon. On November 17, 2010, the Senate Committee on Commerce, Science, and Transportation reported S. 817 ( S.Rept. 111-348 ). H.R. 2977 would have directed the Bureau of Reclamation to enter into an agreement with the National Academy of Sciences to study sustainable water and environmental management in the Sacramento-San Joaquin Delta, California. H.R. 3794 would have amended the Central Valley Project Improvement Act to assist in efforts to avoid losses of juvenile anadromous fish. H.R. 3999 would have directed the Commissioner of the Bureau of Reclamation to initiate ESA consultations on the CVP and the California State Water Project. H.R. 3503 would have required a scientific analysis of federal salmon recovery efforts by the National Academy of Sciences and authorize removal of the four lower Snake River dams by the Army Corps of Engineers. <4.5.3. Delta Smelt> Delta smelt ( Hypomesus transpacificus ) is a small, slender-bodied fish found only in the San Francisco Bay and Sacramento-San Joaquin Rivers Delta in California (Bay-Delta), where they were once abundant. The species was listed as threatened under ESA in 1993 and, in recent years, its abundance has declined to the lowest ever observed. The decline has been attributed to a combination of several factors, including entrainment (i.e., entrapment) in water export pumps, competition and predation from exotic fish species, toxic contaminants, changes in habitat size and quality, and changes in food supply. The contribution of each factor in causing the species decline is controversial. Some contend that entrainment in water pumps is the primary cause, whereas others argue that all causes might be more or less equally responsible for the observed decline. The delta smelt decline has significant consequences for the operation of the federal CVP and the State Water Project (SWP), which supply water to much of California. If entrainment and/or adverse modification of delta smelt critical habitat by water pumps is largely responsible for the decline of delta smelt, changes in how these pumps are operated might be required to satisfy ESA requirements. These requirements could result in reduced pumping and less water for users. In 2004, the Bureau of Reclamation, which operates the CVP, issued a biological assessment (BA) of its proposal to increase pumping as part of a revised coordinated operational plan with the SWP, known as OCAP. To address the impact of OCAP on delta smelt, an ESA Section 7 consultation between FWS and the Bureau was conducted. FWS initially issued a no-jeopardy BiOp with regard to impacts on delta smelt by the operations of the CVP and SWP in 2004, and re-issued the BiOp in 2005 to address potential critical habitat issues of the delta smelt brought up by the Bureau. In May 2007, the FWS BiOp was found not to comply with ESA with regard to delta smelt. The Bureau and FWS reinitiated consultation based on new information on the delta smelt in 2007. While the consultation process was underway, the Bureau implemented interim protective measures required by a court order issued in December 2007. A revised BiOp was issued December 15, 2008. FWS determined that the continued operation of water projects in the Bay-Delta as described in the OCAP BA is likely to jeopardize the continued existence of the delta smelt and adversely modify its critical habitat. Along with the revised BiOp, FWS outlined reasonable and prudent alternatives (RPAs) intended to protect each life-stage and critical habitat of the delta smelt. In the 111 th Congress several measures were introduced but not enacted. H.R. 856 would have authorized support for establishing a fish hatchery program for delta smelt in the Sacramento-San Joaquin Delta and temporarily exempted two pumping plants from ESA take restrictions. On March 31, 2009, the House Committee on Natural Resources held an oversight hearing on the California drought and actions by federal and state agencies to address impacts on lands, fisheries, and water users. H.R. 2977 would have directed the Bureau of Reclamation to enter into an agreement with the National Academy of Sciences to study sustainable water and environmental management in the Sacramento-San Joaquin Delta, California. H.R. 3105 would have provided that operations of the CVP not be restricted by any ESA BiOp, if such restrictions would result in water exports less than their historical maximum. H.R. 3999 would have directed the Commissioner of the Bureau of Reclamation to initiate ESA consultations on the CVP and the California State Water Project. <4.6. Counterpart Regulations: Pesticides and Fire Management Projects> ESA regulations found at 50 C.F.R. Section 402.30 and Section 402.40 are referred to as counterpart regulations. These regulations allow certain action agencies to determine whether their actions jeopardize a listed species without having to consult as required by ESA Section 7. Counterpart pesticide regulations were promulgated by the U.S. Environmental Protection Agency (EPA) for regulatory actions on pesticides. Under the regulations, when EPA took action under the Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA; P.L. 80-104; 7 U.S.C. 136, et seq.), EPA decided whether a proposed FIFRA action was likely to adversely affect a listed species or critical habitat. EPA made this determination without consultation with, or written concurrence from, the FWS Director, once an alternative consultation agreement was executed. FWS did not review the determination for consistency with ESA. On August 24, 2006, a federal court overturned the pesticide counterpart regulations, ruling that these regulations did not conform to the plain language or intent of ESA Section 7 because they excused federal action agencies from engaging in consultation. The court let stand the "optional formal consultation" process, in which NMFS or FWS can adopt EPA effects determinations as their own. National Fire Plan (NFP) counterpart regulations were promulgated by the Forest Service, Bureau of Land Management, Bureau of Indian Affairs, National Park Service, FWS, and NMFS. The alternative consultation process contained in these counterpart regulations eliminates the need to conduct informal consultation with FWS or NMFS, and eliminates the requirement to obtain written concurrence from FWS or NMFS for those NFP actions that the action agency determines are "not likely to adversely affect" any listed species or designated CH. The District Court for the District of Columbia held that the Alternative Consultation Agreement did not improperly bypass ESA Section 7. In contrast to the pesticide counterpart regulations, the services must determine that the action agencies' actions are consistent with ESA Section 7. However, a report by the services of the NFP counterpart regulations found that all 10 projects reviewed by NMFS were deficient in 5 or 6 criteria, and 44 out of 50 projects reviewed by FWS missed at least 1 of 6 criteria, with 19 missing all of them. In the 111 th Congress, H.R. 585 would have directed the President to enter into an arrangement whereby the National Academy of Sciences would determine the impact of P.L. 108-148 (Healthy Forests Restoration Act of 2003) on ESA protection relative to forest fire protection. <4.7. Private Property and Fifth Amendment Takings> The prohibitions in Section 9 (private actions) and Section 7 (federal nexus) at times frustrate the economic desires of owners of land or other property. This has long been a rallying cry for ESA's detractors, who assert that restrictions under ESA routinely "take" property in the constitutional sense of the term. Conflicts between ESA and property owners come about despite the existence of ESA mechanisms intended to soften its impact on property owners. Under the Fifth Amendment, property cannot be "taken" by the United States without just compensation. The Supreme Court has long tried, with limited success, to define which government actions affect private property so severely as to effect such a "taking." In briefest outline, government actions usually are deemed a taking when they cause either a permanent physical occupation of private property or, through regulation, a total elimination of its economic use. When the government regulation removes only part, but not all, of the property's use or value, a three-factor balancing test is used to determine whether a taking has occurred. Although these factors have been little explicated by the courts, it is clear that for a taking to occur, the property impact must be severe. Moreover, except for physical takings, the property impact is assessed with regard to the property as a whole, not just the regulated portion. Approximately 20 court decisions have addressed takings challenges to ESA restrictions on land or other property, with all but two finding no taking. These cases have involved restrictions on timber cutting, reductions in water delivery to preserve instream flows needed by listed species (a particularly active area now), restrictions on shooting marauding animals that were responsible for loss of livestock, and prohibitions on the transport or sale of endangered species. In several of these cases, the taking claim failed because it was filed in the wrong court or was not "ripe." Where taking claims were reached by the court, they were rejected principally because the economic impact was insufficient as to the property as a whole, or because of the long-standing principle that the government is not responsible for the actions of wild animals. Of the two decisions favoring the property owner, one, involving reduced water delivery to a water district owing to the need to maintain in-stream flows for listed fish, has been repudiated by the judge who wrote it. The other, however, instructs that when government requires water subject to appropriative water rights to be physically diverted to a fish ladder (here, for the use of a listed species), the diversion must be analyzed under a physical rather than regulatory taking theory. Under such a theory, as noted, the holder of water rights is likely to win its taking claim unless the government can show that "background principles" of state water law never gave the plaintiff the right to be free of the complained-of diversion. This case is now headed back to the trial court where the United States likely will attempt such a showing. Critics want ESA amended to afford compensation for a broader range of property impacts than the Constitution provides perhaps by specifying a fixed percentage of ESA-related property value loss, above which compensation must always be paid. Provisions to that effect have been included in bills of previous Congresses, although not in recent ones. Opponents of an explicit compensation standard counter that ESA should not be singled out for a more property owner-friendly standard than other statutes or the Constitution. More fundamentally, they note that property rights have never been absolute, and that regulation has long been noncompensable as long as the impact on the property owner is not severe. <4.8. Additional Legislative Initiatives> In the 111 th Congress, Section 9107 of P.L. 111-11 amended P.L. 106-392 to extend the authorizations for the Upper Colorado and San Juan River Basin endangered fish recovery programs through FY2023. On May 12, 2009, the Senate agreed to S.Res. 121 , designating May 15, 2009, as "Endangered Species Day." On May 7, 2010, the Senate agreed to S.Res. 503 , designating May 21, 2010, as "Endangered Species Day." On May 27, 2010, the Senate agreed to S.Res. 542 , expressing support for designating June 20, 2010, as "American Eagle Day." On June 14, 2010, the House agreed to H.Res. 1409 , also expressing support for designating June 20, 2010, as "American Eagle Day." Other introduced measures relating to ESA that were not enacted include: Section 30 of H.R. 1108 would have directed the Secretary of the Interior to establish regional Outer Continental Shelf (OCS) Joint Permitting Offices, with expertise in ESA Section 7 consultations and preparation of BiOps. Section 3 of S. 995 / H.R. 2362 would have directed the Secretary of the Interior to establish a pilot project to improve federal renewable energy permit coordination, with expertise in ESA Section 7 consultations and preparation of BiOps. Section 1713 of H.R. 2300 / H.R. 2828 would have directed the Secretary of the Interior to establish regional offices to coordinate review of federal permits for oil and gas projects on federal lands onshore and on the OCS, with expertise in ESA Section 7 consultations and preparation of BiOps. H.R. 2288 / S. 1453 would have amended P.L. 106-392 to maintain annual base funding for the Upper Colorado and San Juan fish recovery programs through FY2023. The Senate Energy and Natural Resources Subcommittee on Water and Power held a hearing on S. 1453 on July 23, 2009. The House Natural Resources Subcommittee on Water and Power held a hearing on H.R. 2288 on September 22, 2009. On March 2, 2010, the Senate Committee on Energy and Natural Resources reported S. 1453 ( S.Rept. 111-142 ). On May 18, 2010, the House Committee on Natural Resources reported (amended) H.R. 2288 ( H.Rept. 111-481 ), and the House passed this measure (amended) on the same date. H.R. 762 would have validated the final patent for Nevada lands beneficial for desert tortoise recovery; on May 14, 2009, the House Natural Resources Subcommittee on National Parks, Forests, and Public Lands held a hearing on this measure and, on June 23, 2009, the House Committee on Natural Resources reported the measure ( H.Rept. 111-178 ). The House passed this measure on July 15, 2009. On December 17, 2009, the Senate Energy and Natural Resources Subcommittee on Public Lands and Forests held a hearing on this measure; the Senate Committee on Energy and Natural Resources reported this bill on August 5, 2010 ( S.Rept. 111-272 ). Section 106 of S. 684 , Section 627(a)(5) of S. 3663 , and Section 208(a)(5) of H.R. 6292 would have authorized the Coast Guard and NOAA to identify U.S. waters where special navigational measures are warranted to reduce the risk of oil spills and potential damage to natural resources, including ESA critical habitat. Section 4 of H.R. 5863 would have prohibited the Secretary of the Interior from approving an oil or gas exploration and/or development/production plan without certified compliance with the ESA, while Section 5 of this same measure would have required ESA consultation for certain oil and gas leasing and development activities. H.R. 556 and S. 1748 would have established a research program for recovery of the southern sea otter; the House Natural Resources Subcommittee on Insular Affairs, Oceans, and Wildlife held a hearing on H.R. 556 on May 5, 2009. On June 23, 2009, the House Committee on Natural Resources reported H.R. 556 , amended ( H.Rept. 111-175 ); the House passed this measure (amended) on July 28, 2009. On December 10, 2010, the Senate Committee on Commerce, Science, and Transportation reported (amended) S. 1748 ( S.Rept. 111-362 ). H.R. 2455 and S. 3116 would have amended the Whale Conservation and Protection Study Act to promote international whale conservation, protection, and research. On May 6, 2010, the House Foreign Affairs Subcommittee on International Organizations, Human Rights, and Oversight and Subcommittee on Asia, the Pacific, and the Global Environment held a joint hearing on H.R. 2455 . H.R. 6028 and S. 3919 would have prohibited treatment of the gray wolf as an endangered or threatened species. S. 3825 and S. 3864 would have amended ESA to remove certain portions of the distinct population segment of the Rocky Mountain gray wolf from the list of threatened and endangered species. Two bills would have provided that the inclusion of the gray wolf on lists of endangered species and threatened species under the ESA have no force or effect nationally ( H.R. 6485 ) or in the state of Utah ( H.R. 6486 ). Section 123 of H.R. 3086 would have established a Center for International Wildlife Recovery Partnerships to facilitate long-term investment in captive breeding, reintroduction, rehabilitation, release, habitat protection, and research activities concerning species listed as threatened or endangered. S. 1601 , H.R. 5362 , and S. 3387 would have provided for the release of water from the Ruedi Reservoir for the benefit of endangered fish habitat in the Colorado River. On June 9, 2010, the Senate Energy and Natural Resources Subcommittee on Water and Power held a hearing on S. 3387 . H.R. 6276 would have authorized the Secretary of the Interior to identify and declare wildlife disease emergencies and to coordinate rapid response to these emergencies, with species listed under ESA identified as top priority. H.R. 1901 and S. 805 would have provided for a comprehensive study by the National Academy of Sciences to assess the water management, needs, and conservation of the Apalachicola-Chattahoochee-Flint River System. H.R. 5531 would have amended ESA to enable federal agencies to rescue and relocate species that would be taken in the course of reconstruction, maintenance, or repair of flood control levees. H.R. 5964 sought to inform consumers regarding power administration costs associated with compliance for protecting endangered and threatened species under the ESA. S. 3146 would have amended the Internal Revenue Code to provide a tax credit to individuals who enter into agreements to protect the habitats of endangered and threatened species. Section 205 of S. 2921 would have established habitat mitigation zones beneficial to threatened and endangered species within the California Desert Conservation Area. H.R. 5155 would have directed the Secretary of Commerce to conduct an aerial assessment of sea turtle populations in U.S. waters. H.R. 672 would have restricted the use of military and national security exemptions to permit the taking of ESA-listed species. H.R. 3480 would have increased protection afforded eight species of bears by prohibiting trade in bear viscera. H.Res. 1308 would have expressed support for the goals and ideals of the International Year of Biodiversity. <4.9. ESA Appropriations> Appropriations play an important role in the ESA debate, providing funds for listing and recovery activities as well as financing consultations that are necessary for federal projects. In addition, appropriations bills have served as vehicles for some changes in ESA provisions. <4.9.1. Fish and Wildlife Service> On February 1, 2010, the Obama Administration released its detailed budget request for FY2011, including about $280 million for FWS endangered species and related programs, which is $0.483 million (0.2%) less than was enacted for FY2010. Table 2 summarizes recent ESA and related funding for FWS. The Administration's FY2011 request for endangered species and related funding within FWS's Ecological Services Account is $2.017 million (1.1%) more than funding enacted for FY2010. On March 4, 2010, the House Natural Resources Subcommittee on Insular Affairs, Oceans, and Wildlife held an oversight hearing on the FY2011 FWS budget. Under the authority of a continuing resolution ( P.L. 111-322 ) since Interior Department appropriations for FY2011 have not been enacted, FWS was allowed to operate with continued funding at FY2010 levels through March 4, 2011. On June 23, 2009, the House Committee on Appropriations reported H.R. 2996 , recommending more than $283 million in FY2010 appropriations for FWS endangered species and related programs ( H.Rept. 111-180 ). The House recommendation is about 14.1% greater than the FY2009 enacted level and about 1.6% larger than the FY2010 Administration request. The House passed this measure (amended) on June 26, 2009. On July 7, 2009, the Senate Committee on Appropriations reported H.R. 2996 (amended), recommending more than $276 million in FY2010 appropriations for FWS endangered species and related programs ( S.Rept. 111-38 ). The Senate recommendation is about 11.3% greater than the FY2009 enacted level, about 1.0% less than the FY2010 Administration request, and about 2.5% less than the House FY2010 recommendation. The Senate passed H.R. 2996 (amended) on September 24, 2009. On October 28, 2009, a conference report was filed on H.R. 2996 ( H.Rept. 111-316 ), recommending about $281 million for FWS endangered species and related programs for FY2010. The conference recommendation is about 13.2% greater than the FY2009 enacted level and about 0.7% larger than the FY2010 Administration request. On October 30, 2009, President Obama signed H.R. 2996 into law as P.L. 111-88 . Earlier in the 111 th Congress, P.L. 111-8 ( H.R. 1105 , omnibus appropriations for FY2009) provided more than $248 million for FWS's ESA and related programs. <4.9.2. National Marine Fisheries Service> For NMFS, funding for ESA programs is included in a budget line item for "protected species research and management" that also includes funding authorized under the Marine Mammal Protection Act. On February 1, 2010, the Obama Administration released its FY2011 budget request, including about $210 million for NMFS protected species programs. (See Table 3 .) The FY2011 request for NMFS protected species funding within NOAA's Operations, Research, and Facilities (OR&F) Account was $6.3 million (3.1%) more than funding enacted for FY2010. On February 24, 2010, the House Natural Resources Subcommittee on Insular Affairs, Oceans, and Wildlife held an oversight hearing on NOAA's FY2011 budget request. On March 3, 2010, the Senate Commerce, Science, and Transportation Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard held an oversight hearing on NOAA's FY2011 budget request. On July 22, 2010, the Senate Committee on Appropriations reported S. 3636 , recommending more than $213 million for NMFS protected species programs ( S.Rept. 111-229 ); the Senate Committee recommendation is $9.68 million (+4.7%) more than the FY2010 appropriation and $3.38 million (+1.6%) more than the FY2011 Administration request. Under the authority of a continuing resolution ( P.L. 111-322 ) since no Commerce Department appropriations for FY2011 have yet been enacted, NMFS was allowed to operate with continued funding at FY2010 levels through March 4, 2011.

The Endangered Species Act (ESA; P.L. 93-205, 16 U.S.C. §§ 1531-1543) has been one of the more contentious environmental laws. This may stem from its strict substantive provisions, which can affect the use of both federal and nonfederal lands and resources. Under ESA, species of plants and animals (both vertebrate and invertebrate) can be listed as endangered or threatened according to assessments of their risk of extinction. Once a species is listed, powerful legal tools are available to aid its recovery and protect its habitat. ESA may also be controversial because dwindling species are usually harbingers of broader ecosystem decline. The most common cause of species listing is habitat loss. ESA is considered a primary driver of large-scale ecosystem restoration issues. The 111th Congress has considered whether to revoke ESA regulations promulgated in the waning days of the Bush Administration that would alter when federal agency consultation is required. In addition, legislation related to global climate change includes provisions that would allocate funds to the U.S. Fish and Wildlife Service's endangered species program and/or to related funds to assist species adaptation to climate change. Other major issues concerning ESA in recent years have included the role of science in decision-making, critical habitat (CH) designation, protection by and incentives for property owners, and appropriate protection of listed species, among others. The authorization for spending under ESA expired on October 1, 1992. The prohibitions and requirements of ESA remain in force, even in the absence of an authorization, and funds have been appropriated to implement the administrative provisions of ESA in each subsequent fiscal year. Proposals to reauthorize and extensively amend ESA were last considered in the 109th Congress, but none was enacted. No legislative proposals were introduced in the 110th or 111th Congresses to reauthorize the ESA. Several measures related to ESA were enacted in the 111th Congress, including P.L. 111-8, containing language authorizing the Secretary of the Interior to withdraw or reissue (1) revisions to the ESA Section 7 consultation regulations promulgated by the Bush Administration and (2) a December 2008 special rule that outlined protections afforded polar bears; P.L. 111-11, including provisions (1) authorizing the implementation of the San Joaquin River Restoration Settlement, providing for the reintroduction of Chinook salmon, and (2) amending P.L. 106-392 to extend the authorizations for the Upper Colorado and San Juan River Basin endangered fish recovery programs through FY2023; P.L. 111-88, appropriating about $281 million for U.S. Fish and Wildlife Service endangered species and related programs for FY2010 (under the authority of a continuing resolution (P.L. 111-322), ESA funding at FY2010 levels was extended through March 4, 2011); and P.L. 111-241, authorizing the issuance of a Multinational Species Conservation Fund semipostal stamp. This report discusses oversight issues and legislation introduced in the 111th Congress to address ESA implementation and management of endangered and threatened species.

Environmental activities of the U.S. Coast Guard fall within the service's program for protection of natural resources, and consist of maritime oil spill prevention, marine debris, and pollution response preparedness. Protection of living marine resources and fisheries also falls in this category, but is not discussed here. Marine environmental protection is one of six "non-homeland security missions" specified in the Homeland Security Act of 2002. <1. Marine Environmental Protection Budget> Congressional appropriations for the Coast Guard are not broken down by specific mission (e.g., marine environmental protection), but are allocated to broader categories, such as "operating expenses." The Coast Guard accounts for mission-specific funding by using a "sophisticated activity-based costing model." Table 1 identifies the estimated levels of spending for the marine environmental protection mission in recent years. <2. Spill Response, Prevention, and Preparedness4> Protecting the marine environment from accidental oil and chemical spills is a key mission of the Coast Guard. Along with representatives of 15 other federal departments and agencies, the Coast Guard and the Environmental Protection Agency (EPA) comprise the National Response Team and 13 Regional Response Teams. EPA serves as the chair, and the Coast Guard is the vice-chair of these teams. The National Contingency Plan (NCP) provides the organizational structure and procedures for preparing for and responding to discharges of oil and hazardous substances on both water and land. Coast Guard responsibilities can be divided into two categories: (1) spill response and (2) spill prevention/preparedness. As the primary response authority in coastal zone waters, the Coast Guard has the ultimate authority to ensure that a spill is effectively removed and that actions are taken to prevent further discharge from the source. During such response operations, a Coast Guard On-Scene Coordinator would coordinate the efforts of federal, state, and private parties. Preventing and preparing for spills is also a Coast Guard responsibility, and the Coast Guard's jurisdiction covers vessels; onshore, transportation-related facilities; and deepwater ports. The Coast Guard's prevention/preparedness duties are based on international agreements and federal standards and regulations. The Oil Pollution Act of 1990 (OPA) and the international treaty MARPOL 73/78 require the owners and operators of vessels that carry oil and designated hazardous substances to submit to the Coast Guard "Vessel Response Plans" and/or "Shipboard Oil Pollution Emergency Plans." These vessel-specific plans address such matters as spill mitigation procedures, training requirements for the crew, and spill mitigation equipment required to be carried onboard. The Coast Guard must approve the plans for a ship to operate legally in U.S. waters. Under these authorities vessel operators also must submit to regular inspections, and the Coast Guard's inspection program is a key component of their oil spill prevention effort. The Coast Guard represents the United States at the International Maritime Organization (IMO), which, through treaties, sets international environmental and safety standards for vessels. Important treaties cover the following topics: accidental and operational oil and chemical pollution; the right of a coastal state to take measures on the high seas to prevent, mitigate, or eliminate danger to its coastline from pollution by oil; a global, cooperative framework for combating major incidents or threats of marine pollution from oil and hazardous and noxious substances; and pollution from the dumping of wastes and other materials. <2.1. Inspection of Foreign Ships (Port State Control Program)> The Coast Guard conducts "certificate of compliance" examinations both on a random and targeted basis on foreign vessels that make port calls in the United States. The inspection program emphasizes compliance with environmental and safety standards and, particularly since September 2001, is concerned with port security as well. The inspecting officers verify that the vessels and their crews are in substantial compliance with international conventions and applicable U.S. laws. The pollution prevention examination covers the various waste streams onboard and related record keeping, which vary for different types of ships, and may include the following: Oil pollution prevention systems include the oily water separator and the sludge containment system. The oily water separator is a high-maintenance device, and ships sometimes alter their piping to bypass the system. Further, pumping oily sludge ashore is expensive and ships have been known to take illegal steps to avoid it. The black water system includes marine sanitation devices and other systems to treat, store, and discharge sewage. Hazardous waste includes paints, thinners, and cleaning solutions that contain hazardous substances. The types and volumes of hazardous waste vary depending on the technology and processes used aboard. Non-hazardous waste is shipboard garbage, including food waste, plastics, and other synthetic materials, as well as recyclables like glass, and aluminum and steel cans. The gray water system includes discharges from the galley, sinks, showers, and baths. In recent years, cruise ships, most of which are registered in foreign countries, have gained attention. These very large vessels carry up to 5,000 passengers who generate a large amount of sewage and gray water. (For additional information, see CRS Report RL32450, Cruise Ship Pollution: Background, Laws and Regulations, and Key Issues , by [author name scrubbed].) <2.2. Inspection of Domestic Ships> The domestic inspection system is similar to the port state control program in assuring compliance with applicable laws and treaties. Rules vary according to size and type of vessel (e.g., tanker, passenger, cargo, and mobile offshore drilling units), and the number of passengers carried. In 1996, the Coast Guard initiated its Alternate Compliance Program (ACP), under which "classification societies" can perform inspections that satisfy certain periodic Coast Guard test and inspection requirements. <3. National Pollution Funds Center> The Coast Guard created the National Pollution Funds Center (NPFC) in 1991 to carry out many of the requirements of Title I of the OPA. The NPFC manages the Oil Spill Liability Trust Fund (OSLTF). The OSLTF is primarily used to finance prompt responses to oil spills and to reimburse parties for applicable costs associated with oil spills (e.g., cleanup costs, natural resource damages, economic losses). Initially, the primary source of revenue for the fund was a 5-cents-per-barrel fee on imported and domestic oil. Collection of this fee ceased on December 31, 1994, because of a "sunset" provision in the law. However, in April 2006, the tax resumed as required by the Energy Policy Act of 2005 ( P.L. 109-58 ). Moreover, in 2008, the Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ) increased the tax rate to 8 cents per barrel through 2016; in 2017, the rate is scheduled to increase to 9 cents per barrel. The tax terminates at the end of 2017. To ensure that responsible parties can be held accountable for cleanup costs and damages in the event of an oil spill (thereby preserving the oil spill fund), OPA requires that vessels show evidence of financial responsibility, such as insurance. The NPFC carries out this mandate by issuing Certificates of Financial Responsibility (COFRs) to shipping vessel owners when owners demonstrate the ability to pay for oil spill cleanup and damages. In general, vessels over 300 gross tons are required to have a valid COFR to operate in U.S. waters. The NPFC also takes action to recover cleanup costs from responsible parties. It documents ongoing costs and damages from the spill area, and bills the responsible party. About 40% of spills in U.S. waters are "mystery" spills, and the costs go unrecovered. <4. Marine Debris> Marine debris (e.g., discarded fishing lines or nets) can endanger birds and marine animals, and cause damage to coral reefs. Even less lethal trash from recreational fishing and boating (such as beverage cans and bottles, food wrappers, and foam plastic pieces) degrades beaches, coral reefs, and the oceans. The Coast Guard's approach to debris is preventive, promoting compliance by boarding and inspecting vessels, and working with local port agencies to ensure there are facilities to receive garbage from vessels. The Coast Guard also coordinates with the Environmental Protection Agency (EPA), the National Marine Fisheries Service, the National Park Service, and the Ocean Conservancy in monitoring and measuring amounts of marine debris. This activity is authorized in the Act to Prevent Pollution from Ships, 33 U.S.C. 1905 and 1915, as well as MARPOL Annex V. <5. Marine and Environmental Science> The Coast Guard has a history of scientific study of the oceans dating back to 1881, when it began Arctic cruises along the Alaska coast. Today the Coast Guard's role is that of a facilitator, supporting the scientific efforts of other groups. Moreover, many of the oceanographic and other scientific activities conducted by federal agencies, including the Coast Guard, were consolidated in 1970 with the creation of the National Oceanic and Atmospheric Administration (NOAA). The Coast Guard operates three icebreakers in the Arctic and Antarctic, and provides supplies to remote stations. The Coast Guard also participates in the International Ice Patrol, which monitors iceberg danger in the northwest Atlantic, particularly in the area of the Grand Banks of Newfoundland. The iceberg season is usually from February to July, but the Ice Patrol is logistically flexible and can commence operations when iceberg conditions dictate. <6. Environmental Compliance> Coast Guard operations must comply with applicable environmental laws. Ongoing initiatives include meeting the more stringent emission requirements of the Clean Air Act Amendments of 1990, and developing strategies to minimize the generation of hazardous waste. There also are continuing efforts to design pollution prevention into shore facility improvement projects, and to conduct environmental audits at facilities to find and correct potential environmental violations.

The U.S. Coast Guard's environmental activities focus on prevention programs, accompanied by enforcement and educational activities. A key component of the Coast Guard's environmental activities involves maritime oil spill prevention. As required by several environmental statutes, including the Clean Water Act and the Oil Pollution Act, the Coast Guard's pollution preparedness and response activities aim to reduce the impact of oil and hazardous substances spills. Related to this duty, the Coast Guard inspects U.S. and foreign-flagged ships to ensure compliance with U.S. laws and international agreements. In addition, the Coast Guard's National Pollution Funds Center (NPFC) manages the Oil Spill Liability Trust Fund (OSLTF), which is primarily used to finance prompt responses to oil spills and to reimburse parties for applicable costs associated with oil spills (e.g., cleanup costs, natural resource damages, economic losses). The Coast Guard's approach to marine debris (e.g., discarded fishing lines or nets) is preventive, promoting compliance by boarding and inspecting vessels, and working with local port agencies to ensure there are facilities to receive garbage from vessels. With other agencies, the Coast Guard monitors and measures marine debris. The Coast Guard has a history of scientific study dating back to the 1880s, but its current role is that of a facilitator, supporting the scientific efforts of other groups. The Coast Guard operates three icebreakers in the Arctic and Antarctic, and provides supplies to remote stations. Coast Guard operations must comply with applicable environmental laws. Requirements include air emission standards and waste management.

<1. Overview> A July 2005 Joint Statement resolved to establish a U.S.-India "global partnership" through increased cooperation on economic issues, on energy and the environment, on democracy and development, on non-proliferation and security, and on high-technology and space. U.S. policy is to isolate Iran and to ensure that its nuclear program is used for purely civilian purposes. India has never shared U.S. assessments of Iran as an aggressive regional power. India-Iran relations have traditionally been positive and, in January 2003, the two countries launched a "strategic partnership" with the signing of the "New Delhi Declaration" and seven other substantive agreements. Indian leaders regularly speak of "civilizational ties" between the two countries, a reference to the interactions of Persian and Indus Valley civilizations over a period of millennia. As U.S. relations with India grow deeper and more expansive in the new century, some in Washington believe that New Delhi's friendship with Tehran could become a significant obstacle to further development of U.S.-India ties. However, India-Iran relations have not evolved into a strategic alliance and are unlikely to derail the further development of a U.S.-India global partnership. At the same time, given a clear Indian interest in maintaining positive ties with Iran, especially in the area of energy commerce, New Delhi is unlikely to abandon its relationship with Tehran, or accept dictation on the topic from external powers. Many in Congress voice concern about India's relations with Iran and their relevance to U.S. interests. Some worry about New Delhi's defense relations with Tehran and have sought to link this with congressional approval of U.S.-India civil nuclear cooperation. There are further U.S. concerns that India plans to seek energy resources from Iran, thus benefitting financially a country the United States seeks to isolate. Indian firms have in recent years taken long-term contracts for purchase of Iranian gas and oil, and India supports proposed construction of a pipeline to deliver Iranian natural gas to India through Pakistan. The Bush Administration expresses strong opposition to any pipeline projects involving Iran, but top Indian officials insist the project is in India's national interest. Some analysts believe that geostrategic motives beyond energy security, including great power aspirations, drive India's pursuit of closer relations with Iran. Of immediate interest to some Member of Congress are press reports on Iranian naval ships visiting India's Kochi port for "training." Indian officials downplayed the significance of the port visit, and Secretary Rice challenged the report's veracity, although she did state that, "The United States has made very clear to India that we have concerns about their relationship with Iran." Such concerns include the proposed gas pipeline. Secretary of Energy Sam Bodman, visiting New Delhi in March 2007, reiterated U.S. opposition to the pipeline project. <2. Strategic/Political Relations> According to the 2006-2007 annual report of the Indian Ministry of External Affairs, India's relations with Iran are underlined by historical, civilizational and multifaceted ties. The bilateral cooperation has acquired a strategic dimension flourishing in the fields of energy, trade and commerce, information technology, and transit. During 2006-07, relations with Iran were further strengthened through regular exchanges. Past reports have lauded "further deepening and consolidation of India-Iran ties," with "increased momentum of high-level exchanges" and "institutional linkages between their National Security Councils." Iranian leaders, always looking for new allies to thwart U.S. attempts to isolate Iran, reciprocate New Delhi's favorable view and insist that warming U.S.-India relations will not weaken their own ties with New Delhi. However, there are signs that, following the 2005 launch of a U.S.-India "global partnership" and plans for bilateral civil nuclear cooperation, New Delhi intends to bring its Iran policy into closer alignment with that of the United States. Yet India is home to a sizeable constituency urging resistance to any U.S. pressure that might inhibit New Delhi-Tehran relations or which prioritize relations with the United States in disregard of India's national interests. While top Indian leaders state that friendly New Delhi-Tehran ties will continue concurrent with or even despite a growing U.S.-India partnership, some observers see such rhetoric as incompatible with recent developments. <3. Indian Policy Toward Iran's Nuclear Program> The Indian government has made clear that it does not wish to see a new nuclear weapons power in the region and, in this context, it has aligned itself with international efforts to bring Iran's controversial nuclear program into conformity with Non-Proliferation Treaty and IAEA provisions. At the same time, New Delhi's traditional status as a leader of the "nonaligned movement," its friendly links with Tehran, and a domestic constituency that includes tens of millions of Shiite Muslims, have presented difficulties for Indian policymakers. There are also in New Delhi influential leftist and opposition parties which maintain a high sensitivity toward indications that India is being made a "junior partner" of the United States. These political forces have been critical of proposed U.S.-India civil nuclear cooperation and regularly insist that India's closer relations with the United States should not come at the expense of positive ties with Iran. The current Indian National Congress-led coalition government has thus sought to maintain a careful balance between two sometimes conflicting policy objectives. India's main opposition, the Bharatiya Janata Party, has voiced its approval of the present government's policy toward Iran's nuclear program. There were reports in 2005 that India would oppose bringing Iran's nuclear program before the U.N. Security Council and was likely to abstain on relevant IAEA Board votes. However, on September 24, 2005, in what many saw as the first test of India's position, New Delhi did vote with the majority (and the United States) on an IAEA resolution finding Iran in noncompliance with its international obligations. The vote brought waves of criticism from Indian opposition parties and independent analysts who accused New Delhi of betraying a friendly country by "capitulating" to U.S. pressure. In January 2006, the U.S. ambassador to India explicitly linked progress on proposed U.S.-India civil nuclear cooperation with India's upcoming IAEA vote, saying if India chose not to side with the United States, he believed the U.S.-India initiative would fail in the Congress. New Delhi rejected any attempts to link the two issues, and opposition and leftist Indian political parties denounced the remarks. Yet, on February 4, 2006, India again voted with the majority in referring Iran to the Security Council, even as it insisted that its vote should not be interpreted as detracting from India's traditionally close relations with Iran. Overt U.S. pressure may have made it more difficult for New Delhi to carry out the policy it had already chosen. Some independent observers saw India's IAEA votes as demonstrating New Delhi's strategic choice to strengthen a partnership with Washington even at the cost of its friendship with Tehran. In July 2006, the House passed legislation ( H.R. 5682 ) to enable proposed U.S. civil nuclear cooperation with India. The bill contained non-binding language on securing India's cooperation with U.S. policy toward Iran (an amendment seeking to make such cooperation binding was defeated by a vote of 235-192). The Senate version of enabling legislation ( S. 3709 ) contained no language on Iran. The resulting "Hyde Act," which became P.L. 109-401 in December, preserved the House's "statement of policy" language and added a prerequisite that the President provide to Congress, inter alia , a description of India's efforts to participate in U.S. efforts to prevent Iran from obtaining weapons of mass destruction. In their explanatory statement ( H.Rept. 109-721 ), congressional conferees called securing India's participation "critical" and they emphasized an "expectation" of India's full cooperation on this matter. <4. Weapons of Mass Destruction-Related Relations> In recent years there have been occasional revelations of Indian transfers to Iran of technology that could be useful for Iran's purported weapons of mass destruction (WMD) programs. These transfers do not appear to be part of an Indian-government-directed policy of assisting Iran's WMD, but could represent unauthorized scientific contacts that have resulted from growing India-Iran energy and diplomatic ties. Some Indian persons have been sanctioned by the Bush Administration under the Iran Non-Proliferation Act (INA, P.L. 106-178 ). According to determinations published in the Federal Register, in 2003 an Indian chemical industry consultancy was sanctioned under the Iran-Iraq Arms Nonproliferation Act ( P.L. 102-484 ). In a September 2004 determination, two Indian nuclear scientists, Dr. Chaudhary Surendar and Dr. Y.S.R. Prasad, were sanctioned under the INA. The two formerly headed the Nuclear Power Corp. of India and allegedly passed to Iran heavy-water nuclear technology. Surendar denied ever visiting Iran and sanctions against him were ended in December 2005. In that same December determination, two Indian chemical companies were sanctioned under the INA for transfers to Iran. In August 2006, the United States formally sanctioned two additional Indian chemical firms under the INA for sensitive material transactions with Iran. The firms denied any WMD-related transfers and New Delhi later said the sanctions were "not justified." In February 2007, India moved to impose restrictions on nuclear-related exports to Iran in accordance with U.N. Security Council Resolution 1737 of December 2006. <5. Defense and Military-to-Military Relations> India and Iran have established steady but relatively low level defense and military relations since the formation of an Indo-Iran Joint Commission in 1983, three years after the start of the Iran-Iraq war. There is no evidence that India provided any significant military assistance to Iran during that war, which ended in 1988. Iran reportedly received some military advice from Pakistan during the conflict. Following the war, Iran began rebuilding its conventional arsenal with purchases of tanks, combat aircraft, and ships from Russia and China. No major purchases from India were reported during this time. However, Iran reportedly turned to India in 1993 to help develop batteries for the three Kilo-class submarines Iran had bought from Russia. The submarine batteries provided by the Russians were not appropriate for the warm waters of the Persian Gulf, and India had substantial experience operating Kilos in warm water. There have been expectations that Iran-India military ties would further expand under the 2003 "New Delhi Declaration," in which the two countries "decided to explore opportunities for cooperation in defense and agreed areas, including training and exchange of visits." Some experts see this as part of broad strategic cooperation between two powers in the Persian Gulf and Arabian Sea, but the cooperation has generally stalled since it was signed and has not evolved into a noteworthy strategic alliance. Instead, the cooperation appears to represent a manifestation of generally good Indo-Iranian relations and an opportunity to mutually enhance their potential to project power in the region. India had reportedly hoped the Declaration would pave the way for Indian sales to Iran of upgrades of Iran's Russian-made conventional weapons systems. Major new Iran-India deals along these lines have not materialized to date, but Iran reportedly has sought Indian advice on operating Iran's missile boats, refitting Iran's T-72 tanks and armored personnel carriers, and upgrading Iran's MiG-29 fighters. Under the Declaration, the two countries have held some joint naval exercises, most recently in March 2006. The first joint exercises were in March 2003. In March 2007, apparently at Iran's request, the two countries formed a joint working group to implement the 2003 accord, which Iran apparently feels has languished. During a visit of the commander of Iran's regular Navy the first such high level exchange since 2003 India reportedly deferred specific Iranian requests, such as an exchange of warship engineers. <6. Economic and Energy Relations> India-Iran commercial relations are dominated by Indian imports of Iranian crude oil, which alone account for some 90% of all Indian imports from Iran each year. The value of all India-Iran trade in the fiscal year ending March 2007 topped $9 billion (by comparison, U.S.-India trade was valued at about $32 billion in 2006). Iran possesses the world's second-largest natural gas reserves, while India is among the world's leading gas importers. With a rapidly growing economy, India is building energy ties to Iran, some of which could conflict with U.S. policy and the Iran Sanctions Act (ISA). ISA requires certain sanctions on investments over $20 million in one year in Iran's energy sector. Under a reportedly finalized 25-year, $22 billion deal, the state-owned Gas Authority of India Ltd. (GAIL) is to buy 5 million tons of Iranian liquified natural gas (LNG) per year. To implement the arrangement, GAIL is to build an LNG plant in Iran, which Iran does not now have. Some versions of the deal include development by GAIL of Iran's South Pars gas field, which would clearly constitute an investment in Iran's energy sector. India currently buys about 100,000-150,000 barrels per day of Iranian oil, or some 7.5% of Iran's oil exports. It is also widely reported that Indian refineries supply a large part of the refined gasoline that Iran imports. Gasoline is heavily subsidized and sells for about 40 cents per gallon in Iran, and Iranian refining capacity is insufficient to meet demand. The purchase of Iranian petroleum product is not generally considered an ISA violation. A major aspect of the Iran-India energy deals is the proposed construction of a gas pipeline from Iran to India via Pakistan, with a possible extension from Pakistan to China. Some of the Indian companies that reportedly might take part in the pipeline project are ONGC, GAIL, Indian Oil Corporation, and Bharat Petroleum Corporation. Iran, India, and Pakistan have repeatedly reiterated their commitment to the $4 billion-$7 billion project, which is tentatively scheduled to begin construction later in 2007 and be completed by 2010. Pakistani President Musharraf said in January 2006 that there is enough demand in Pakistan to make the project feasible, even if India declines to join it. Since January 2007, the three countries have agreed on various outstanding issues, including a pricing formula, and the Indian and Pakistani split of the gas supplies, but talks continue on several unresolved issues, including the pipeline route, security, transportation tariffs, and related issues. During her March 2005 visit to Asia, Secretary of State Rice expressed U.S. concern about the pipeline deal. Other U.S. officials have called the project "unacceptable," but no U.S. official has directly stated that it would be considered a violation of ISA. Successive administrations have considered pipeline projects that include Iran as meeting the definition of "investment" in ISA. <7. Cooperation on Afghanistan> India and Iran are tacitly cooperating to secure their mutual interests in Afghanistan. Iran has perceived the Sunni Islamic extremism of the Taliban regime as a threat to Iran's Shiite sect. India saw the Taliban as a manifestation of Islamic extremism that India is battling in Kashmir, and which is held responsible for terrorist attacks in India. India and Iran both supported Afghanistan's minority-dominated "Northern Alliance" against the Taliban during 1996-2001 (in contrast to Pakistan, which supported the Taliban). Both countries also seek to prevent a Taliban return to power and have each given substantial economic aid to the U.S.-backed government in Kabul. India's presence in Afghanistan is viewed by Pakistan as a potential security threat as a policy of "strategic encirclement."

India's growing energy needs and its relatively benign view of Iran's intentions will likely cause policy differences between New Delhi and Washington. India seeks positive ties with Iran and is unlikely to downgrade its relationship with Tehran at the behest of external powers, but it is unlikely that the two will develop a broad and deep strategic alliance. India-Iran relations are also unlikely to derail the further development of close and productive U.S.-India relations on a number of fronts. See also CRS Report RL33529, India-U.S. Relations, and CRS Report RL32048, Iran: U.S. Concerns and Policy Responses. This report will be updated as warranted by events.

<1. Introduction> A diverse array of efforts to reduce greenhouse gas (GHG) emissions is currently under way or being developed on the international, national, and sub-national level (e.g., individual state actions or regional partnerships). Proposals in the U.S. Congress have generally focused on market-based approaches, but some proposals have included a mix of market and non-market strategies. Market-based mechanisms that limit GHG emissions can generally be divided into two types: quantity control (e.g., cap-and-trade) and price control (e.g., carbon tax or fee). To some extent, a carbon tax and a cap-and-trade program would produce similar effects: both are estimated to increase the price of fossil fuels, which would ultimately be borne by consumers, particularly households. Preference for a carbon tax or a cap-and-trade program ultimately depends on which variable one wants to directly control emissions or costs. Although Members have introduced and debated GHG emission control proposals both cap-and-trade and carbon tax programs in previous Congresses, the Obama Administration's stated commitment to GHG emission reduction has spurred interest in developing a workable program. This position contrasts starkly with the previous Administration, which had rejected the concept of mandatory emissions reductions, instead focusing on voluntary initiatives to reduce the growth in GHG emissions (i.e., emissions intensity targets). In addition to the policy shift in the executive branch, a number of states have taken actions in recent years that directly address GHG emissions. For example, 23 states have joined one of the three regional partnerships that would require GHG (or just carbon dioxide) emission reductions. One of these partnerships the Regional Greenhouse Gas Initiative (RGGI) took effect January 2009. Industry stakeholders are especially concerned that the states will create a patchwork of climate change regulations across the nation. This prospect is causing some industry leaders to call for a federal climate change program. Some have stated a preference for a cap-and-trade system; others have indicated a preference for a carbon tax approach. Another potential driver of market-based federal legislation is activity by the Environmental Protection Agency (EPA) to control GHG emissions under existing Clean Air Act authority. On December 15, 2009, EPA finalized an "endangerment finding" under Section 202 of the Clean Air Act, which requires the agency to regulate pollutants due to their GHG impacts. In addition, on May 19, 2009, President Obama announced a plan to integrate federal fuel economy standards (under the Energy Policy and Conservation Act) with federal vehicle emissions standards (under the Clean Air Act) and state standards (driven by California's rulemaking action). The Administration finalized GHG and fuel economy standards in the May 7, 2010, Federal Register . In the context of these events and efforts, Members in the 111 th Congress have introduced several proposals that would use market-based approaches to reduce GHG emissions. This report focuses on these legislative proposals. <2. Legislative Proposals> In the 111 th Congress, Members have introduced nine bills that include provisions to impose or permit some form of market-based controls on GHG emissions. General descriptions of these bills follow. The major provisions of the House bills are compared in Table 1 ; the Senate bills are compared in Table 2 . H.R. 2454 , introduced May 15, 2009, by Representatives Waxman and Markey, passed the House on June 26, 2009. It includes numerous energy policy provisions as well as cap-and-trade provisions (Titles III, IV, and V). H.R. 2454 would set up a cap-and-trade system that would reduce GHG emissions from covered sources to 17% below 2005 levels by 2020 and 83% below 2005 levels by 2050. Covered entities would account for approximately 85% of U.S. total GHG emissions. The proposal would allow covered entities to submit offsets to cover an increasing percentage (approximately 27% in 2016) of compliance obligations. Unlike previous cap-and-trade proposals (from previous Congresses), the program would create a rolling two-year compliance period. H.R. 2454 would distribute allowances to both covered and non-covered entities at no cost to support various policy objectives. In addition, an increasing percentage (approximately 17% in 2016) of the allowances would be sold through auction. As with the distribution of no-cost allowances, auction revenues would be used to further various policy objectives. S. 1733 , introduced September 30, 2009, by Senator Kerry, was ordered reported by the Senate Committee on Environment and Public Works on November 5, 2009. Largely similar to H.R. 2454 , S. 1733 would establish an economy-wide GHG cap-and-trade program, while addressing other energy-related matters through numerous energy policy provisions. Although the similarities outweigh the differences, six key distinctions include the following: (1) the Senate bill has a more stringent emissions cap between 2017 and 2029; (2) the two bills allocate emissions allowances and auction revenue to different recipients at different levels; (3) the bills would treat offsets differently; (4) the House bill would establish extensive carbon market regulation (the Senate bill currently has a placeholder for this topic); (5) the House bill would establish a requirement that importers purchase special emission allowances for certain imports from countries without greenhouse gas controls (the Senate bill currently has a placeholder for this topic); and (6) both bills would limit EPA's authority to regulate greenhouse gases under the Clean Air Act, although in different ways. For a more comprehensive comparison between H.R. 2454 and S. 1733 , see CRS Report R40896, Climate Change: Comparison of the Cap-and-Trade Provisions in H.R. 2454 and S. 1733 , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. H.R. 594 , introduced January 15, 2009, by Representative Stark, would impose a carbon-content tax on fossil fuels starting at $10/ton and increasing by $10 every year. The tax would apply to fossil fuels as they enter the U.S. economy (i.e., at the production or importation level). The bill does not specify how the tax revenues would be applied. H.R. 1337 , introduced March 5, 2009, by Representative Larson, would impose a carbon-content tax on fossil fuels starting at $15/ton. The tax would increase by $10 each year, but if identified emission targets (established by EPA, based on reaching 80% below 2005 emissions by 2050) are not met, the tax would increase by $15 in that year. The tax revenues would be used to support (1) a payroll tax rebate; (2) affected industry transition assistance; and (3) clean energy technology. The vast majority of the revenue would support the payroll tax rebate. The proposal also would impose a carbon equivalency fee on imported carbon-intensive goods. H.R. 1666 , introduced March 23, 2009, by Representative Doggett, would establish a cap-and-trade program to reduce greenhouse gas emissions from covered sources from 6.2 billion metric tons in 2012 to 253 million in 2050. The program would be administered through the Department of the Treasury and 100% of the allowances would be auctioned. In order to mitigate price volatility in the early years of the program, the bill would establish a Climate Program Oversight and Coordination Board to set targets for allowance prices and manage quarterly auctions to maintain a smooth allowance price path. The managed price program would run from 2012 through 2019, and, depending on a review, revisions would be made for 2020 and beyond. If the price path resulted in excess emissions from the expectations set out in the bill, those emissions would be made up through additional reduction in the years 2020 through 2030. Auction revenues would be put in an Auction Revenue Trust Fund at Treasury, but no specific purpose is delineated in the bill for them. H.R. 1683 , introduced March 24, 2009, by Representative McDermott, would establish a hybrid approach to GHG emission control. The approach may be described as a dynamic carbon-content tax. Producers and importers of GHG emission substances fossil fuels and other GHG emission inputs would be required to purchase emission permits for each ton of emissions that would occur from the combustion or use of the GHG emission substance. Permits may not be traded or exchanged, thus the purchase requirement would effectively act as a carbon-content tax (or fee). The Department of the Treasury would determine the (annual) price for emission permits based on annual emission allocations (or caps) identified in the bill. Treasury would publish price schedules every five years, but the sale price may be modified (under certain conditions and to a limited extent) within the five-year periods. If the permits sold exceed allocations allotted in a particular year, subsequent year allocations would be reduced, thus imposing an overall cap. H.R. 1862 , introduced April 1, 2009, by Representative Van Hollen, would cap emissions associated with the combustion of CO 2 . Fossil fuel producers and importers would be required to surrender carbon permits in relation to the carbon dioxide emissions generated through the combustion of fossil fuels the entities sold during the previous year. The cap would decline annually, leading to an 85% reduction below 2005 CO 2 emissions from covered entities by 2050. All of the carbon permits would be sold through an auction process. Nearly 100% of the auction proceeds would be redistributed monthly to those with a social security number. H.R. 2380 , introduced May 13, 2009, by Representative Inglis, would impose a carbon-content tax on fossil fuels starting at $15/ton. The tax rate would increase by an equal percentage each year (approximately 6.5%), until it reached $100/ton in 2040 (not including inflation adjustments). All of the tax revenue would be used to offset reductions in the payroll tax paid by employees, employers, and self-employed persons. The proposal would impose a tax on carbon-intensive imported goods. S. 2877 , introduced December 11, 2009, by Senator Cantwell, would create a program that seeks to combine both emission and price control. The program would apply only to CO 2 emissions (covering 80% of U.S. GHG emissions), requiring fossil fuel producers (e.g., coal mines, wellheads) and importers to submit "carbon shares" for the carbon dioxide (CO 2 ) emissions related to the fossil fuels they produce or import. The President would limit (or cap) the quantity of carbon shares available for submission each year, and the Department of Treasury would distribute all of the carbon shares through monthly auctions. The auctions would have a price floor and a price ceiling (i.e., safety valve). If the price ceiling were reached in a given auction, additional carbon shares would be sold to accommodate all bids. Offsets would not be allowed for compliance purposes; however, if the price ceiling is reached during an auction the possibility of which would be increased by not allowing offsets revenues from the additional carbon shares would be used exclusively on domestic mitigation activities, including offset-like projects from agriculture and forestry sectors. S. 2877 would distribute 75% of its auction revenue to individuals on a monthly basis; the remaining 25% would be allotted (through the appropriations process) to support a range of policy objectives. Two bills H.R. 1759 and S. 2729 have been introduced to address specific issues. H.R. 1759 , introduced by Representatives Inslee and Doyle on March 26, 2009, would set up an allowance distribution scheme to assist energy-intensive industries that are trade-exposed and potentially subject to carbon leakage. S. 2729 , introduced by Senator Stabenow on November 4, 2009, includes (among other provisions) comprehensive offset provisions that could serve as an alternative to offset program text in other cap-and-trade proposals. On May 12, 2010, Senators Kerry and Lieberman released a draft of new climate change legislation. A comprehensive energy and climate change policy proposal, the draft would set GHG reduction goals similar to those of H.R. 2454 . Employing a market-based cap-and-trade scheme for electric generators and industry with a separate set-price mechanism to allocate allowances to cover transportation fuels, the proposal allocates a substantial percentage of the allowances created for the benefit of energy consumers and low-income households. As the program proceeds through the mid-2020s, it shifts to more government auctioning with most of the proceeds returned to households. The bill's allocation scheme includes free allowance allocations to energy-intensive, trade-exposed industries, and other measures to prevent carbon leakage. While it is expected that the Kerry-Lieberman proposal would be rolled into S. 1462 , it does contain other energy initiatives, including incentives for nuclear power, carbon capture and storage technology, and natural gas vehicles. <3. Legislative Activity> H.R. 2454 (Waxman/Markey, introduced May 15, 2009) was subsequently modified (both technical and substantive changes) and offered as a "Manager's Amendment" on May 18, 2009. On that day, the bill began markup in the House Committee on Energy and Commerce. After making several amendments to the bill most of which did not affect the cap-and-trade program the committee reported the bill on June 5, 2009 ( H.Rept. 111-137 , Part I). The House of Representatives passed H.R. 2454 on June 26, 2009. The version summarized in Table 1 reflects the bill as passed by the House. On September 30, 2009, Senators Kerry and Boxer introduced S. 1733 , which was referred to the Senate Committee on Environment and Public Works. The committee held hearings on the bill starting October 27, 2009, and markup of the bill began November 3. On November 5, the committee approved Senator Boxer's "Manager's Amendment" as a substitute, and ordered S. 1733 reported. The version summarized Table 2 reflects the bill as amended by the Manager's Amendment released by Senator Boxer on October 30, 2009.

As of the date of this report, Members in the 111th Congress have introduced nine stand-alone proposals that would control greenhouse gas (GHG) emissions. The proposals offered to date would employ market-based approaches—either a cap-and-trade or carbon tax system, or some combination thereof—to reduce GHG emissions. The legislative proposals are varied in their overall approaches in controlling GHG emissions. Some control emissions by setting a quantity (or cap); others control emissions by setting a price (or tax/fee). In addition, the proposals differ in their inclusion of particular design elements, such as whether or not to allow offsets (emission reduction opportunities from economic sectors not directly addressed by the primary approach). H.R. 2454, the American Clean Energy and Security Act of 2009 (Waxman/Markey), and S. 1733, the Clean Energy Jobs and American Power Act (Kerry/Boxer), have been the primary energy and climate change legislative vehicles in the 111th Congress. On June 26, 2009, the House passed H.R. 2454. On November 5, the committee approved Senator Boxer's "Manager's Amendment" as a substitute, and ordered S. 1733 reported. In addition to establishing a cap-and-trade system to regulate GHG emissions, both H.R. 2454 and S. 1733 would address energy efficiency, renewable energy, and other energy topics. Other proposals—H.R. 1862 (Van Hollen) and H.R. 1666 (Doggett)—would control emissions by limiting quantity, but would differ in their structure and implementation. Three of the proposals—H.R. 594 (Stark), H.R. 1337 (Larson), and H.R. 2380 (Inglis)—would use a carbon tax approach to address carbon dioxide (CO2) emissions from fossil fuel combustion. Other proposals do not fit precisely into either a price or quantity control category. H.R. 1683 (McDermott) would establish a program that may be described as a dynamic carbon tax: its tax rate would be linked with annual emission allocations (or caps). S. 2877 (Cantwell) would establish a CO2 emission control program on fossil fuel producers and importers. Although the bill would limit the number of carbon shares auctioned each year, the auctions would include a price safety valve, allowing for the purchase of additional shares. To counter the emissions from these additional shares (above the cap), the price safety-valve revenues would be used to support mitigation efforts outside of the emission control program. On May 12, 2010, Senators Kerry and Lieberman released a draft of new climate change legislation. A comprehensive energy and climate change policy proposal, the draft would set GHG reduction goals similar to those of H.R. 2454. The proposal would employ a market-based cap-and-trade scheme for electric generators and industry with a separate set-price mechanism to allocate allowances to cover transportation fuels. A key element in GHG emission reduction bills is how, to whom, and for what purpose the value of emission allowances or carbon tax revenue would be distributed. The distribution strategy is a critical policy decision, because it would affect (1) the overall cost of the program and (2) how program costs are distributed throughout the economy. In the early years of the program, H.R. 2454 and S. 1733 would distribute allowances at no cost to both covered and non-covered entities to support various policy objectives. In addition, an increasing percentage of the allowances would be sold through auction. As with the distribution of no-cost allowances, auction revenues would be used to further various policy objectives.

<1. Introduction> As India's economy continues to grow, its energy needs, including for natural gas, will likely grow as well. India's economy is expected to grow fivefold by 2040, according to Prime Minister Narendra Modi. Its population is expected to surpass China as the world's largest by 2022, reaching approximately 1.4 billion people, creating greater demand for energy. In 2015 India accounted for 5.3% of global primary energy consumption, while China was the largest consumer with 22.9%. Overall, India imports almost three-quarters of its energy needs, making it highly dependent on other countries. The Organization for Economic Co-operation and Development (OECD) believes India will remain the fastest-growing G20 economy in 2017-2018, with an annual projected growth rate of 7.5%. By 2050, India has the potential to overtake the United States as the world's second-largest economy in terms of purchasing power parity (PPP). Natural gas makes up 7% of India's total energy consumption, well behind coal and oil. Similarly, natural gas accounts for 6% of China's energy mix, though China uses almost four times as much natural gas as India (see Figure 1 ). With an eye on increasing this percentage, India is instituting a number of policy initiatives like the Hydrocarbon Exploration and Licensing Policy (HELP) and major infrastructure investments such as expanding domestic gas pipelines and liquefied natural gas (LNG) import terminals. If global natural gas prices continue to be relatively low, natural gas consumption in India will likely grow in the coming decade. However, these changes likely will take significant investment and commitment from the Indian government to reach fruition. India's natural gas demand is forecasted to grow at about 6% annually over the next five years, according to the International Energy Agency (IEA) due to increases in domestic production and falling LNG import prices. India is continuing to build its energy infrastructure for natural gas, which had previously been almost exclusively configured for coal and oil, to reverse the recent declines in natural gas consumption. In 2015, India's natural gas consumption declined almost 18% since its peak in 2011, two-thirds of which occurred between 2012 and 2013, in part because of large drops in domestic production and an inability to compensate for the drop in domestic production with LNG imports. The Government of India (GoI) has indicated it will change this in the short term, but the GoI's commitment and resources necessary for these changes are uncertain. India has not been a major factor in global natural gas markets as a producer, but is growing as an importer. India is the 27 th -largest natural gas producer in the world, accounting for less than 1% of global production, according to the BP Statistical Review of World Energy . In 2015, India's natural gas production fell by 3.8%, its fifth straight year of decline. This has been due to a variety of factors, including difficult geology, cheaper alternative energy sources, and lagging infrastructure development. In 2015, India was the 14 th -largest consumer of natural gas in the world. This consumption comes from domestically produced and imported LNG, which has been growing. India is currently the 5 th -largest importer of LNG in the world and is likely to grow as more LNG import terminals are built. The United States has viewed India as an important strategic partner in advancing common interests in the Asia-Pacific region and globally. India is the dominant actor in South Asia and viewed by many analysts as a counterweight to China's growing influence. In 2015, India was the United States' 10 th -largest trading partner, comprising $39 billion in U.S. exports and $69 billion in U.S. imports. The two nations have also pledged to increase their annual trade about five-fold to $500 billion by 2024. India's relationship with the United States on energy issues, though not significant to the broader energy market, has grown closer in recent years. The United States has expanded technical assistance programs in order to help India meet its carbon emission reduction goals. Indian energy companies have also signed contracts to import U.S. LNG. While he was chief minister of Gujarat, India's most western state and an important natural gas producing area, current Prime Minister Narendra Modi took a strong interest in modernizing his state's energy supply, eventually bringing electricity to all of Gujarat's villages. Modi's party came into office with the first parliamentary majority in 30 years and has already enacted several policy changes intended to provide India with a reliable, secure, and diverse energy supply. For example, the Modi Administration has loosened offshore exploration regulations, as well as instituted a policy to provide fertilizer plants with subsidies for purchasing natural gas more affordably. <2. Issues for Congress> Some Members of Congress have been interested in enhancing energy cooperation between the United States and India since the mid-2000s. Bills were introduced in both houses that would support closer energy ties between the two countries; however, none were enacted into law. India's natural gas plans have implications for a number of issues in which Congress has expressed an interest. Those issues include the following: Prospects for U.S. natural gas exports; Prospects for U.S. energy companies' investments in India; Indian investment in the U.S. energy sector; India's ability to meet its global commitments to reduce greenhouse gas emissions in order to combat climate change; India's ability to reduce its chronic air pollution problems, especially in New Delhi, where recently smog has reached 16 times levels deemed safe; and India's political and economic relationships with regions such as the Middle East, a major supplier of LNG, and Central Asia, a potential supplier of natural gas via pipelines. <3. Background: Government Control of Natural Gas> For years, oil and natural gas exploration in India was carried out only by state-owned companies like Oil and Natural Gas Corporation (ONGC) and Oil India Limited (OIL). By the 1980s, the GoI recognized the need for additional exploration, and began allowing foreign and domestic private companies through joint ventures and foreign direct investment to explore for oil and natural gas. In order to attract more foreign direct investment, the GoI liberalized the upstream and downstream domestic gas industries in a phased manner with the launching of the New Exploration Licensing Policy (NELP) in 1999. With India's energy use expected to double by 2040, in 2016 the Modi government introduced the Hydrocarbon Exploration and Licensing Policy (HELP), a new scheme intended to enhance domestic oil and gas production, entice major investment into the sector, and increase employment. HELP instituted a new investment-friendly policy, including for foreign companies, to provide uniform exploration and production standards for all domestic oil and natural gas production. Previously, the GoI's heavy-handed approach to energy investments led to frequent delays and disputes with foreign companies. Under HELP, there is to be a new streamlined revenue sharing model, which will allow the offshore energy-producing companies to market and sell their products with minimal government interference. As of January 2017, however, the first auction of oil and gas blocks under HELP has yet to take place. <3.1. Key Indian Government Agencies> Despite recent market-oriented reforms, additional energy policy guidance is still needed from the highest levels of the Indian government. This guidance mainly consists of schemes to improve access to and encourage consumption of natural gas. The GoI oversees four main ministries devoted to energy production, along with the Department of Atomic Energy. Natural gas production and distribution is regulated mainly through the Ministry of Petroleum and Natural Gas (MoPNG). Within the MoPNG are 11 public sector undertakings (PSUs) focused on petroleum and natural gas; the Directorate General of Hydrocarbons (DGH), which largely manages the awarding and implementation of the New Exploration Licensing Policy (NELP) scheme; the Petroleum Planning and Analysis Cell, which is responsible for periodically revising natural gas prices under the guidelines set in 2014; and the Petroleum Conservation Research Association, which promotes policies and strategies aimed at reducing India's dependence on oil. <3.2. India's Major Energy Companies> India's domestic natural gas production and distribution industry operates through a mix of state-owned and private companies. India's two main national companies, ONGC and Oil India Limited (OIL), were responsible for three-fourths of India's total domestic natural gas production in 2015-2016. In 2016, the industry newsletter Platt's ranked ONGC as the 20 th - and OIL the 201 st -largest oil and gas companies in the world. Additionally, Petroleum Intelligence Weekly , another industry publication, ranked ONGC 22 nd and 25 th for natural gas production and reserves in the world, respectively. A third state-run company, Gas Authority of India Limited (GAIL), is India's largest commercial marketer and domestic distributor of natural gas. The GoI has also promoted joint ventures. One of these, Petronet, is India's largest LNG importer. Petronet was formed by GAIL, ONGC, Indian Oil Corporation Limited (IOC), and Bharat Petroleum Corporation Limited (BPCL). Petronet is now publicly traded on the National Stock Exchange of India and is a major player in India's growing LNG market, operating two of India's largest LNG import terminals. Additionally, in early 2017, GAIL agreed to buy 3.5 million tons of LNG, or about 170 million cubic feet (5 billion cubic meters [BCM]), per year at a fixed fee of $3/million British thermal unit (mmBtu) from Cheniere's Sabine Pass LNG plant in Louisiana's Gulf Coast region. India also now has a number of large private companies that have expanded into natural gas production and development. Reliance Industries is a Fortune Global 500 company, and is the largest private sector company in India, with annual revenues over $34 billion. The company has made major investments in U.S. shale gas deposit projects with Pioneer Natural Resources in Texas and with Chevron in Pennsylvania. <3.3. 12th Five-Year Plan (2012-2017)> In five-year increments, the GoI lays out its plans and goals for key economic sectors, including for energy. During the period of the 12 th five-year plan, 2012-2017, India planned to continue relying on coal for the majority of its fuel to supply electrical power. According to the plan, coal would supply the energy for over 80% of the electrical capacity added during the Plan's period. The GoI planned to add 28 times more coal-fired capacity than that for gas. While India intends to lessen its dependence on coal in favor of nuclear and renewables after 2030, according to its 12 th five-year plan, coal will likely continue to be the primary energy source for electricity generation. By comparison, the plan projected only a marginal role for natural gas in meeting India's energy demands. In the plan, the GoI recognized the need for it to play less of a direct role in oil and natural gas "contract administration," as well as "capex/pricing decisions." This recognition led to the new Hydrocarbon Exploration and Licensing Policy (HELP) unveiled in late 2016. As a foreign investment policy, HELP is intended to make it easier and more profitable for foreign energy companies to extract India's offshore oil and natural gas resources. The first round of bidding on offshore drilling blocks is underway and expected to be finalized in early 2017. India's 13 th five-year plan is expected to be published sometime in 2017. It is unclear if the government intends to change course and place greater emphasis on natural gas in India's energy mix or not. <3.4. U.S.-India Cooperation on Energy> India-U.S. energy relations have steadily grown stronger in recent years. In 2009, the United States and India launched the Partnership to Advance Clean Energy (PACE) in order to accelerate low-carbon growth in India. As part of this program, the U.S. Department of Energy committed $25 million from 2011 to 2016 to support the U.S.-India Joint Clean Energy Research and Development Center (JCERDC). The Indian Ministry of Science and Technology also pledged to provide an additional $50 million in funding to support JCERDC research in India. PACE was strengthened and expanded in 2015 during a meeting between Indian Prime Minister Modi and President Obama, and in May 2016 the two governments announced the first nine recipients of off-grid innovation funding. In 2010, the Indian Ministry of Petroleum and Natural Gas (MoPNG) and the U.S. Department of State signed a memorandum of understanding (MOU) to expand cooperation on the development and extraction of India's shale gas resources. In 2012, through the State Department's Unconventional Gas Technical Engagement Program, the United States agreed to share experience and best practices to establish the necessary environmental protection and regulatory framework as India explores its own shale gas potential. A 2016 research partnership between the GoI, the Government of Japan, and the U.S. Geological Survey discovered highly enriched natural gas hydrates in the Bay of Bengal. It is believed to be the largest and most concentrated discovery of gas hydrates anywhere in the world. However, natural gas hydrates are currently uneconomic to produce with existing technology. Indian companies are increasingly investing in U.S. gas projects in the hope of improving technical expertise that can eventually be used on the 17 potential shale oil and gas well sites along the coasts of India. For example, in 2011 GAIL bought 20% equity in a project located in the Texas Eagle Ford shale play, while in 2012 OIL and IOC bought a 30% stake in a project located in Colorado's Niobrara shale oil and gas site. U.S. natural gas reserves and production currently far exceed India's (see Figure 2 ). <4. Natural Gas Consumption: Not Meeting Its Targets> In 2015, Indian energy use was dominated by coal, which accounted for 58% of India's total energy consumption. This was followed by oil at 28%. In contrast, natural gas accounted for 7% of India's energy consumption. The GoI expected demand for natural gas to grow from 71 BCM in 2011-2012 to 170 BCM in 2016-2017. Instead, India consumed just under 51 BCM in 2015. One likely explanation is the lack of growth in adequate infrastructure; the proliferation and integration of compressed natural gas into urban areas has not occurred as quickly as anticipated. India's domestic consumption of natural gas is dominated by the fertilizer (34%), electric power (23%), refining (11%), local distribution (11%), and petrochemical (8%) industries (see Figure 3 ). In recent years the GoI has undertaken initiatives to make imported LNG more attractive, especially to the power and fertilizer industries. For electricity generation, the Ministry of Power, along with the Ministry of Petroleum and Natural Gas, directed natural gas pipeline companies to reduce their tariffs to support greater natural gas use in electric power generation. In 2015, the GoI instituted a gas pooling policy to provide natural gas at a uniform price for all fertilizer plants. The GoI hopes that increasing the country's natural gas consumption will help meet the GoI's objective of reducing dependency on crude oil by 10% by 2022. In 2010, India already had the fifth-largest natural gas vehicle fleet in the world, with over 2.8 million natural gas vehicles. The IEA forecasts that India will constitute the third-highest growth in natural gas vehicles through 2040, after the United States and China. Indian companies are currently experimenting with ways to integrate natural gas into the transport industry. For example, Petronet and IOC are running a trial program of long-haul buses that run on LNG. Natural gas consumption varies widely by region across India. For example, the states of Gujarat and Maharashtra in the west and Uttar Pradesh in the north consume more than 65% of the India's natural gas, while making up only 31% of the population. The GoI is currently supporting initiatives to better balance the distribution and consumption of natural gas across the other regions of the country. Expanding India's use of natural gas is constrained by lack of infrastructure, particularly pipelines to move natural gas throughout the country. India currently has 15,000 km (roughly 9,320 miles) of domestic natural gas pipelines. The Petroleum and Natural Gas Regulatory Board (PNGRB) has recently tendered bids for the planning and construction of another 15,000 km (see Figure 4 ). Comparatively, the United States has approximately 484,826 km (301,257 miles) of natural gas pipelines as of 2015. India also lacks a broad network of distribution pipelines to move natural gas to consumers, especially residential users for heating and cooking. The GoI has recognized this shortcoming and has introduced plans to address it, but achieving their plans remains a goal. India is undertaking a concerted effort to bring low-carbon fuel sources to rural communities. Over the next three years the GoI is planning to connect 10 million households to the growing piped natural gas (PNG) network, a tripling of existing households. As of October 2016, 3.3 million households were connected to the PNG network. Additionally, the GoI has launched the Ujjwala welfare program, which is to provide 50 million Indian families free liquefied petroleum gas (LPG) connections over the next five years. Although LPG is not natural gas, this program fits in with the government's efforts to decrease in-home burning of wood and oil. In the first six months of the program 1 million families had already been provided with these free connections, which are intended to make rural households smoke-free. <4.1. Environmental Commitments May Prompt Greater Gas Use> Although India has very low energy consumption per capita because of widespread poverty, it is among the top five biggest carbon emitters, and faces major long- and short-term environmental challenges from climate change and local pollution. This stems from its use of coal in electric power generation, which accounts for 58% of India's total electricity production, as well as growing vehicular traffic, industry, and generally low energy efficiency. During the Paris Climate negotiations in 2015 (COP-21) India was viewed as a recalcitrant nation, but one whose participation was deemed essential to meet emission reduction goals. India's Intended Nationally Determined Contribution (INDC), released after signing the Paris agreement, outlined India's intention to pursue a 33% to 35% reduction in carbon intensity as a percentage of GDP from 2005 levels by 2030. The Modi government also committed to produce 40% of power from non-fossil fuel sources by 2030 (non-fossil fuels currently comprise 7% of India's electricity generation). Additionally, the Ministry of Environment, Forest, and Climate Change mandated that new and existing power plants will face stricter limits for various emissions beginning in January 2017. These restrictions favor increased natural gas-fired generation and renewables, and may promote greater use of both, if implemented and adhered to. The GoI anticipates that meeting the goals set forth in the INDC will require $2.5 trillion over 15 years, or $167 billion annually. Paying for this massive commitment is a major hurdle for development, but also is inspiring creative schemes for financing green projects. For example, in 2015 India's YES BANK issued one of the first ever "Green Bonds," worth $160 million. This loan was backed up by the India Infrastructure Finance Company Ltd (IIFCL), as well as by the Asian Development Bank. Although a relatively small amount compared to the government's goals, it is one example of a finance scheme to generate capital for India to meet its sustainable development and emission reduction goals. <4.2. Government-Set Prices Limit Supply and Raise Demand> In October 2014, the GoI introduced a new natural gas pricing formula, which is linked to a grouping of various prices on the international market. This new arrangement has kept the price in a range acceptable to domestic gas-consuming sectors, but many gas-producing companies have argued that this scheme does not offer sufficient financial incentives to expand investments in exploration and production, particularly in the offshore. The price of natural gas in India is determined twice each year by the government through a weighted average of the Henry Hub (United States), National Balancing Point (U.K.), Russian gas, and Canadian Alberta gas prices. The distribution of domestically produced gas is set by the government through its "Gas Utilisation Policy," which rations domestically produced gas and distributes it to certain priority sectors before it is released for sale to the general public. This is intended to benefit the so-called "Tier 1" industries (city gas for households and transport, fertilizer plants, grid-connected power plants). Imported LNG is available at prices that are significantly higher than domestically produced natural gas. In recent years there have been proposals to combine LNG with domestically produced gas to make it more accessible for domestic use and to increase consumption of imported LNG in the power sector. In November 2016, the Modi government proposed creating an Indian natural gas hub, similar to the U.S. Henry Hub, which is a physical distribution hub, or the U.K.'s National Balancing Point, which is a virtual pricing point. This development is intended to make the allocation of natural gas more efficient, make the market more dependable, and decrease political influence over trade. <5. Supply: Untapped Potential> India has many unexplored areas that may contain natural gas resources. India's total reserves are estimated to represent only 0.8% of the global total, but data are scarce for many of India's sedimentary basins and require additional scientific exploration in order to better assess their potential for producing natural gas. Over the next five to seven years, India's MoPNG plans to invest $20 billion to further develop its offshore deepwater natural gas potential, which is viewed as having greater immediate returns. India imports natural gas exclusively as LNG and will continue to do so in the near future. Despite some discussion of pipelines importing natural gas from Turkmenistan, Iran, and Russia, major political, security, and economic challenges must be overcome before pipelines become a viable option for India. India has emerged as one of the world's largest markets for LNG because of the falling price of LNG due to an abundance of supply. <5.1. Onshore> Shale gas has the potential to increase the role of natural gas in India's energy future. India has an estimated 96 trillion cubic feet (2,700 BCM) of shale gas resources, and the resource has been identified in six main geographic areas (basins) spread throughout the country: Cambay, Assam-Arakan, Gondwana, Krishna-Godavari, Cauvery, and the Indo-Gangetic plain. A shale policy issued in October 2013 assigned the rights to exploit shale gas to the national oil companies, but was opened to private investment under the NELP X licensing program in 2014. Despite the potential, no commercial shale production exists in India today. Problems over land use, water availability, and acceptance by local communities are likely to be major factors in shale's potential contribution to Indian energy. There is the potential for new gas discoveries onshore, but the potential for larger discoveries lies offshore. <5.2. Offshore> India's offshore territory remains largely unexplored. It is estimated that only 3,000 wells have been drilled in India's offshore basins. With an average density of one well per 146 km 2 , Indian offshore production remains far behind that of the United States in the Gulf of Mexico, where there is an average density of one well per 14 km 2 . The deep-water Krishna-Godavari basin (KG) has historically been the center of Indian offshore natural gas extraction. In 2002, Reliance Industries discovered what was then considered India's largest natural gas reservoir (the KG-D6). Early optimism in the region has given way to a more pessimistic long-term outlook. Extraction from the deep-water discoveries has been technically challenging. This has led to high development costs, deterring potential investors. The KG-D6 project, which had an initial capacity of 2.8 billion cubic feet per day (29 BCM), has also suffered from major extraction performance issues and disputes with the GoI. Recent pro-foreign-investment signals from the Modi government have led to renewed optimism for KG-D6. For example, BP and Reliance Industries have withdrawn from arbitration proceedings against the GoI, and intend to produce four times as much natural gas by 2022. HELP is intended to alleviate many of the previous bureaucratic barriers to investment in India's offshore resources. Specifically, the new policy will allow companies to choose more narrow exploration blocks than required under NELP, improving chances for success, and will combine all hydrocarbon extraction under one single license. In contrast to its earlier policy, the GoI is now factoring in the degree of geological difficulty by providing incentives for exploiting offshore resources. For example, a graded system of royalty rates has been introduced, making profits increasingly more lucrative for energy companies if they choose an ultra-deep-water block over a shallow-water one. Additionally, other incentives, such as an easier-to-administer revenue sharing model, are provided to companies that are awarded drilling blocks under this new system. <5.3. Imported LNG> India first began importing LNG in 2004, and by 2015 India had become the world's fifth-largest importer of LNG behind Japan, South Korea, China, and Taiwan. In 2015, India imported a total of 21.7 billion cubic meters (BCM) of LNG from 16 different countries: 62% from Qatar, 14% from Nigeria, 5% from Equatorial Guinea, and 5% from Australia (see Figure 5 ). In February 2016, India received its first LNG shipments from the United States. Given India's rising demand for LNG, and the growing U.S. LNG export capacity, it is likely additional U.S. natural gas will supply India in the future. For example, GAIL has signed an agreement with the Cove Point LNG facility in Maryland, which is under construction, for 50% of its capacity. India's domestic production of natural gas peaked in 2010 and has declined annually ever since. India's consumption of natural gas has also declined since 2010, but not as quickly as production. LNG imports have been making up a greater percentage of consumption each year from 2010 to 2015 (see Figure 6 ). This is due in large part to an increased abundance of cheap global LNG supplies, an improved ability to absorb LNG imports, and regulated domestic. The increased global supply of natural gas has shifted the market to one that favors the buyers. This increased bargaining power by the consumer has allowed Indian companies like Petronet to renegotiate long-term natural gas contracts, especially pricing terms, and gain other favorable concessions from companies like Qatar's RasGas. Due to India's proximity to major producers in the Middle East and Australia, it is likely to be a major LNG importer for years to come. Despite abundant global supplies of LNG, the resource remains too expensive to substitute for coal in electricity generation. If India is to increase reliance on natural gas, it would also require improving existing infrastructure and building new infrastructure. As of 2016, India had four operational LNG terminals, giving it a total import capacity of 22.5 BCM (see Table 1 ). Should all of these LNG terminals currently under construction and proposed be built, India's LNG import capacity could reach 41 BCM by 2019. This development would drastically improve access to natural gas along India's eastern seaboard, and possibly make it a more competitive alternative to coal. <5.4. Pipeline Imports: A Work in Progress> Increasing India's natural gas supply via international pipelines has centered primarily on two potential projects: the Turkmenistan-Afghanistan-Pakistan-India (TAPI) pipeline and the Iran-Pakistan-India (IPI) pipeline, both of which have been in development for many years. A third project has been proposed more recently to bring Russian natural gas to India, the Russia-India pipeline. TAPI has long been supported by the United States due to its potential to produce an economic windfall for Afghanistan. Though a ground-breaking ceremony for the project took place in Turkmenistan in 2015, there are still significant political and commercial obstacles to overcome, such as transiting Pakistan, if it is to be completed by its target date of 2019. With the loosening of sanctions on Iran's oil and gas industry, the prospects for the IPI pipeline were expected to improve. This renewed optimism was seemingly put to rest in 2016 when Iran's ambassador to India declared the project to be dead. The ambassador cited the lack of major investments in India's LNG infrastructure and the perceived inevitability that the United States would oppose its construction as the two major reasons for his pessimism. These two reasons are in addition to India's concerns of possibly relying on Pakistan as a natural gas transit country for Iranian natural gas. In October 2016, India and Russia agreed to build a 4,500 km to 6,000 km-long pipeline from Siberia estimated to cost $25 billion. However, the parties involved estimate the cost to transport Russia's natural gas to be at least double that of TAPI or IPI. In light of this, the two countries are now exploring an alternative gas swapping scheme involving China and Burma.

India's population is expected to surpass China as the world's largest by 2022, reaching approximately 1.4 billion people, creating greater demand for energy. India has the potential to be a much larger producer and consumer of natural gas. Competing political and economic factors have limited the government's effectiveness in changing the country's energy mix, which is heavily weighted toward coal and oil. Continually beset by high-profile environmental issues such as major air pollution and contaminated water supplies due to their reliance on coal and oil, the Indian government is now setting policies to increase lower-carbon energy use, but whether the government can overcome the economic and political hurdles remains a question. The portion of natural gas in India's energy mix, 7%, remains small compared to that of the United States, though it is comparable to similar emerging economies like Brazil, China, and South Africa. Despite India's intentions to double the proportion of natural gas consumption by 2022, achieving this goal would require major upstream, midstream, and downstream investments as well as the continued political will to enact the necessary changes to decrease reliance on coal and oil. India's natural gas plans have implications for a number of issues in which Congress has expressed an interest. Those issues include the prospects for U.S. hydrocarbon exports, U.S. energy companies' investments, Indian investments in U.S. natural gas production, India's ability to meet its international commitments to reduce greenhouse gas emissions in order to combat climate change, and India's plans for integrating itself into the growing South Asian energy market. In the mid-2000s, Members of both houses of Congress expressed interest to formalize closer energy ties between the United States and India, and legislation was introduced. The legislation was not enacted into law; however, the executive branch has implemented programs to further improve the energy partnership between the two nations. India's central government manages its energy sector mainly via four ministries: Power; Coal; Petroleum and Natural Gas; and New and Renewable Energy; along with the Department of Atomic Energy. Decades ago the Government of India created entities designated "Public Sector Undertakings (PSUs)" to ensure complete control of the petroleum logistics chain. These PSUs have become some of India's largest companies. The Oil and Natural Gas Corporation (ONGC), Gas Authority of India Limited (GAIL), and Indian Oil Corporation Limited are consistently ranked among the world's bigger energy companies. The PSUs are India's primary international and domestic energy actors, although some private sector companies have become key players as well. However, government control of the energy sector has stymied India's development of its domestic resources and hindered its efforts internationally. In the past decade, India has incentivized foreign access to its upstream sector as a way to increase domestic production. Some of India's energy companies are also investing more in U.S. energy projects and have signed contracts to import U.S. liquefied natural gas (LNG). Due to limited drilling activity and available information, how much technically recoverable natural gas exists in India is unclear. However, India's current assessment of total reserves—resources that are economically and technically viable under existing market conditions—is estimated to represent less than 1% of the global natural gas total. As India attempts to shift away from coal and oil over the coming decades, natural gas production, especially from offshore resources, is seen as a way to increase domestic supply. Combined with improving infrastructure for imported LNG, India could become a bigger natural gas consumer in the future.

<1. Introduction> In 2007, much higher than expected defaults and delinquencies in the "subprime" segment of the mortgage market, led to a significant slowdown of the housing market. Most of these mortgages were financed not by traditional banks, but by global capital markets through asset or mortgage-backed securities. Thus, rather than being confined to the institutions who made the loans initially, the losses caused by the unexpected volume of mortgage defaults have been felt throughout the financial system by any person or institution who bought such securities. In addition, financial guaranty insurance companies, often known as "monoline" insurers, have also been impacted because they provided insurance for various asset-backed bond issues. These insurers also insure a variety of other bonds. Consequently, if the ratings of a bond insurer should fall (due to widespread default problems associated with a particular category of bonds), then the ratings of other bonds insured by the same firm will also decline. Such spillover and contagion effects are raising questions regarding the possibility of a government-sponsored rescue of bond insurers in difficulty. Although the federal government does not currently oversee insurers, various proposals for broad federal oversight of all insurers have been introduced, including S. 40 / H.R. 3200 in the 110 th Congress. The House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises held a hearing on "The State of the Bond Insurance Industry" on February 14, 2008, and the full Financial Services Committee is scheduled to examine "Municipal Bond Turmoil: Impact on Cities, Towns, and States" on March 12, 2008. At the time of writing, there have been no bills focused on the current bond insurance market introduced. This report begins with a description of the bond insurance industry and its business model, including the relatively recent move into providing insurance for asset-backed securities. An analysis of the current market difficulties follows along with the various possibilities of spillover effects. Finally, a number of broader policy questions are briefly discussed. This report will be updated as events warrant, particularly if and when Congress takes action on the issue. <2. The Bond Insurance Industry> The bond insurance industry is small relative to the entire industry as a whole. According to the Association of Financial Guaranty Insurers (AFGI), total premiums collected in 2006 by the 12 insurers and reinsurers that represented nearly all the industry were $3.2 billion. In comparison, the total direct premium collected by U.S. property/casualty insurers in 2006 was $447.8 billion, and that collected by life and health insurers was $619.7 billion. While the total premium volume is fairly low, the total net par value of the bonds insured by its members is much higher, namely $2.3 trillion with four companies, Ambac, FGIC, FSA, and MBIA, insuring approximately $2.0 trillion of that $2.3 trillion. The oldest of the insurers, Ambac Assurance Corporation, was established less than 40 years ago. The bond insurance sector is relatively small because the companies are restricted, under the state chartering laws, to providing only one kind of insurance, financial guaranty insurance, which is why they are often referred to as monolines. While this restriction applies to the business activity of providing financial guarantees to securities, it does not limit the types of securities that can be insured. Bond insurance basically guarantees bond purchasers that interest payments will be made on time, and if the issuers default, that principal will eventually be returned. This insurance is typically purchased by the issuer of the bond for a one-time payment. The purpose of this insurance, therefore, is to "credit enhance" or raise the credit rating that would have been assigned based upon the financial strength of the original issuer to that of the insurance company guaranteeing the bond. A higher credit rating may be useful for issuers wanting to attract more investors, in particular smaller bond issuers or those unfamiliar to most investors. Many institutions also prefer highly rated "AAA" securities either because risk-based capital requirements are less for institutions holding such securities or, in the case of mutual funds, because of specific investment requirements. Issuers without the necessary capital reserves can still obtain higher ratings for their securities by purchasing bond insurance. <2.1. Municipal Bonds and Asset-Backed Securities> Monoline insurers began writing insurance for municipal bonds, and this insurance remains their primary business (60% of their total according to AFGI). Over the past 10 years, the annual share of municipal bonds that are issued with bond insurance has varied from approximately 40% to more than 55% with the current total being approximately 50% of the outstanding municipal bonds. Municipal bonds are typically purchased for their tax advantages, often by individual investors who are not seeking risky securities. Individual households held $911 billion in municipal debt at the end of the third quarter of 2007, 35.4% of the total. Other large holders of municipal debt include various types of mutual funds ($895.6 billion or 34.8%) and property/casualty insurance companies ($346.8 billion or 13.5%). Insuring municipal bonds historically been a low-risk line of business. Municipalities rarely default on their bond offerings, so the losses required to be paid by insurers have been very low. While they rarely default, municipalities often do not maintain the capital reserves or other requirements rating agencies look for in awarding AAA ratings. Bond insurers sought a AAA rating so the bonds they insure would also share this status, making the insurance attractive to many municipalities. If a bond insurer were to lose its AAA rating, it would become very difficult, if not impossible, for the firm to write new business. If a monoline is unable to attract new business, they would be forced to pay any existing claims with existing resources, rather than being able to rely upon the cash flow from new business. The bond insurer would essentially be in what is known as "run off" in the insurance industry unless the AAA rating could be re-established. Hence, protection of a AAA rating is essential for such insurers to remain ongoing concerns. Over time, bond insurers expanded the types of products that they insured, branching out into public and infrastructure bonds originated by issuers from other countries (14% of their business according to AFGI), and into other classes of asset-backed securities also known as structured finance or securitization (26% of the business). Structured finance is the process of pooling similar types of financial assets (typically loans) and transforming them into bonds or debt securities. Investors typically purchase these asset-backed securities by paying an initial lump sum, and they are repaid the principal and interest over time with the cash flows generated from the underlying assets. Monolines begin to guarantee asset-backed securities in the 1990s. Ambac, for example, created a specific division to focus on these securities in 1993. <2.2. Movement into Credit Default Swaps> A traditional insurance policy is a long-standing method of protecting oneself from financial loss. As financial markets have become more sophisticated, however, other financial instruments have been developed that may offer similar protection in a different form. Derivatives known as credit default swaps (CDS) are one of these newer instruments. A CDS is an agreement between two parties where the seller agrees to provide payment to the buyer in the event of a third party credit event, such as default on a security. In return, the buyer typically makes periodic payment to the seller. From an economic point of view, a CDS can be identical to an insurance policy. Unlike a traditional insurance policy, however, CDS are not regulated by state insurance departments and are tradeable assets that can be easily bought and sold on the open market. The CDS contract terms can be whatever the two parties agree to, and there is no general requirement that any capital be held by the seller to back the promise made in the contract. When monoline insurers expanded into offering guarantees for asset-backed securities, they apparently did so as protection sellers on CDSs rather than through selling more traditional insurance products. The move to CDS, however, did require the creation of separate subsidiaries to offer the CDS, because state insurance regulators generally would not allow insurance companies to offer them. The insurers, however, were allowed to write insurance policies to their subsidiaries guaranteeing the CDS entered into by the subsidiaries. According to AFGI, the movement toward CDS contracting was initiated by its customers due to more favorable accounting treatment and regulatory reasons. As long as the CDS contract is on the same terms as the traditional insurance policies, the switch to CDS contracting would not alter capital requirements for the financial guarantor wanting to maintain a very high credit rating. Both AGFI and the individual bond insurer MBIA indicate that the vast majority of the CDS offered by bond insurers mirrored the guaranty of the traditional products namely, prompt interest payments and ultimate return of principle under the original terms of the security. (In response to CRS questions, AFGI also indicated that one insurer, ACA, which already has been severely downgraded, had entered into some swaps that required payment if the insurer were downgraded, which likely contributed to its difficulties.) One important difference between CDS and traditional insurance is the accounting treatment. As a tradeable instrument, a CDS must be assigned a current value, or "marked to market," on a company's financial statements under standards put forth by the Financial Accounting Standards Board (FASB). Changes in the value of the contract must generally be reported as current income during each reporting period. An insurance policy, however, is not marked to market in a similar manner. Thus, if there is significant increase in a default risk that is being covered by a CDS, the market value of the CDS to the buyer would rise significantly, (the value to the seller would, of course, drop significantly) and this rise (or drop) would have to be reflected on the income statement. This would not be the case if the identical risk were covered by an insurance policy. This accounting difference between traditional insurance policies and CDS holds even if the economic substance and legal commitment of the insurance policy and the CDS are identical. <3. Current Bond Insurer Situation> As noted above, the current difficulty in the bond insurance market is rooted in the unexpected rise in mortgage defaults and foreclosures, which caused an increase in defaults on a number of mortgage-backed securities, including many that had previously been thought to be essentially risk-free. This crisis affects bond insurers in a number of ways. The most straightforward is that, if they insure any securities that default due to the non-performance of the underlying mortgages, the bond insurer would be responsible for paying off these securities, which would mean an increase in future payments to be made by the insurer. A second, more immediate impact would be on the insurer's balance sheet, particularly if the insurance protection is provided in the form of CDS, rather than a traditional policy. Even if default has not occurred, as the probability of default on a security covered by a CDS increases, the insurers offering the protection must show a loss on their books, even if the immediate cash flow has not changed. Finally, the bond insurers may be affected by generally increased skepticism on the part of investors and the ratings agencies. Over the past months, market sentiment on bond insurers has turned substantially negative. Stock prices for bond insurers are down substantially, nearly 90% in the last year for Ambac, which has been downgraded to Aa by one rating agency (Fitch), but has to this point kept AAA ratings from Moodys and Standard & Poor's. Other downgrades have included FGIC to AA by Fitch and Standard & Poor's, and SCA to A by Fitch. One insurer, ACA, has been downgraded all the way to junk levels by Standard and Poor's. Several insurers have scrambled to raise capital to avoid being downgraded. Two large insurers, MBIA and Ambac, have been successful in raising sufficient capital to maintain AAA ratings from at least two of the rating agencies. Multi-billion dollar paper losses have been reported, primarily from the value of the insurers' CDS contracts. New York State Insurance Superintendent Eric Dinallo has held meetings with various banks and other financial institutions attempting to arrange some kind of rescue package to prevent further downgrades. No rescue package has been forthcoming from Superintendent Dinallo's efforts, although they may have contributed to the ability of some of the insurers to raise new capital. Losses in the hundreds of billions of dollars throughout the financial system have been foreseen by some analysts. Different market participants have come up with dramatically different views on the future of the bond industry. Two competing views are summarized below, the first promoted, unsurprisingly, by many in the bond industry, while the second is voiced more by outside skeptics. <3.1. An Optimistic View> According to this view, the bond insurers are not in trouble for the following reasons: First, when bonds go into default, the insurer pays only the interest and principal at the time the payments are scheduled. The firms generally do not have to accelerate the payment schedule if the insured bond defaults, if the insured bond's credit rating falls, or if the guarantor's rating falls. As a result, the concern over monolines being unable to meet their payment obligations has been somewhat exaggerated. Second, it is argued that, because a credible reputation is extremely valuable to attracting future business, financial monolines only insure highly-rated bonds. Based on this assumption, it is unlikely that they would have insured the riskier bonds backed by subprime mortgages. Third, turmoil in the mortgage-backed security market associated with the subprime crisis may effect the liquidity and value of all such securities, even those that do not contain subprime loans. While investors trying to sell these securities are likely to absorb losses associated with falling mark-to-market values, it is maintained that insurers would only be affected if the underlying mortgage holders failed to make payments. As long as cash payments are still being made, the declining market value of the securities would not trigger any losses from the guarantor, since the market value of the security is not being insured. Hence, optimists maintain that insurers, while buffeted by a skeptical market, are not headed for long-term financial trouble. <3.2. A Pessimistic View> The pessimistic view holds that monoline insurers are in serious trouble. Pessimists observe that past ratings of monolines not only fail to reflect the increase in default associated with the increase of the share of asset-backed bonds they guarantee, but that these bonds are backed by assets highly susceptible to default, such as subprime mortgages. From this perspective, the guaranty industry did, in fact, agree to provide insurance to the riskier securities backed by subprime mortgages, and their ratings should be revised to reflect a high level of financial risk. Those making this argument assert that the industry is currently not fully disclosing all information that will eventually emerge as the financial market turmoil continues. It is possible as well that the situation falls somewhat between the two. As was noted above, monoline insurers expanded their business from providing insurance to municipal bonds to providing insurance to asset-backed securities/bonds, some of which were backed by mortgage loans. Even in the absence of a mortgage default crisis, mortgage loans generally have a greater probability of default than municipal bonds. Previous ratings of financial monolines, therefore, may not have reflected the increase in default risk solely resulting from a shift in the ratio of bonds backed by municipals relative to bonds backed by other types of financial assets. Hence, the current ratings pressures may be the market accurately reassessing the prospects of the insurers in their expanded line of business. If this is correct, the monoline industry may need increased capital to back the riskier bonds and retain a AAA rating, but it may not be in risk of default or bankruptcy. At the February 14 hearing, Secretary Dinallo indicated that he did not see the bond insurers at risk for insolvency, but that they were definitely facing difficulties in maintaining their ratings. Important considerations going forward include the following: Will a large portion of the bond insurance market be downgraded? Would downgrades lead to fewer customers and put the insurers in serious jeopardy? What percentage of securities backed by monolines eventually go to claim, thus requiring the insurers to make substantial real payments? Are there other surprises in the insurers' books? Did the insurers in fact insure more risky securities than is currently indicated? Are any of the insurers, like ACA, counterparty to derivatives that might require immediate payment upon a downgrade? <4. Spillover Effects from Monoline Difficulties> The direct impact of a monoline insurer being downgraded from AAA is critical for that company. What may not be obvious, however, are the effects on other actors in the financial system, some of whom may never have even heard of the asset-backed securities and credit default swaps that are the catalyst for the current problems. These participants and possible impacts are discussed below. <4.1. Individual Investors> The crucial question for individuals holding municipal bonds is whether they are "buy and hold" investors who are using the bond for ongoing income and then the return of principle at maturity, or whether they are intending to sell the bonds before maturity. For the buy-and-hold investor, the downgrade makes no difference, unless the bond issuer defaults in the future. Since municipal bond defaults are exceedingly rare, the downgrade will likely have no impact on this investor. For someone intending to sell the municipal bonds before maturity, the downgrade cuts the value of the bond. How much of a loss in value would depend on how low the insurer was downgraded and the rating on the underlying bond. In addition to holding individual municipal bonds, many individuals hold the bonds indirectly through mutual funds. These individuals are facing losses in the value of the funds just as the individual who was planning on trading the bonds that he or she owned. <4.2. Municipalities> For the large majority of insured bonds that have already been sold, it makes essentially no difference to the issuing municipality whether or not the insurer is downgraded as the municipalities commitment to pay off the terms of the bond is unchanged. The exception to this is a small class of securities known as auction-rate securities. Although these are long-term securities, the interest rate paid by municipalities is set at periodic auctions. The turmoil in the market, including doubts about bond insurers, has caused many of these auctions to fail, resulting in higher immediate interest costs for municipalities issuing these bonds. In 2006, approximately 8.5% of the municipal bond volume were auction-rate bonds. The dollar value was $32.99 billion, of which $21.39 billion was insured. In the future, however, municipalities will likely face a choice between paying a higher premium on insurance from one of the remaining AAA-rated bond insurers, assuming that AAA-rated bond insurers remain, or paying a higher interest rate for their bonds if they offer them either without insurance or with lower rated insurance. In 2007, a AAA-rated bond's average yield was 4.07%, compared with 4.17% for AA, 4.43% for A, and 4.78% for BAA. Depending on the comparison between future insurance premiums and interest rates on differently rated bonds, significant numbers of municipalities might choose to forgo bond insurance altogether. The possible damage to future municipal bond offerings was reportedly a significant factor in Superintendent Dinallo's encouragement of the newly created Berkshire-Hathaway bond insurer. <4.3. Other Financial Institutions> Financial and institutional investors holding insured securities that lose AAA ratings may find they are no longer in regulatory compliance after these downgrades. Banks and insurers face regulatory requirements concerning the amount of capital they must hold against their outstanding loans and written insurance policies. Some pension funds are required to hold AAA investment grade securities. Downgrades will subsequently reduce the value of holdings, and these investors must hold more capital or rebalance their portfolios with higher quality assets. Estimates of the magnitude of this effect are obviously highly speculative at this point in time, and the range of estimates is very wide. One Barclays Capital analysis puts the additional capital needed by global banks to be as high as $143 billion. This $143 billion figure includes both U.S. and European banks, and takes into account the market value losses as well as the increased capital required by regulators since the banks would be holding lower-rated securities. A Morgan Stanley analyst, however, reportedly indicated on a conference call that they found total bank exposures in the United States to be in the $20 billion to $25 billion range with likely losses being $5 billion to $7 billion. <5. Future Policy Issues> The future of the individual bond insurers revolve around the actual extent of their losses on asset-backed securities and whether or not they are able to retain their AAA ratings. While the answer to these questions are largely unknowable at the moment, the situation does seem to raise three significant policy questions: Is an immediate federal government response necessary to address the situation and avert possible widespread losses and systemic risk? Was a regulatory failure at least partially responsible for allowing conditions for a potential crisis situation to exist? What regulatory changes, in particular those addressing the use of derivatives, may prevent future financial instability? If the potential losses are truly so high, it would seem to be in the self-interest of a wide number of financial institutions to help the insurers retain their AAA rating with or without direct government intervention. Unless a single, very well capitalized individual or firm becomes convinced that buying out a large bond insurer made business sense, the odds of a purely private rescue seem small. This is primarily due to the collective action problems due to the large number of actors involved. Even if the overall losses would be huge, for each individual bank or insurer affected, the most logical course of action may be to sit back and let somebody else put their money up to solve the problem. In such a case, government coordination, even if no government money is directly involved, might avert the larger loss. This was essentially the solution to the 1998 Long Term Capital Management (LTCM) failure that was brokered by the Federal Reserve. The bond insurer situation, however, is much more complicated than LTCM was. There are several bond insurers in difficulty and hundreds or thousands of institutions that could be affected if the insurers fail. To this point, the direct government intervention has been much less, than in the LTCM rescue. The primary government official pushing for some sort of solution right now is Superintendent Dinallo, who is the insurance regulator of the state where most bond insurers are based, but who does not have the same overall status that the leadership of the Federal Reserve did in the LTCM crisis. The current absence of federal involvement at the micro level points to the more macro questions about regulatory failure. The bond insurers, like all insurers, are state regulated entities. While most are domiciled in New York, the largest, Ambac is domiciled in Wisconsin, and the insurer most negatively affected by the current crisis, ACA, is domiciled in Maryland. Questions by Members of Congress about whether state insurance regulators have the ability to ensure the solvency of insurers were raised in earnest in the late 1980s after several large insolvencies and have continued as the financial services marketplace has become increasingly complex since then. The current bond insurer difficulties will likely cause such questions to be raised again due to the central role played by the relatively new and sophisticated financial instruments, such as credit derivatives and collateralized debt obligations. In addition to the question of how insurers should be regulated, the crisis also may raise questions about whether and how financial derivatives, such as the credit default swaps offered by the bond insurers, should be regulated. Currently, some derivatives trading is regulated by the Commodity Futures Trading Commission under the Commodity Exchange Act. Other derivative instruments, including CDS, are traded in over-the-counter (off-exchange) markets that are essentially unregulated. Congress has repeatedly considered the question of whether unregulated derivatives markets have the potential to facilitate fraud, price manipulation, or financial instability; for example, in December 2007, the Senate passed legislation ( H.R. 2419 , Title XIII) that would expand the CFTC's authority over currently unregulated energy derivatives. Unregulated financial derivatives markets have increased in size such that a widespread crisis in derivatives could cause substantial damage to the rest of the financial system and lead to a downturn in the real economy. This sort of systemic risk is seen as a major rationale for regulating other financial services, such as banks. If derivatives are posing a similar systemic risk, some may point to this in arguing for their regulation as well.

Beginning in 2007, higher than expected defaults and delinquencies in "subprime" mortgages led to a significant slowdown of the housing market. Most of these mortgages were financed by capital markets through asset- or mortgage-backed securities, rather than by traditional banks. Thus, rather than being confined to the institutions that made the now-questionable loans, losses caused by unexpected mortgage defaults have been felt throughout the financial system by any entity who bought mortgage-backed securities. In addition, financial guaranty insurance companies, often known as "monoline" insurers, have also been affected because they insured the prompt payment of interest and return of principal for various securities that may now not be able to pay the promised amounts. With most possible insurance payouts still in the future, these insurers have yet to experience large real losses. Possible massive future losses, however, have caused financial turmoil for insurers, downgrades from rating agencies, and fears about further harm to other institutions, individuals, and municipalities. While the federal government does not currently oversee any insurers, various proposals for broad federal oversight have been introduced, including S. 40/H.R. 3200 in the 110th Congress. The House Financial Services Subcommittee on Capital Markets, Insurance, and Government Sponsored Enterprises held a hearing entitled "The State of the Bond Insurance Industry" on February 14, 2008, and the full Financial Services Committee is scheduled to examine "Municipal Bond Turmoil: Impact on Cities, Towns, and States," on March 12, 2008. The financial guaranty insurance industry began less than four decades ago with insurance policies being offered on municipal bonds. Bond insurers became known as monoline insurers because they were limited by the regulators to offering financial guaranty insurance, and relatively few companies entered the business. While insuring municipal bonds has remained the majority of their business, bond insurers also expanded into offering insurance for international bonds and the aforementioned asset-backed securities. The insurance provided on the asset-backed securities has been offered through relatively new financial derivatives known as credit default swaps, rather than through traditional insurance policies. The coverage provided through such swaps has in most cases been essentially identical to that provided through traditional insurance policies, but the accounting treatment is different for these tradeable contracts. As the risk of default for the underlying securities has risen, the value of the credit default swaps to insurers has fallen, resulting in multi-billion dollar paper losses for bond insurers. With the possibility of wider financial damage spilling over from bond insurer difficulties, various market participants and government regulators have broached the idea of some sort of rescue for the troubled insurers. Uncertainty about the need for, and size of, such a rescue, as well as complexities in the bond insurer situation have stymied any such rescue to this point. In addition to the immediate demands of crisis management, the turmoil surrounding the bond insurers may also bring longer term regulatory issues to the fore, including questions about future federal oversight regulation of insurers and future federal oversight of derivatives, many of which are essentially unregulated. This report will be updated as events warrant.

<1. Introduction> Between 1989 and 2008, Congress passed several laws placing political and economic sanctions on Burma's military junta as part of a policy to identify individuals responsible for repression in Burma and hold them accountable for their actions, foster the reestablishment of a democratically elected civilian government, and promote the protection of human rights. Various developments in Burma between 2010 and 2016 led the Obama Administration and others to perceive positive developments toward the restoration of a democratically elected civilian government in that nation after nearly five decades of military rule. Based on that perception, the Obama Administration waived most of the sanctions on Burma, particularly after Aung San Suu Kyi and the National League for Democracy won the 2015 parliamentary elections and a new NLD-controlled Union Parliament took office in April 2016. Certain events since 2016, however, have led some Members of Congress and others to call for the reinstatement of some of the waived sanctions and/or the imposition of new restrictions on relations with Burma. One of the more prominent events was the "clearance operation" in northern Rakhine State in late 2017, during which Burma's security forces allegedly committed serious human rights abuses against the Rohingya including murder, torture, and rape. A U.N. fact-finding mission (and other investigations) have determined that these human rights abuses may constitute genocide, crimes against humanity, and/or war crimes. Burma's security forces have also been accused of committing crimes against humanity and war crimes against civilians in Kachin and Shan State between 2011 and 2018 as part of its ongoing conflict with various ethnic armed organizations (EAOs). Other events that have contributed to congressional reconsideration of U.S. policy in Burma are the lack of progress in peace talks between Aung San Suu Kyi's government, the Burmese military, and the EAOs; and the continuing arrest, detention, and conviction of "political prisoners," including the conviction of two Burmese reporters for their coverage of the alleged atrocities in Rakhine State. The Trump Administration has utilized the Global Magnitsky Act to impose "limited targeted sanctions" on five military officers and two military units it has determined were responsible for serious human rights abuses in Kachin, Rakhine, and Shan State. To some Members of Congress, this response is insufficient given the severity of the alleged human rights violations, as well as the Burmese military's apparent intransigence in the ongoing cease-fire negotiations. Two bills have been introduced during the 115 th Congress, the Burma Unified through Rigorous Military Accountability (BURMA) Act of 2018 ( H.R. 5819 ) and the Burma Human Rights and Freedom Act of 2018 ( S. 2060 ), that would redefine U.S. policy in Burma and impose greater restrictions on bilateral relations. In addition, both the House and Senate committee versions of the Department of State, Foreign Operations, and Related Programs Appropriations Act, 2019, ( H.R. 6385 and S. 3108 ) would continue the practice of placing restrictions on the use of appropriations in Burma. <2. Brief History of Burma and U.S. Sanctions> From 1948 to 1966, the Union of Burma was ruled by a democratically elected civilian government representing the goals and interests of the nation's Bamar majority and its various ethnic minorities. The fragile federated state was based on the provisions of the Panglong Agreement signed by Burma's revolutionary leader, General Aung San (father of Aung San Suu Kyi), and representatives of some of the nation's larger ethnic minorities the Chin, the Kachin, and the Shan. The ethnic-based coalition proved to be unstable, and on March, 2, 1962, Burma's military, known as the Tatmadaw, staged a coup d' tat, led by General Ne Win. Following the coup, several of Burma's ethnic minorities organized militias to protect themselves from Tatmadaw and Bamar domination. From 1962 to 2011, Burma was ruled by a military junta that denied the people of Burma the right to select the government of their choice and many of their internationally recognized human rights, such as freedom of speech and freedom of association. Throughout this period, a low-grade civil war raged off and on between the Tatmadaw and over 20 different ethnic armed organizations (EAOs). Despite the military coup, the political repression, and the ongoing civil war, the United States established and maintained normal diplomatic relations with the military junta, including relatively close military-to-military relations. Between 1989 and 2008, Congress passed a series of laws imposing diplomatic and economic sanctions on Burma's military junta, in response to its violent suppression of democratic protests in 1988, 1990, 2003, and 2007. Two of the sanctions laws were the Burmese Freedom and Democracy Act of 2003 (BFDA, P.L. 108-61 ) and the JADE Act, which imposed various political and economic restrictions on U.S. relations with Burma. In 2008, Burma's military junta, then known as the State Peace and Development Council (SPDC), began a process to transform the nation's government into what it called a "disciplined democracy." On May 8, 2008, the SPDC held a national referendum on a new constitution that would establish a mixed civilian/military government. Many observers viewed the results of the referendum in which over 90% of the voters supported the new constitution as fraudulent. On November 7, 2010, the SPDC held parliamentary elections that were boycotted by many political parties, including Aung San Suu Kyi's National League for Democracy (NLD). The promilitary Union Solidarity and Development Party (USDP) won nearly 80% of the contested seats (25% of the seats in Burma's Union Parliament are not contested, but rather under the 2008 constitution are appointed by the Commander in Chief of Defence Services). The new Union Parliament appointed SPDC Prime Minister Lieutenant General Thein Sein as President. He was sworn in on March 30, 2011, after the SPDC officially transferred power to the new government. Following the establishment of a new government in Burma under the provisions of the 2008 constitution, the Obama Administration adopted a new policy of greater engagement while maintaining existing sanctions. President Obama utilized the waiver provisions in sanctions laws to waive the enforcement of some of the sanctions, in part in response to President Thein Sein's undertaking some political reforms and releasing many political prisoners. On November 8, 2015, Burma held nationwide parliamentary elections, in which the NLD won nearly 80% of the contested seats. The Union Parliament chose Htin Kyaw, a long-standing NLD member and close friend of Aung San Suu Kyi, as President. Aung San Suu Kyi was subsequently appointed to the newly created position of State Counselor, as well as Foreign Minister. During Aung San Suu Kyi's September 2016 visit to Washington, DC, President Obama announced Burma's reinstatement in the U.S. Generalized System of Preferences (GSP) program and his intention to revoke several executive orders that enforced many of the sanctions on Burma. President Obama's pledge to revoke the executive orders was fulfilled by the release of E.O. 13472 on October 7, 2016. On December 2, 2016, he issued Presidential Determination 2017-04, ending restrictions on U.S. assistance to Burma as provided by Section 570(a) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1997. Several noneconomic restrictions as detailed in the sections that follow, however, remain in effect, including a prohibition on issuing visas to enter the United States to certain categories of Burmese officials; restrictions limiting the types of U.S. assistance to Burma; and an embargo on arms sales to Burma. In addition, Congress has set limits on bilateral relations in appropriations legislation. Section 7043(a) of the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), for example, places a number of restrictions on bilateral, international security, and multilateral assistance to Burma. Similar restrictions were included in the Consolidated Appropriations Act, 2012 ( P.L. 112-74 ); the Consolidated Appropriations Act, 2014 ( P.L. 113-76 ); the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ); the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ); and the Consolidated Appropriations Act, 2017 ( P.L. 115-31 ). The pending appropriations legislation for the State Department in FY2019 H.R. 6385 and S. 3108 also contains possible restrictions on relations with Burma. <3. U.S. Policy Goals in Burma Sanctions Legislation> At the time it passed legislation imposing sanctions on Burma, Congress articulated goals of U.S. policy toward Burma and, by extension, how the sanctions might facilitate the achievement of those goals. Among the goals stated in those laws were the establishment of a constitutional democratic civilian government; the protection and/or the improvement of internationally recognized human rights; the release of political prisoners; greater cooperation with U.S. counternarcotics efforts; the alleviation of the suffering of Burmese refugees and the provision of humanitarian assistance to the Burmese people; and the identification of individuals responsible for repression in Burma and holding them accountable for their actions. Progress has been made on some of these goals, but arguably none have been fully achieved. Circumstances in Burma have raised a number of questions for Congress regarding U.S. policy and the restrictions on relations, such as the following: Should waived restrictions be reinstated or new restrictions be imposed in light of the alleged serious human rights violations against the Rohingya and other ethnic minorities in Burma? To what extent did the formation of the NLD-led government advance the goals of U.S. policy? Did the sanctions on Burma contribute to the political changes that occurred between 2008 and 2015? Are the previously stipulated goals of U.S. policy toward Burma still suitable given the current situation in Burma and in the region? If not, what are the appropriate new or revised goals? Are the existing restrictions on relations with Burma consistent with U.S. goals in Burma? If not, how should they be changed or altered to make them consistent? Will the continuation or renewal of restrictions on relations with Burma lead to the achievement of U.S. goals in Burma? <4. Restrictions in Place> Following President Obama's release of E.O. 13472 on October 7, 2016, and Presidential Determination 2017-04 on December 2, 2016, the restrictions on relations with Burma that remain in place consist of restrictions on the issuance of visas to certain Burmese nationals, limits on U.S. assistance to Burma contained in the Consolidated Appropriations Act, 2018 ( P.L. 115-141 ), and various restrictions on U.S. relations with Burma's military. In addition, the Trump Administration has utilized the Global Magnitsky Act (22 U.S.C. 2656) to apply visa and economic sanctions to five Burmese military officers and two military units. <4.1. Visa Restrictions> Section 570(a)(3) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act of 1997 ( P.L. 104-208 ) states, "Except as required by treaty obligations or to staff the Burmese mission to the United States, the United States should not grant entry visas to any Burmese government official." Section 6 of the Burmese Freedom and Democracy Act (BFDA; P.L. 108-61 ) expanded the discretionary authority to deny entry visas to "the former and present leadership" of the SPDC and USDA. Neither the President nor the State Department has used the authority granted by these two laws. Section 5(a)(1) of the Tom Lantos Block Burmese JADE (Junta's Anti-Democratic Efforts) Act of 2008 (JADE Act; P.L. 110-286 ) states the following: The following persons shall be ineligible for a visa to travel to the United States: (A) Former and present leaders of the SPDC, the Burmese military, or the USDA. (B) Officials of the SPDC, the Burmese military, or the USDA involved in the repression of peaceful political activity or in other gross violations of human rights in Burma or in the commission of other human rights abuses, including any current or former officials of the security services and judicial institutions of the SPDC. (C) Any other Burmese persons who provide substantial economic and political support for the SPDC, the Burmese military, or the USDA. (D) The immediate family members of any person described in subparagraphs (A) through (C). The JADE Act authorizes the President to waive the visa ban if "the President determines and certifies in writing to Congress that travel by the person seeking such a waiver is in the national interest of the United States." The Obama Administration and the Trump Administration on many occasions have issued such presidential waivers. <4.2. Restrictions on U.S. Assistance> The Consolidated Appropriations Act, 2018 ( P.L. 115-141 ) contains several restrictions on U.S. programs and activities in Burma. Section 7034(b)(2) prohibits the appropriation of funds, to Burma and other countries, "to support any military training or operations that include child soldiers," or for "tear gas, small arms, light weapons, ammunition, or other items for crowd control purposes for foreign security forces that use excessive force to repress peaceful expression, association, or assembly in countries undergoing democratic transition." Section 7043(a) places restrictions on assistance to Burma, including the following: Bilateral economic assistance (Title III): "may not be made available to any individual or organization if the Secretary of State has credible information that such individual or organization has committed a gross violation of human rights, including against Rohingya and other minority groups, or that advocates violence against ethnic or religious groups or individuals in Burma"; "may not be made available to any organization or entity controlled by the armed forces of Burma"; and "may only be made available for programs to support the return of Rohingya, Karen, and other refugees and internally displaced persons to their locations of origin or preference in Burma if such returns are voluntary and consistent with international law." International Security Assistance (Title IV): prohibits funding for International Military Education and Training (IMET) and Foreign Military Financing Program (FMF Program) in Burma; and restricts Department of State consultations with the armed forces of Burma "only on human rights and disaster response in a manner consistent with the prior fiscal year, and following consultation with the appropriate congressional committees." Multilateral Assistance (Title VI) is restricted to projects "carried out in accordance with the requirements of section 7029(b)(2) of this Act." Section 7029(b) requires the Secretary of the Treasury to instruct the U.S. executive director of each international financial institution to vote against any loan or financing for any project unless the project provides for accountability and transparency; is developed and carried out in accordance with best practices regarding environmental conservation, cultural protection, and empowerment of local populations (including indigenous communities); does not "provide incentives for, or facilitate, forced displacement"; and does not "involve enterprises owned or controlled by the armed forces." <4.3. Restrictions on Relations with Burma's Military> In addition to the restrictions in P.L. 115-141 , the United States has other restrictions on relations with Burma's military. These include the following: Prohibition on the Sale of U.S. Military Equipment On June 9, 1993, the State Department's Bureau of Political-Military Affairs issued Public Notice 1820 suspending "all export licenses and other approvals to export or otherwise transfer defense articles or defense services to Burma." Ban on the Provision of Visas to Military Leaders Section 5(a)(1)(A) of the Tom Lantos Block Burmese JADE (Junta's Anti-Democratic Efforts) Act of 2008 (JADE Act; P.L. 110-286 ) states that former and present leaders of the Burmese military "shall be ineligible for a visa to travel to the United States." Section 5(a)(1)(B) of the same act also makes officials of the Burmese military "involved in the repression of peaceful political activity or in other gross violations of human rights in Burma or in the commission of other human rights abuses" ineligible for a visa. Prohibition on Military Training or Operations that Include Child Soldiers From 2010 to 2016, and again in 2018, Burma was designated by the State Department as a country whose government has armed forces or government-supported armed groups that recruit and use child soldiers. Pursuant to the Child Soldiers Prevention Act of 2008 (CSPA, P.L. 110-457 ), certain security assistance and commercial licensing of military equipment with Burma (including IMET, FMF, Excess Defense Articles, and Peacekeeping Operations, as well as the issuance of licenses for direct commercial sales of military equipment) were prohibited, unless the President issues a waiver. However, Section 7034(b)(1) of P.L. 115-141 states, "Funds appropriated by this Act should not be used to support any military training or operations that include child soldiers." Given that the State Department has identified Burma as a nation that recruits and uses child soldiers, this section would apparently preclude military training or operations with either the entire Burmese military, or those units within it that include child soldiers. <4.4. Global Magnitsky Sanctions> In late 2017, the Tatmadaw conducted a "clearance operation" in northern Rakhine State in response to attacks on security outposts along the border with Bangladesh, during which Burma's security forces may have committed genocide, crimes against humanity, and war crimes. The "clearance operation" resulted in the exodus of over 700,000 Rohingya from Burma into Bangladesh. Satellite imagery confirms that over 300 Rohingya villages were partially or totally destroyed during the Tatmadaw's operation. The United Nations and other organizations have interviewed Rohingya survivors, who recount stories of mass killings, torture, and rape perpetrated by Tatmadaw soldiers and other Burmese security officers. The Trump Administration has condemned the initial attacks on the Burmese security outposts, as well as the Tatmadaw's response to attacks, characterizing the "clearance operations" as "ethnic cleansing." On December 21, 2017, the Department of the Treasury placed Major General Maung Maung Soe, Burma's Western Commander during the "clearance operations," on its Specially Designated Nationals and Blocked Persons (SDN) List under the Global Magnitsky Act "for his command of forces involved in serious human rights abuses in northern Rakhine State." As a result, General Maung Maung Soe will not be granted a visa to enter the United States, any assets he may have in U.S. financial institutions have been frozen, and he is to be denied financial services by any U.S. entity or person. On August 17, 2018, the Department of the Treasury added four more Burmese senior military officers Lieutenant General Aung Kyaw Zaw, Major General Khin Hlaing, Major General Khin Maung Soe, and Brigadier General Thura San Lwin plus two military units the 33 rd Light Infantry Division and the 99 th Light Infantry Division to its SDN list under the Global Magnitsky Act. The five officers and two units are subject to the same sanctions as General Maung Maung Soe. <5. Waived or Lapsed Restrictions> As noted above, some of the laws imposing sanctions on Burma also include provisions whereby the President could waive, temporarily or permanently, the sanctions under certain conditions. In addition, some of the laws also contain provisions by which the President can terminate the sanctions. President Obama waived several restrictions, but also stated that waivers could be reversed, and the restrictions reimposed, if conditions in Burma so warrant. On December 2, he issued Presidential Determination 2017-04, terminating the restrictions on bilateral assistance to Burma contained in Section 570(a) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 1997 ( P.L. 104-208 ). In addition, Congress has permitted certain trade restrictions contained in Sections 3 and 3A of the BFDA (as amended) to lapse by not passing the necessary annual renewal resolution. <5.1. Economic Restrictions> In the past, Congress and the executive branch placed several economic restrictions on relations with Burma that have been subsequently terminated, waived, or suspended, including a general ban on the import of goods from Burma; a ban on the import of Burmese jadeite and rubies, and products containing Burmese jadeite and rubies; a ban on the import of goods from certain Burmese companies; the "freezing" of the assets of certain Burmese nationals; a prohibition on providing financial services to certain Burmese nationals; restrictions on U.S. investments in Burma; restrictions on bilateral assistance to Burma; and restrictions on U.S. support for multilateral assistance to Burma. <5.1.1. Ban on Import of Products of Burma> Section 3 and 3A of the BFDA (as amended) banned the importation of "any article that is a product of Burma," goods and services from certain Burmese companies, jadeite and rubies from Burma, and articles of jewelry containing jadeite or rubies from Burma. This ban, however, was subject to annual renewal by Congress passing a resolution as stipulated in Section 9(b) of the same act. From 2004 to 2012, Congress passed the annual renewal resolution, but has not done so since. As a consequence, these restrictions contained in Section 3 and 3A of the BFDA have lapsed, but could be reinstated by the passage of the required resolution. On August 7, 2013, President Obama issued Executive Order 13651, reinstating the ban on the import of jadeite and rubies from Burma, and articles of jewelry containing jadeite or rubies from Burma. Executive Order 13651, however, was revoked on October 7, 2016, when President Obama issued Executive Order 13742, thereby terminating the ban on the import of jadeite and rubies from Burma. <5.1.2. "Freezing" the Assets of Certain Burmese Nationals> Section 5(b)(1) of the JADE Act blocked the transferal, payment, export, withdrawal, or other handling of property or interest in property belonging to a person described in Section 5(a)(1) of the act that is "located in the United States or within the possession or control of a U.S. person" (including the overseas branch of a U.S. person); or "comes into the possession or control of a U.S. person after the date of the enactment of this Act" (July 29, 2008). In Executive Order 13742 on October 7, 2016, President Obama "determined and certified" to Congress that "it is in the national interest of the United States" to waive the sanctions in Section 5(b) of the JADE Act, pursuant to Section 5(i) of that act. <5.1.3. Restrictions on the Provision of Financial Services> As described above, Section 5(b) of the JADE Act freezes the assets of persons described by Section 5(a)(1) of the act, and bars the payment or transfer of any property, or "any transactions involving the transfer of anything of economic value," as well as the "export or reexport directly or indirectly, of any goods, technology, or services" to persons described by Section 5(a)(1) of the act, or to "any entity, owned, controlled, or operated by the SPDC or by an individual described in such subsection." Pursuant to Section 5(i) of the same law, President Obama determined and certified to Congress on October 7, 2016, in Executive Order 13742 that it was in the national interest of the United States to waive these sanctions. <5.1.4. Ban on Investment in Burma> Section 570(b) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act of 1997 ( P.L. 104-208 ) states the following: The President is hereby authorized to prohibit, and shall prohibit United States persons from new investment in Burma, if the President determines and certifies to Congress that, after the date of enactment of this Act, the Government of Burma has physically harmed, rearrested for political acts, or exiled Daw Aung San Suu Kyi or has committed large-scale repression of or violence against the Democratic opposition. Pursuant to Section 570(e) of the same act, the Department of State (having been delegated authority by President Obama) waived the investment restrictions on Section 570(b) effective July 11, 2012, having determined that it would be contrary to the national security interests of the United States to continue the restrictions. <5.1.5. Restrictions on Bilateral Assistance> Section 570(a) of the Foreign Operations, Export Financing, and Related Programs Appropriations Act of 1997 ( P.L. 104-208 ) restricted bilateral assistance to Burma to the following: (A) humanitarian assistance, (B) subject to the regular notification procedures of the Committees on Appropriations, counter-narcotics assistance under chapter 8 of part I of the Foreign Assistance Act of 1961, or crop substitution assistance, if the Secretary of State certifies to the appropriate congressional committees that (i) the Government of Burma is fully cooperating with United States counter-narcotics efforts, and (ii) the programs are fully consistent with United States human rights concerns in Burma and serve the United States national interest, and (C) assistance promoting human rights and democratic values. The act also provided that these restrictions were to remain in effect "[u]ntil such time as the President determines and certifies to Congress that Burma has made measurable and substantial progress in improving human rights practices and implementing democratic government." On December 2, 2016, President Obama issued Presidential Determination 2017-04, providing such a determination and certification to Congress, and thereby terminating the restrictions on bilateral assistance contained in Section 570(a). <5.1.6. Restrictions on Multilateral Assistance> Section 307(a) of the Foreign Assistance Act of 1961 (P.L. 87-195, as amended) withholds the "United States proportionate share" of the funding for certain international organizations' programs in Burma (as well as several other nations). Section 307(c) exempts the Atomic Energy Agency and the United Nations Children's Fund (UNICEF). Organizations subject to the restriction include the United Nations Development Program, the United Nations Environmental Program, the World Meteorological Organization, and a number of other U.N. programs. Section 7017 of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), however, included the statement that "the requirement to withhold funds for programs in Burma under section 307(a) of the Foreign Assistance Act of 1961 shall not apply to funds appropriated by this Act." This exemption was extended into FY2017 by P.L. 115-31 and FY2018 by P.L. 115-141 . Section 5 of the 2003 BFDA required the U.S. executive director of each international financial institution (IFI) in which the United States participates to vote against the extension of any loan, financial, or technical assistance to Burma. In September 2012, Congress passed P.L. 112-192 , granting the President the authority to waive U.S. opposition to IFI assistance to Burma required under Section 5 of the 2003 BFDA if the President determines that doing so is in the national interest of the United States. President Obama issued a memorandum on October 10, 2012, delegating the authority granted by P.L. 112-192 to Secretary of State Clinton, who then issued a determination stating that "it is in the national interest of the United States to support assistance for Burma." <6. Perspective of the NLD-Led Government> The NLD-led government and Aung San Suu Kyi have given mixed and sometimes contradictory statements on U.S. restrictions on relations with Burma. In November 2015, when asked if she would like to see U.S. sanctions lifted, Aung San Suu Kyi reportedly said, "Well, with a genuinely democratic government in power, I do not see why they would need to keep sanctions on." In March 2016, however, Han Thar Myint, an NLD central executive committee member, reportedly said that the NLD will not push for a lifting of U.S. restrictions given that the military retains considerable power in the government, as well as in Burma's economy. In a joint press availability after her meeting with Secretary of State Kerry on May 22, 2016, Aung San Suu Kyi stated the following: [W]e're not afraid of sanctions. We're not afraid of scrutiny. We believe that if we are going along the right path, all sanctions should be lifted in good time. I understand and I accept and I believe that United States is a friend, and are not keeping the sanctions to hurt us. I'm sure that the time will come soon where the United States will rule that this is not the time for sanctions. Ambiguity over the NLD-led government's position on U.S. restrictions on relations with Burma arose during Aung San Suu Kyi's visit to Washington, DC, in September 2016. In a press statement following her meeting in the Oval Office with President Obama on September 14, 2016, Aung San Suu Kyi stated, "We think that the time has now come to remove all the sanctions that hurt us economically, because our country is in a position to open up to those who are interested in taking part in our economic enterprises." In subsequent meetings with Members of Congress, however, Aung San Suu Kyi reportedly said that she had hoped that some restrictions on relations with high-level Burmese military officers and businesses owned or controlled by the Burmese military could remain in effect, but also reportedly said that she had been told by U.S. officials that such a selective retention of restrictions was not possible. In general, Aung San Suu Kyi and Senior General Min Aung Hlaing have denied claims that Burma's security forces committed serious human rights abuses in Rakhine State, or elsewhere in Burma as part of its conflict with the EAOs. As a result, they have opposed the imposition of sanctions on Burma in response to the events in Rakhine State, including the Treasury's placement of five senior military officers and two military units on its SDN list. <7. Congressional Considerations> Congress may examine a number of different factors as it considers whether to alter U.S. restrictions on relations with Burma. One question is whether to reassess the goals of U.S. policy toward Burma, the prospects for achieving them, and whether there are contradictions among them. Another factor is how to evaluate the current political situation in Burma, and whether further political and economic reforms are likely. Congress may also examine to what extent restrictions on relations enhance or harm developments in Burma that are consistent with U.S. policy objectives in order to determine which restrictions to maintain, impose, or remove. <7.1. Goals of U.S. Policy> For many years, Congress and the executive branch have, in general, shared a common view on the broader goals of U.S. policy in Burma the establishment of a democratically elected civilian government that respects the human rights of its people and promotes the peace and prosperity of the nation. The current U.S. ambassador to Burma, Scot Marciel, reiterated this policy in a press interview on May 10, 2016, stating, "But our goal, the United States' goal, remains the same: We want to see a peaceful, prosperous, democratic Myanmar. One whose people live in harmony and enjoy full rights." What Congress chooses to do with respect to U.S. restrictions on relations with Burma will depend on what it determines the objectives of U.S. policy toward Burma should be, and in what order of priority. Among the specific objectives for U.S. policy in Burma that have been proposed by various human rights organizations and that Congress may choose to consider are supporting the peace process and national reconciliation to end the nation's civil war; addressing the plight of the Rohingya in Rakhine State, including investigating alleged genocide, crimes against humanity, and/or war crimes perpetrated by the Tatmadaw and other security forces, providing adequate and reliable humanitarian assistance to the internally displaced persons (IDPs) in Rakhine State, and addressing the citizenship status of the currently stateless Rohingya; responding to the allegations that Burmese security forces committed crimes against humanity and/or war crimes in Kachin and Shan States; promoting amendments to the 2008 constitution to establish a more democratic, civilian government; amending or repealing Burmese laws that are inconsistent with internationally recognized human rights, and promoting the protection of human rights in Burma; supporting the development of governmental institutions that are resilient enough to function during times of political change and natural disasters; and promoting economic growth and development to provide greater prosperity to the people of Burma. Moving beyond these general goals, however, may reveal underlying contradictions between the different goals. Efforts to promote economic prosperity in Burma, for example, may run counter to establishing a democratically elected civilian government. The Burmese military, via such entities as the Myanmar Economic Corporation (MEC) and the Union of Myanmar Economic Holdings Limited (UMEHL), controls many sectors of the Burmese economy, including most of the nation's natural resources. Efforts to promote economic prosperity by permitting U.S. trade and investment in portions of the economy controlled by the Burmese military may bolster their economic and political power, and as such, lead Burma's military leaders to resist further political and economic reforms. Further political and economic reform could depend on the Burmese military's willingness to relinquish some or all of its seats in the Union Parliament, as well as its control over the appointment of the Ministers of Border Affairs, Defence, and Home Affairs. At the same time, however, it is also possible that permitting U.S. economic relations with MEC, UMEHL, and other companies owned by the Burmese military, its leaders, and/or relatives and close friends of the military leaders, could prompt Burma's military leaders to be more willing to relinquish some of their political power. Congress may explore these questions further. <7.2. Burma's Current Political Situation> Aung San Suu Kyi has emerged as the dominant political figure in the NLD-led government, and is using her authority as State Counselor and Foreign Minister to set priorities and oversee implementation of government policy. Depending on how the dynamics between Aung San Suu Kyi and other influential figures and forces (such as Commander in Chief Min Aung Hlaing and the ethnic armed organizations) proceed, Congress may choose to assess if her views on specific issues are consistent with U.S. policy, and how best to work with her to advance those efforts. Understanding the views of Burma's military leaders has always been crucial in forming a framework to understand Burmese political conditions. It was Burma's military leaders that effectively wrote the 2008 constitution, held the parliamentary elections in 2010, and formed the core of the Thein Sein government that ran the country from 2011 to 2015. The political and economic reforms that have occurred in Burma since 2008 are either the direct results of the actions of Burma's military leaders or were undertaken with the support of the military leaders. Those reforms have been generally consistent with the "seven step roadmap to a disciplined democracy" announced by General Khin Nyunt, the military junta's Prime Minister, on August 30, 2003. In the various meetings and conferences held to discuss a path to ending Burma's civil war, Commander-in-Chief Min Aung Hlaing and other Tatmadaw representatives have demonstrated little willingness to negotiate. As a result, it appears unlikely that Burma's military leaders will be supportive of or willing to allow the political and economic reforms proposed by the NLD-led government, and they will resist efforts to fundamentally alter the current governance system. Similarly, the opinions of the various EAOs may play a vital role in achieving U.S. goals in Burma. Ending the civil war will require the EAOs to either agree to a cease-fire and the terms for a new governance system, and/or be defeated militarily. Achieving the former may require major changes in the 2008 constitution (including its possible replacement with a new constitution) and Burma's economy, particularly control over the nation's natural resources. Such changes may be unacceptable to Burma's military or the NLD-led government. Defeating the EAOs in the battlefield, however, may be beyond the capabilities of the Burmese military without substantial international assistance, as well as the support of the NLD-led government. At this time, neither Aung San Suu Kyi nor the NLD-led government appear to support a military solution to Burma's civil war, but prospects for Aung San Suu Kyi's proposed peace process also are unclear. Another potentially important force in Burma's current political dynamic is the community of emerging civil society organizations (CSOs). During the decades of military rule, Burma's military leaders actively suppressed the establishment of CSOs in order to maintain control over the Burmese people. The Thein Sein government allowed the emergence of issue-driven CSOs in Burma, and some of them have undertaken causes generally consistent with U.S. policy. Relations between some CSOs and the NLD-led government, however, are reportedly strained; 40 CSOs wrote an open letter to Aung San Suu Kyi in July 2016 asking that they be allowed to play a more active role in the peace process. Besides their potential support for U.S. goals in Burma, CSOs may play a vital role in the discussion of political reform and the peace process, according to some observers. One such observer expressed concern that national reconciliation, if left to the NLD-led government, the Burmese military, and the EAOs, could result in the establishment of a federation of "crony states," in which the current military leaders and their supporters in each region of Burma control both the political and economic systems, and prevent the establishment of a democratic civilian government based on the rule of law and the will of the Burmese people. <7.2.1. Escalation of the Civil War> The NLD-led government has been in office for more than two years, and questions are being raised in Burma about its commitment and ability to secure an end to the nation's civil war, promote political reform, and protect the human rights of the Burmese people. Aung San Suu Kyi has identified the end of the civil war as a top priority for the new government, but the three "21 st Century Panglong Conferences" have demonstrated that the various groups in attendance have different visions for a democratic federated state of Burma and the path to achieving that goal. Fighting between the Tatmadaw and at least four of the EAOs (the Kachin Independence Army, the Myanmar National Democratic Alliance Army, the Ta'ang National Liberation Army, and the Arakan Army) has escalated, raising doubts about the prospects for peace and the Tatmadaw's support for a nationwide cease-fire agreement. <7.2.2. Crises in Rakhine State> More than a year has passed since the Tatmadaw launched their "clearance operations" in northern Rakhine State, and virtually all of the more than 700,000 Rohingya who fled to Bangladesh remain in refugee camps, with a trickle of new arrivals every week. The estimated 600,000 Rohingya who remain in Burma face harsh conditions, including a 10:00 p.m. to 5:00 a.m. curfew, restrictions on movement, lack of employment, limited access to their farms, and harassment from local police and others. Provision of humanitarian assistance in Bangladesh appears adequate, but funding is a growing concern. Access to northern Rakhine State remains strictly controlled by the Tatmadaw, despite an agreement with the United Nations, resulting in a shortage of food, water, and medical care for the Rohingya community. Prospects for the dignified, safe, voluntary, and sustainable return of Rohingya displaced into Bangladesh are presently poor. While the governments in Dhaka and Naypyitaw have signed a memorandum of understanding (MOU) regarding the return of the Rohingya, none have returned in accordance with the procedures prescribed by the MOU. The United Nations has stated conditions in northern Rakhine State are neither sufficiently safe nor sustainable for the return of the Rohingya. Two other issues pose major barriers to the voluntary return of the Rohingya. Many of the Rohingya insist that their Burmese citizenship must be reinstated before they will return to Rakhine State. In 1982, Burma's military junta promulgated a new citizenship law, the implementation of which effectively stripped most of the Rohingya of their citizenship. Aung San Suu Kyi and the NLD have chosen to leave that law in place despite a supermajority in Burma's Union Parliament, but have offered to consider applications for citizenship from the Rohingya according to the provisions of the 1982 law. This appears to be unacceptable to many of the Rohingya. The other issue that could preclude the return of the Rohingya is their desire for some form of accountability for the crimes committed against them during the "clearance operations." A United Nations fact-finding mission has recommended that the U.N. Security Council refer the case to the International Criminal Court (ICC) or an "ad hoc international criminal tribunal." The ICC determined in September 2018 that it has jurisdiction over the displacement of Rohingya into Bangladesh. Various organizations have called for the passage of U.N. sanctions against Burma and the Tatmadaw, as well as the imposition of bilateral restrictions on relations with Burma. To date, the international response to calls for accountability in Burma has been limited, and unlikely to be considered sufficient by the displaced Rohingya. <7.2.3. Human Rights> Progress on other human rights issues has also been relatively slow, according to some observers. In her first official act as State Counsellor, Aung San Suu Kyi ordered the release of 113 political detainees on April 7, 2016, and indicated that freeing all political prisoners would be a priority for the new government. President Htin Kyaw granted amnesty to 70 political prisoners on April 17, 2016. By mid-August, the NLD-led government reportedly had released 457 people facing trial for political activities. According to the Assistance Association for Political Prisoners (Burma), a nonprofit human rights organization formed in 2000 by former political prisoners, there were 276 political prisoners as of the end of September 2018, including 26 serving sentences, 51 detained while awaiting trial, and 199 released while awaiting trial. Burma's ongoing problem with political prisoners is in part facilitated by the existence of a number of laws, some dating back to British colonial rule, that restrict freedom of speech, freedom of association, and other internationally recognized human rights. In June 2016, Human Rights Watch released a report, They Can Arrest You at Any Time , detailing how various repressive laws criminalize peaceful expression in Burma. <7.3. Addressing U.S. Restrictions> Depending on what goals it sets for U.S. policy in Burma and its perspective on the current political situation in the country, Congress may decide to address the existing restrictions on U.S. relations. In the past, this has been done by passing specific legislation to impose or recommend restrictions on bilateral or multilateral relations, or by including provisions in appropriations legislation setting limits on bilateral or multilateral assistance to Burma. Congress has also passed legislation that places conditions on certain forms of bilateral relations contingent on acceptable behavior with regard to specific issues, such as the recruitment and induction of children into the military. In addition, Congress may actively or passively permit the President and the executive branch to determine what restrictions, if any, should be placed on relations with Burma, and provide the necessary authority and appropriations to implement U.S. policy toward Burma. Congress may have the opportunity to take action with respect to U.S. policy in Burma on certain dates or at particular junctures. For example, congressional consideration of appropriations legislation or continuing resolutions provides a legislative juncture when restrictions on relations with Burma may be considered and altered, if Congress so chooses. In addition, Congress may consider revisiting the body of legislation imposing restrictions on relations with Burma to determine if the time has come to repeal or amend those laws in light of the changes that have occurred in the country, and the extent to which the restrictions imposed in those laws are no longer in effect due to presidential waivers. To lift the economic restrictions on Burma, President Obama had to terminate and revoke five separate Executive Orders, and invoke authority in the JADE Act. Some observers suggest Congress should pass new legislation stating the goals of U.S. policy, accounting for the current situation in Burma, indicating the restrictions in relations with Burma that are to remain in place, and providing clear and concise conditions or guidelines for the removal of those restrictions. During the 115 th Congress, two bills of this type the Burma Unified through Rigorous Military Accountability Act of 2018 ( H.R. 5819 ) and the Burma Human Rights and Freedom Act of 2018 ( S. 2060 ) were introduced. <7.3.1. Appendix. Chronology of Burmese Sanction Legislation and Related Executive Orders> Starting in 1989 and continuing through 2008, Congress and the executive branch imposed a series of political and economic sanctions on Burma's ruling military junta. Since 2008, most of the congressional or executive actions have been to waive or eliminate some of those sanctions. The following table provides a list of such congressional or presidential actions in chronological order.

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

<1. Introduction> Over the past several decades, U.S. household indebtedness has generally risen regardless of macroeconomic or financial conditions. In light of the 2007-2009 recession, however, households are reducing their debt burdens. Household debt balances fell in the third quarter of 2008 and continued to do so until the second quarter of 2011 when they rose by 0.55% before resuming their downward trend. Simultaneous declines in household income and net worth made it difficult for some households to support previous debt levels, thus encouraging them to reduce debt service obligations and work toward restoring the health of their balance sheets. Household debt reduction (or deleveraging) may have important implications for job creation and economic recovery. Deleveraging may translate into a reduction in near-term consumption, which typically accounts for approximately 70% of gross domestic product and likely an important source of economic recovery. Deleveraging may also manifest itself in the form of above normal loan defaults that weaken the banking system and discourage new lending, which can be the source of job creation. Moreover, when consumer spending and bank lending are curtailed, fiscal policy initiatives (e.g., tax cuts or spending increases) become less effective at stimulating the economy. For example, academic experts have proposed large-scale mortgage refinancing efforts to propel economic stimulus. In light of these recommendations, the purpose of policy initiatives (e.g., the Home Affordable Refinance Program [HARP], H.R. 363 and its companion S. 170 , the Housing Opportunity and Mortgage Equity Act of 2011) is to facilitate the refinancing of mortgages. In addition, the Obama Administration announced an initiative to assist qualified homeowners, whose mortgages are not owned or guaranteed by any institution affiliated with the federal government, in lowering their mortgage rates. If refinancing activity results in lower mortgage payments, then households may have more discretionary income to spend and, therefore, spur economic stimulus. Some households, however, are choosing to pay down current debt obligations, which means any additional income that would have gone toward mortgage interest still may not be applied to new spending. Hence, policies aimed at stimulating near-term consumption may instead enhance future borrowing capacity and longer-term consumption if households continue to strengthen their balance sheets via near-term deleveraging. This report presents data illustrating household deleveraging since 2008 in comparison to previous trends in household credit use. It also presents various explanations for deleveraging in particular, changes in both consumer demand and lending supply. On the demand side, job losses and declining wealth particularly associated with declining real estate values are factors that made it difficult for households to repay old loans or secure new ones. On the supply side, rising loan losses caused lenders to write off more obligations, which put a strain on lenders' (regulatory) capital reserves. Consequently, lending standards are higher and likely to remain until lenders feel more confident that borrowers have the ability to repay. <2. Recent Household Deleveraging Patterns> Figure 1 illustrates the Federal Reserve's aggregate household debt service burden ratio (DSR). The DSR is the percentage of disposable personal income required to make minimum repayments on outstanding mortgage and consumer debt. Beginning in the mid-1990s, the DSR rose but then declined after 2008. The DSR movements are affected by changes in the amount of household debt, changes in household income, and changes in interest rates (debt costs). Rising incomes and falling interest rates would cause the DSR to fall over time. Given the rise in real disposable income prior to the financial crisis coupled with falling interest rates, the rise in the DSR reflects household debt usage rising at a faster pace than household income growth. Conversely, the DSR might be expected to rise during recessions when incomes tend to fall. During the 2007-2009 recession, however, the DSR began to decline in 2008, which reflects a shift toward deleveraging by households as well as the refinancing of some debt at lower interest rates. Figure 2 illustrates the quarterly percentage change in total household debt balances since 1968, and the shaded areas indicate U.S. recessions. Household debt balances consist of home mortgages, revolving or credit card debt, and nonrevolving credit, which consists primarily of automobile and student loans. Note that the growth rate of household debt declined during the 1981-1982, 1990-1991, and 2001 recessions but still remained positive. Beginning in the second quarter of 2008 through the first quarter of 2011, however, the rate of change in debt usage became negative and was sustained. Post-2008 household deleveraging, therefore, appears to be atypical compared with previous economic contractions occurring over the past few decades. Table 1 illustrates the percentage changes in household debt usage from the second quarter of 2008 through the third quarter of 2011 by loan type. Mortgage debt represents the largest share of all household debt. A significant share of the decline in mortgage debt outstanding can be attributed to declining home equity loan balances, which can be used as a substitute for other types of consumer credit. Revolving or credit card debt use also declined, but growth in nonrevolving credit remained positive over this period. <3. Explanations for Household Deleveraging> Household deleveraging may be explained by factors influencing both the demand for and supply of credit. Beginning with demand-side explanations, the spike in unemployment and a decline in household net worth, which occurred during the recession of 2007-2009 and has continued along with declining home values, can lead to debt reduction either by inducing households to curtail credit use (and pay down existing debt) or in the form of defaults. On the supply side, lenders experiencing large volumes of loan losses may have also grown more reluctant to make loans. This section explains these factors in more detail. <3.1. Decrease in the Demand for Credit> "Trigger events" are defined as sudden changes in circumstances that can lead to greater loan defaults. A steep rise in unemployment is an example of a trigger event. During the 2007-2009 recession, the unemployment rate soared to 10.0%, which was the highest it has climbed since 1982. Job losses can translate into income disruptions that make it difficult to repay existing credit obligations or seek new loans. A sharp, unanticipated decline in household net worth is another example of a trigger event. During the 2007-2009 recession, households saw a decline in household net worth that had not occurred in previous recessions over the past three decades ( Figure 3 ). Net worth (i.e., the difference between the value of assets and liabilities) fell for seven consecutive quarters beginning in the third quarter of 2007. The most recent decline in net worth was larger and persisted for more successive quarters than did the steep decline in the stock market of the late 1990s, which lasted until approximately 2002. Much of the decline in net worth is attributable to real estate assets that many households financed through borrowing. The Federal Housing Finance Agency and Case-Shiller house price indices show that U.S. house prices began declining in 2007, and homeowners were increasingly likely to find themselves "underwater" or "upside-down" as the amount of their outstanding mortgage balances exceeded current home values. Academic research suggests that changes in real estate values generate a greater response in consumer spending and borrowing decisions than do changes to stock values. For one reason, most households purchase stocks with cash, which means there are no debt obligations to repay based upon the original purchase prices should their stock assets fall in value. Second, stock market declines are often short-lived in comparison to declines in real estate values, which means volatile short-term fluctuations are less likely to prompt investors to reassess longer term financial decisions. Housing assets are also typically a much larger component of household balance sheets. Hence, stock market declines tend to have a smaller impact on household consumption and borrowing decisions relative to declines in real estate prices. Given that declining real estate asset values may lead to permanent wealth reductions that would prevent existing (mortgage) debt obligations from being repaid, two possible reasons for household deleveraging are worth considering. <3.1.1. Deleveraging for Precautionary Reasons> Households may have a precautionary savings motive that influences them to reduce borrowing when household wealth drops. If households wish to maintain a certain level of wealth to protect against unexpected economic reversals, their consumption behavior is likely to change if those balances fall below desired thresholds. Households may reduce spending (and borrowing) and increase saving until net wealth has been restored to more desirable levels. For example, Figure 4 shows that "cash-in" mortgage refinancings became more common relative to "cash-out" refinancings by 2008. During the mid-2000s housing boom, many borrowers pulled equity out of their homes to finance expenditures. Freddie Mac refers to this type of transaction as a "cash-out" refinance when the outstanding mortgage balance increases by more than 5%. Conversely, a "cash-in" refinance occurs when borrowers refinance and pay down some mortgage principal, which reduces outstanding balances. The percentage of cash-in mortgage refinances began to exceed cash-out refinances in mid-2010. A corresponding reduction of home equity loan balances can represent an array of borrowing given that this type of mortgage product was used to consolidate existing debt obligations, finance new consumption, and even finance the acquisition of new (real estate) assets. Moreover, the soaring unemployment rate may have influenced many households to reduce debt obligations just in case their continued employment prospects seemed at risk. Hence, such a marked increase in cash-in refinances arguably may reflect an increase in precautionary savings behavior by households in response to an adverse trigger event, which generates greater economic and financial uncertainty. <3.1.2. Deleveraging by Defaulting on Loans> A negative trigger event in the form of job losses (or shifts to part-time status) is likely to disrupt income streams. A severe and persistent disruption, when coupled with circumstances that prevent, for example, the sale of housing assets for amounts necessary to pay off outstanding mortgage balances, may cause households to default on existing loans. Moreover, risky mortgage underwriting practices prior to the 2007-2009 recession made it possible for some borrowers to receive mortgages that could only be repaid assuming continued house price growth rather than income growth. The combination of relaxed underwriting standards, which allowed for rapid debt accumulation, and the unexpected trigger event, which was the large and pronounced downturn in U.S. house prices, resulted in greater household defaults on all types of loans. Figure 5 shows charge-off rates for commercial bank loans in three categories: single-family residential mortgages, credit card debt, and other consumer loans. Charge-offs occur when lenders conclude that a debt will not be repaid and charge it against their loss reserves. During the past few years, all three major categories of household debt experienced rising loss rates. <3.2. Decrease in the Supply of Credit> The previous explanations involved factors influencing the demand for credit, but household deleveraging may also be affected by a reduction in credit supply. Rising loan losses may cause lenders to be more skeptical about extending new credit without greater assurances of repayment. Many banks may be unable to make new loans if they are still struggling to rebuild their required loan loss reserves and capital reserves, which have been diminished by loan defaults. The observed household deleveraging, therefore, may reflect both decreasing supply and demand for credit given the extent to which lenders tightened underwriting standards, lowered existing lines of credit, and restricted new lending to stabilize profitability and satisfy regulatory capital requirements. The Federal Reserve's Senior Loan Officer Opinion Survey on Bank Lending Practices, which is conducted quarterly, asks bankers about changes in the standards and terms of bank lending as well as changes in the demand for loans. Figure 6 presents a graphical illustration of the responses collected between 1996 and 2011. The two dotted lines represent the net percentage of loan officers reporting that they expect to tighten standards for credit card and other consumer loans. The greatest tightening of loan standards over the period began in 2007.

Since the third quarter of 2008, U.S. household debt has steadily fallen. Household debt reduction is known as deleveraging, and such substantial and persistent deleveraging (reflected in Federal Reserve data) has been uncommon over the past several decades. Given that much household debt is used to finance consumption, which accounts for about 70% of gross domestic product, continued deleveraging implies slower consumption growth and economic recovery. Beginning in the third quarter of 2007, household net worth (i.e., the difference between the value of assets and liabilities) preceded the fall in household debt. The recent drop in household net worth has also been substantial and persistent relative to previous decades and, therefore, may arguably have precipitated such pronounced household deleveraging. Household deleveraging may dampen the immediate effectiveness of legislative efforts to generate economic stimulus. For example, H.R. 363 and its companion S. 170, the Housing Opportunity and Mortgage Equity Act of 2011, were introduced to facilitate the refinancing of mortgages held by the government-sponsored enterprises. In addition, the Obama Administration announced an initiative to assist qualified homeowners with privately held mortgages refinance into lower rate loans. If refinancing activity results in lower mortgage payments, then households may have more discretionary income to spend and, therefore, spur economic stimulus. Given the trend of household debt reduction, the additional income that would have gone toward paying mortgage interest still may not be applied to new spending. Households may prefer using the additional income to pay down current debt obligations. Hence, such legislative efforts may enhance future borrowing capacity and long-term consumption if households continue to strengthen their balance sheets via deleveraging, but the effect on near-term consumption activity may be modest. This report presents information on recent household debt usage patterns. It also discusses possible reasons for the reduction in household credit use. Consumers have reduced their indebtedness by accelerating repayment of outstanding debts and defaulting on loan obligations. Lenders have also tightened lending standards. Hence, both demand and supply factors can explain the decline in household credit usage.

<1. Introduction> The National Security Agency (NSA), one of the largest components of the U.S. Intelligence Community, hasreached a major watershed in its history. Responsible for obtaining intelligence from international communications, (1) NSA's efforts are being challenged by the multiplicity of new types of communications links, bythe widespread availability of low-cost encryption systems, and by changes in the international environment inwhich dangerous security threats can come fromsmall, but well organized, terrorist groups as well as hostile nation states. NSA was established in 1952 as a highly compartmented secret codebreaking effort undertaken by a handful of military officers and civilians, but the Agency hasgradually become an acknowledged government agency responsible for signals intelligence (sigint). This evolutionhas been in significant measure a result ofcongressional initiatives. Congress provided the statutory framework for NSA and its activities. Laws have beenenacted that carefully prescribe the limits ofNSA's electronic surveillance of U.S. persons. Congress has been increasingly inclined to take public notice ofproblems at NSA and is supporting reforms thatare designed to make NSA more effective in current technological and geopolitical environments. The challenges facing NSA are formidable; a difficult operational environment as well as limitations on spending levels for intelligence call into question thefuture capabilities of NSA. Public interest in NSA has been heightened in recent months by some members of theEuropean Parliament who allege that the UnitedStates and a few other countries are cooperatively engaged in systematic electronic eavesdropping in order topromote the commercial interests of U.S.corporations. This Report will attempt to provide an unclassified description of NSA's evolution, the technical andoperational environment that now exists, andindicate some issues that the executive branch and Congress will be facing in coming years. An unmistakable change affecting NSA has been the openness with which its policies and problems are now discussed both by the Agency's leadership and bycongressional oversight committees. Until very recently NSA was the most secretive intelligence agency, moreshielded from public scrutiny than the CentralIntelligence Agency (CIA). Only the most elliptical references were made in public to the sigint mission, and atone time, NSA employees identified themselvesonly as working for the Defense Department. In the past few years, however, senior intelligence officials frequentlydescribe NSA's problems and reportsaccompanying intelligence legislation include extensive commentary on the challenges facing NSA and theapproaches encouraged by Congress. These changeswere made possible by the absence of a superpower competitor capable of exploiting any inadvertent security slipand by the need to justify intelligence spendingat a time when international climate is apparently more benign. These factors removed inhibitions against NSA"going public" and, at the same time, created apolitical environment that would require public understanding of NSA's mission if the Agency could continue toobtain the funding necessary to update itsoperations. <2. Roles and Missions: The Growing Influence of Congress> For decades Congress was content to consider the signals intelligence effort and the organization of NSAprimarily as the responsibility of the executive branch.For a quarter century after the end of the Second World War, NSA and the nation's other intelligence agenciesundertook their activities with little publicity andwith congressional interest limited to a handful of members of armed services and appropriations committees. Theintelligence investigations of the 1970s,however, led to well-publicized hearings that placed many secrets, including those of NSA, on the public record. Of greater enduring significance was theestablishment of select intelligence committees in both the House of Representatives and the Senate. Thesecommittees were granted the authority to conductoversight over the intelligence activities of the Federal Government, including NSA. They became, along with theappropriations committees, the points ofcontact between the intelligence agencies and Congress. As a result of the extreme sensitivity of much intelligenceinformation, the two intelligence committeescame to act essentially as surrogates for the Congress and the public in regard to intelligence agencies. Until themid-1990s much of interest of the committees, asreflected in report language and public hearings, centered on the CIA and especially its operations directorate. Sigintactivities were undoubtedly matters ofcongressional concern, but they were very rarely the focus of public attention. (2) In recent years, with the end of the Cold War the two intelligence committees have had much more intensive concern with NSA as reflected in more detailedreport language on NSA's activities. The extent of oversight is reflected by comments in the report on the FY2000Intelligence Authorization bill( H.R. 1555 ) by the House intelligence committee: In the last two Congresses, the committee has been direct in its identification of process and management problemsthat require attention. The committee believes that NSA management has not yet stepped up to the line. There havebeen some efforts at reform, but there are stillseveral areas where change is not only needed but is critical for NSA's future. (3) Congress has taken a more open interest in NSA at a time when the Agency's roles and missions are facing significant reformulation. Congress has providedguidance for NSA's future direction and has made budgetary allocations based on its sense of appropriate goals,personnel policies, and organizational structure. Most observers believe, moreover, that, given the fluid state of international affairs and information technologies,that further congressional attention is likely asNSA changes to adapt to its new environment. <3. Changing Technologies> The primary targets of electronic surveillance during the Cold War were the communications of hostile militaryorganizations and governments. Most of suchcommunications were encrypted; in many cases this message traffic could be read only sporadically, if at all(although useful information can often be obtainedwithout actually reading the actual messages). Some communications were carried on land lines that could beintercepted only if they could be physically tapped,inevitably a difficult undertaking. It was, nonetheless, the government and military circuits that provided the mostimportant intelligence of military capabilities,hostile intentions, and diplomatic maneuvers that could place this nation's security at risk. Civiliancommunications-telegraphs, telephones, facsimile devices,etc.-were usually unencrypted and often sources of valuable information, albeit of secondary priority. In the past decade, two important trends have combined to change the nature of electronic surveillance efforts. The end of the Cold War meant policymakers andmilitary officials had a wider range of countries that they were concerned with and placed much greater emphasison "non-state actors"-terrorist groups andnarcotics smuggling organizations that have come to be seen as genuine national security threats. These links arenot necessarily easy targets given the greatexpansion in international telephone service that has grown by approximately 18% annually since 1992. Intelligenceagencies are faced with profound "needle-in-a-haystack" challenges; it being estimated that in 1997 there were some 82 billion minutes of telephone serviceworldwide. (4) The technologies used in civilian communications circuits have also changed; in the past decade reliance on microwave transmissions (which can be interceptedwith relative efficiency) has been increasingly displaced by fiber optic cables. (5) Fiber optics can carry far more circuits with greater clarity and through longerdistances and provides the greater bandwidth necessary for transmitting the enormous quantities of datacommonplace in the Internet age. Inevitably, fiber optictransmission present major challenges to electronic surveillance efforts as their contents cannot be readilyintercepted, at least without direct access to the cablesthemselves. The widespread use of fiber optics may also affect requirements for expensive sigint satellites sincetransmissions over fiber optic cables cannot beintercepted from space-based platforms. (6) In addition to the widespread use of fiber optic cable, civilian communications have been marked by increased access to high-quality encryption systems formerlyavailable only to governments and militaries. Some systems are available at no cost on the Internet and others canbe obtained commercially at minimal expense. This has led to an extensive debate in the United States about the need for export controls on sophisticatedencryption systems. Although it is universallyacknowledged that commercial encryption systems available throughout the world present major challenges tointelligence (and law enforcement) agencies, U.S.intelligence officials have argued that permitting export of high-quality U.S. systems with associated systemssupport would greatly extend the capabilities ofother governments and hostile groups to protect their communications. After extensive discussions within theexecutive branch and Congress, steps have beentaken to loosen, but not remove, U.S. restrictions on encryption exports. (7) NSA officials were active in criticizing unrestricted encryption exports andobserverssuggest that these views, which were shared by many in Congress especially within the intelligence and armedservices committees, may have fueled presscriticism of NSA. Changing threats, coupled with the evolving global technological environment, have undoubtedly made NSA's tasks far more difficult. The proliferation ofcommunications throughout the world and the spread of encryption may make electronic surveillance almostimpossible. Much equipment acquired for Cold Warmissions is not effective against new targets. In some cases, NSA must resort to analyses of traffic patterns-whois communicating with whom, when, and howoften-to provide information that may not be obtainable through breaking of codes and reading of plaintext. A major shortcoming was revealed in January 2000 when a software anomaly in the communications infrastructure curtailed NSA's operations for some 72 hours. An intensive and expensive effort was required to restore operations. A subsequent assessment found that thefundamental problem was not technical, butdoctrinal and organizational. (8) <4. Personnel Matters> NSA has employed many highly gifted scientists, engineers, and mathematicians. However, shifting geopoliticalconcerns and budget reductions required in theearly 1990's led to early retirements and fewer newly hired employees. During the same period, the Agency wasalso required to move towards a personnelstructure more closely reflective of national demographics. Simultaneously, a revolution in communications andinformation technologies was launched in manysmall, start-up firms whose culture and salary and personnel benefit levels were radically different from those ofgovernment agencies. As the extent of theseproblems became apparent, Congress has provided guidance in several areas. <4.1. Diversity and Equal Opportunity Issues> At least since the enactment of the National Security Agency Act of 1959 NSA's personnel policies have been the subject of congressional interest. That Act inessence established a separate personnel system for NSA. By the mid-1980s the House Intelligence Committeebecame concerned with the relatively smallnumbers of African-Americans, Hispanics, and women within the NSA workforce. (In 1993, blacks constituted 9%of the total number of NSA employeeswhereas the national labor force percentage was just over 10; the NSA Hispanic percentage was 1.2, whereas thenational average was just over 8; for AsianAmericans, the national figure was 2.9, at NSA it was 0.9.) (9) One congressional initiative included provisions in the FY1987 Intelligence Authorization Act( P.L.99-569 ) amending the National Security Agency Act to establish an undergraduate training program to facilitatethe recruitment of minority high schoolstudents with skills in mathematics, computer sciences, engineering and foreign languages. Recruitment efforts weremade in colleges with higher concentrationsof Hispanic students and efforts were made to ensure equal consideration in promotions. By 1996, NSA had mademeasurable increases in minority and femalerepresentation in the general workforce and in leadership positions. (10) These initiatives were not welcomed by all NSA personnel, with someofficials expressingconcerns that others would receive preference at their own expense. (11) Since the mid-1990s public congressional hearings and publishedcommittee reports havenot given extensive discussion to diversity issues. Although efforts continue to increase the diversity of NSA'sworkforce, other personnel issues have complicatedhiring and promotion policies. <4.2. Changing Personnel Requirements> Since the end of the Cold War, the nature of sigint targets has changed; the sheer quantity of communications has dramatically risen and sophisticated encryptionsystems are increasingly available throughout the world. These changes in targets and technologies have requireda substantially different NSA workforce. Longstaffed by civil servants and military personnel who made their whole careers in cryptologic specialities; NSAofficials must now be able to shift rapidly amongdisparate sigint efforts and varying targets. Different skill mixes are required at NSA at a time when technicalspecialists in communications, computer services,and encryption systems are in high demand throughout the economy. Observers believe that entry- and mid-levelgovernment salaries are not equal toopportunities currently available in an especially dynamic sector of the economy; furthermore, workers in technicalfields often shift jobs in short periods and itmay not be possible to retain them solely on the basis of the career benefits of federal service. (12) As has been the case with other intelligence agencies, staffing levels at NSA have been reduced during the past decade. Many analysts and others who spent theircareers focusing on Soviet and Warsaw Pact issues no longer directly relevant to U.S. security concerns have retiredor moved into new specialities. Some mediaobservers suggest, however, that NSA continues to be burdened by an "old guard" of Cold War-era careerists whosetalents are not precisely suitable to emergingmissions. Although such charges are difficult to document (and may only reflect bureaucratic politics), it isgenerally acknowledged that NSA will have to adoptan altered personnel structure. FY2001 Intelligence Authorization legislation (passed by both houses, but vetoedby the President because of concerns not directlyrelated to NSA) would provide authority for NSA to offer early retirement and voluntary separation pay toemployees with 20 or 25 years of service (depending onage). This provision was inserted to provide the NSA Director with the opportunity to institute personnel changesthat are considered necessary and reflects theintelligence committees view that "the situation at NSA is unique, not only in the enormity of the task ofmodernization, but also in the direct impact on nationalsecurity should NSA modernization fail." (13) One approach that has been adopted is to increase reliance on contracting out personnel services although security considerations can complicate the use ofnon-career personnel. (14) In some cases it has beenpossible to acquire the services of some retired NSA officials who are able to receive the relevant clearanceswith little delay. In other situations NSA is able to compartmentalize some activities and make use of specialistswho do not need access to sensitive information. Some observers warn, however, that contract personnel will tend not to be as committed to the Agency's missions,and may work subsequently fornon-government concerns with an increased possibility of unauthorized sharing of classified information. <5. Charting NSA's Future Direction> In recent years, congressional oversight committees have become concerned about the effect of the changedinternational threat environment and new technologieson NSA's future effectiveness. The requirement to replace aging satellite systems in particular have placed pressureson intelligence spending across the board;the size and extent of NSA's budget inevitably meant that it would be subject to close scrutiny. Thus, in 1997 theSenate Select Committee on Intelligenceestablished a Technical Advisory Group (TAG) to review the U.S. sigint effort along with other technical challengesfacing the Intelligence Community. TheTAG was composed of leading U.S. scientists and experts in technology and intelligence and has made twoclassified reports on NSA's capabilities. According tothe Senate Committee, the TAG identified serious deficiencies; "as resources have been reduced, the NSAsystematically has sacrificed infrastructuremodernization in order to meet day-to-day intelligence requirements. Consequently, the organization begins the21st Century lacking the technologicalinfrastructure and human resources needed even to maintain the status quo, much less meet emerging challenges." (15) One media account indicates that the TAG'sconclusions were highly critical: "`We told them that unless you totally change your intelligence-collection systemsyou will go deaf," one involved official[stated]. "You've got ten years."' According to the account, the Group "urged that the agency immediately begina major reorganization, and start planning for therecruitment of several thousand skilled computer scientists." (16) According to the Senate report, the TAG also recommended new business procedures and additional resources. The report indicated that the FY2001authorization bill would likely reflect TAG recommendations, with resources being shifted to long-terminfrastructure modernization at the expense of someshort-term collection. (17) The House Permanent Select Committee on Intelligence also reached the conclusion in 1998 that "very large changes in the National Security Agency's cultureand method of operations need to take place." (18) The Committee indicated its approach: First, the committee is funding and mandating external management reviews. Second, the committee is attempting toinfuse fresh thought, needed expertise (especially in systems engineering), and greater fairness by insisting thatsignificant portions of certain categories becontracted out and that outside proposals and expertise be solicited, notably in systems engineering, advancedresearch and development, and in developmentactivities.... Third, fences have been placed on portions of the budget, with the prospect that a considerable amountof money could be reprogrammed for other[Intelligence Community] needs if NSA does not develop detailed strategic and business planning. (19) The House committee envisioned "a far more radical revision of the budget process than presently contemplated." Emphasis would be placed on "a new culture inwhich all team together on a new architecture." <5.1. Director Hayden's Initiatives> Aware of the challenges facing the Nation's sigint effort and responsive to congressional concerns, the senior leadership of NSA has been moving to make drasticchanges in NSA's operations and organization. Upon becoming NSA's director in March 1999 Air Force Lt. GeneralV. Michael Hayden assigned a number ofmid-level NSA officials to review the Agency's organizational structure. Known as the New Enterprise Team, thegroup recommended a new executiveleadership team, the development of strategic business plans, the acquisition of agency wide managementinformation systems, and hiring a financial managementofficer. A separate report by a smaller group of outside experts with experience in the telecommunications industrymade similar recommendations. (20) The two sets of recommendations reflected a consensus by these advisory groups (and by congressional overseers) that NSA requires more centralizedmanagement, that separate divisions that had long enjoyed functional independence need greater coordination toreduce duplicative functions, and that there needsto be a strategic vision of how the Agency is to adapt to changed geopolitical and technological environments. Bothreports reflected confidence in the importanceof NSA's missions, but both were highly critical of NSA's management and personnel structures. The outsideexperts concluded: "The most serious issues areleadership, accountability, and empowerment, as evidenced by great dissatisfaction with decision making withinthe Agency." (21) The NSA officials noted theAgency's fundamental problems: "lack of governance, lack of leadership, and lack of strategic alignment." Althoughsome specific criticisms reflect the inherentlimitations of government agencies in comparison with the civilian telecommunications industry, NSA was urgedto take special steps to hold middle managersresponsible for personnel decisions. Although NSA has traditionally hired recent college graduates and retainedthem until retirement, changes in technology, inthe international environment, as well as disparities in government and civilian salaries, imply that in the future theremay be fixed-term positions and upgradedsalary levels for some critical technical specialists. NSA was also urged to move away from its traditional preference for performing all functions in-house rather than to look for creative ways to find civiliancontractors not just as sources of manpower but as "solution providers," and to make hard choices over prioritiesrather than to make across-the-board budgetaryreductions. The outside team of experts urged NSA not only to take advantage of the potential advantages ofoutsourcing but also to bring in mid- and upper-levelmanagers from successful businesses. In November 1999, Hayden launched "100 Days of Change"-another series of managerial initiatives responsive to the recommendations of these groups. Hesubsequently summarized NSA's challenges: "maintaining a strong infrastructure of people and facilities in a timeof constrained budgets; accurately forecastingtechnology trends in the face of an explosion of information systems; and reacting agilely to new technologicalinnovations." (22) With congressional support Hayden has brought in industry experts from civilian firms to develop a comprehensive business plan for the Agency that will enableit to perform in a transformed global information technology arena. An initial step was the appointment of a newchief financial manager from private industry inJanuary 2000. He has also hired a chief information officer, a senior acquisition executive, and created atransformation office. It is hoped that these officials willprovide the capability for strategic planning and centralized coordination that NSA has been criticized for notmaintaining. In July 2000 it was announced thatWilliam Black, Jr., a former NSA official who had retired and found employment in a high-tech consulting firm,Science Applications International Corporation,would be appointed deputy director. Black replaces Barbara McNamara who has been widely blamed in somemedia accounts (23) as part of an "old guard" thathasdelayed NSA's transition to post-Cold War challenges. McNamara has been assigned as head of NSA's liaisonoffice in London. In October 2000, further adjustments in NSA's management structure were announced. General Hayden will serve as Director and Chief Executive Officer andintends to focus on implementing the changes necessary to keep NSA relevant to the needs of the rest of theGovernment. Deputy Director Black will also serveas Chief Operating Officer and be responsible for day-to-day operations. A new Executive Leadership Team willbe created to concentrate on overall strategicplanning issues, composed of Hayden, Black, and the deputy directors for operations, information assurance, andtechnology. (24) In June 2000 NSA announced that it intended to contract out "non-mission related" information technology (IT) support-information technology functions that arenot part of its core cryptologic efforts. (25) A $4billion IT contract, to be known as Project Groundbreaker, will be awarded for handling many of the Agency'sextensive and varied requirements for information processing including desktop and workstation computers, email,network operations, software and telephonesystems. (26) Hayden indicated that NSA divisionstraditionally had undertaken much of their own IT work to support their ongoing operations, with inadequateconcern for overall financial implications for the entire Agency. He was quoted in one account: I knew exactly how much activity X cost. I knew when we spent the money, I knew what it cost, I knew when it wasappropriated. But we didn't really have the ability to aggregate all activity Xs and portray them to the agency as,"Hey, by the way, do you realize that is whatactivity X cost you around the world and do you really want to be spending [this] percentage of your budget onactivity X as opposed to activity Y?" We couldn'tdo that. We couldn't pull the thread and aggregate what it was we were doing as an enterprise in order to makestrategic decisions ondirection. (27) Hayden realizes that a more centralized system, with much work outsourced to a civilian contractor, may result in having to say "no to legitimate daily operationalneeds because the system can't handle it. That is the big change." (28) On November 8, 2000 NSA announced the accomplishment of the initial phase of its new acquisition program and indicated an intention to solicit industry forconcept studies for sigint modernization. This initiative is known as Trailblazer and the studies are expected to beundertaken in 2001. <5.2. Elements of Uncertainty> Few observers deny that significant structural changes in NSA's organization are warranted, but some caution that the changes thus far envisioned may not resolvethe expected problems. Skeptics note, in particular, that outsourcing is no panacea, that it may mean the loss ofexperienced personnel with longstanding ties toNSA without necessarily reducing overall costs to the taxpayers. Further, they argue, the necessity of grantingsensitive clearances to contractor personnel mayincrease risks of compromising classified information and processes. All agree that costs of background securityinvestigations will increase. Other objections may be raised concerning the consolidation of IT functions in a centralized office. The flexibility of individual components to design uniquesystems may be jeopardized, and the NSA Director has acknowledged that certain legitimate functions may haveto be curtailed. Observers note that many of thetechnological advances in the past decade have been made by decentralized organizations that permit componentdivisions to establish their own operationalpractices and develop their own IT solutions without micro-management from a headquarters staff. The External Team argued that "intelligence targets will continue to be increasingly transnational in nature, and . . . alignment to geographical locations andentities is obsolete." Although all observers would agree that NSA cannot maintain uniform depths of area expertisefor all potential concerns, some suggest thatthere are areas that will be of intense concern to the U.S. Government for decades to come and dispersing areafamiliarities acquired over many years would beseriously mistaken. Congressional observers strongly support the use of NSA's budget to establish priorities. They do not indicate that they believe NSA has mishandled funds; theydo maintain that the Agency has not managed its budget to achieve managerial goals. In 1999 the House IntelligenceCommittee noted that "In the last twoCongresses, the committee has been direct in its identification of process and management problems that requiredattention," but "NSA management has not yetstepped up to the line." The committee added that it "looks forward to the opportunities for change that presentthemselves with the introduction of a newDirector of NSA." (29) The Senate Intelligence Committee has urged that the NSA Director should have greater authority over the 70% of cryptologic resources that are currentlymanaged by the military services. The military services operate collection sites, undertake initial analysis, andprovide direct support to military commanders.NSA is responsible for tasking their efforts and for final analysis of the data they collect. Since service cryptologicelements support both NSA and militarycommanders there are inevitably differences over their disposition and responsibilities. Although the SenateIntelligence Committee advocates the NSA Directorhave "centralized direction across the SIGINT infrastructure as he implements his modernization strategy," (30) some in DOD (and perhaps in Congress as well)would argue, however, that the need to configure sigint resources in direct support of operational commanderswould argue against such augmented authorities forthe leader of a Washington-area agency. The House Committee, in reporting its version of the FY2001 Intelligence Authorization Act in May 2000 ( H.R. 4392 ), accepted the need formanagerial changes at NSA. Criticizing the traditional independence of NSA's divisions, the Committee arguedthat: Each type of communication-radio, satellite, microwave, cellular, cable-is becoming connected to all the others. Each new type of traffic shows up on every type of communication. Unfortunately, as the global network hasbecome more integrated, NSA's culture has evolvedso that is seemingly incapable of responding in an integrated fashion. The House Committee argued that NSA must, as a result, "prepare itself for complex, prioritized, carefully timed and integrated systems acquisitions that, inaggregate, rival the complexity of programs commonly managed by the NRO, the Defense Department, andcommercial industry." (31) The House Intelligence Committee's recommendations for significant shifts in NSA's budget have not yet been accepted. DOD urged that the changes not beapproved pending a review of the results of Hayden's initial reorganization efforts. (32) In particular, DOD, with support by the Senate Armed Services Committee,views with concern any efforts to give the DCI influence over NSA that would detract from that of the Secretaryof Defense. These separate approaches may noteasily be reconciled. A major issue related to sigint in the post-Cold War environment is the erosion of distinctions between foreign and domestic threats. For example, an attack fromoutside the borders of the country through cyberspace could result in major damage to U.S. institutions, butresponsibilities for monitoring potential threats arecomplex and in some ways ill-defined. Constitutional principles and statutes sharply distinguish betweeninformation gathering by foreign intelligence anddomestic law enforcement agencies and efforts to involve NSA in surveillance of U.S. persons have been sharplyrestricted. Various administrative arrangementshave been made to facilitate cooperation between NSA and the FBI and other law enforcement agencies in gatheringinformation on threats with both foreign anddomestic components, but many uncertainties remain. Many observers strongly oppose the use in court cases ofinformation derived from sigint provided by NSAat the same time, sigint specialists are highly reluctant to see NSA diverted from its foreign intelligence missionsto tasks that may risk involvement in domesticcontroversies. Congress, included in the FY2001 Intelligence Authorization bill ( H.R. 4392 , Section 606)a requirement for a report from theAttorney General regarding actions taken in regard to the dissemination of intelligence information within theJustice Department. (This provision replaced anearlier version that would have required the establishment of procedures to accomplish this dissemination.) (33) NSA and counterpart agencies in a number of other countries, especially Great Britain, have come under much criticism in the European Parliament for allegedlymonitoring private communications of non-U.S. businessmen in a coordinated electronic surveillance effort knownas Echelon in order to support domesticcorporations. Some critics go further and charge that NSA's activities represent a constant threat to civil libertiesof foreigners and U.S. persons as well. ThoughNSA has reassured congressional oversight committees that the Agency complies strictly with U.S. law, thesecontroversies will undoubtedly continue. (34) <6. Conclusion> The National Security Act establishes sigint as a recognized function of the U.S. Government and requires thatit is usually to be carried out by NSA. The U.S.Government thus has accepted responsibility for electronic surveillance activities that are condemned (but notnecessarily eschewed) by some foreign countries. Although some specialists in international law argue that electronic surveillance is inherently illegal, U.S. officialscontend, based on constitutionalresponsibilities, statutes, and long-established practice, that electronic surveillance related to national security andpreventing terrorism and international narcoticssmuggling is a legitimate function of the U.S. government. Unlike some foreign countries, the U.S. has not asserteda right to conduct electronic surveillance tosupport its "economic well-being." Managing this effort in a changing geopolitical and technological environment, according to knowledgeable observers and congressional overseers, requires thatNSA's organization and operations be substantially altered. This process is currently underway to strengthen theNSA Director's role in managing the Agency,but many uncertainties remain that will determine NSA's future. No national security official can confidently predictwhat collection priorities will exist in fiveyears time, nor can the equipment acquisition priorities be firmly projected very far into the future. Withcongressional encouragement, the current leadership ofNSA is drawing increasingly on talent available in the civilian community to offset the difficulties involved inretaining talented technological experts in a verytight sector of the labor market. This effort may not result in the stable, loyal workforce that, in the past, led toNSA's gradual successes against Cold War targets. Some observers also believe that NSA will ultimately require significant budgetary increases at a time when thereis a determination to restrict overall governmentspending. The future success of NSA is by no means guaranteed. The current NSA Director's managerial initiatives and the move to use outside contractors have widespreadsupport, but these efforts may not achieve all their intended goals. NSA may not be adaptable to radically changingdevelopments in internationaltelecommunications and the bewildering emergence of terrorist groups previously unheard of. The wider publicmay come to view NSA's activities as inherentthreats to privacy that outweigh the value of information acquired. Attention will be paid to the costs and benefitsof allocating additional funds to NSA at a timewhen there are sure to be competing demands. The current level of congressional concern with NSA is unlikely to diminish. Observers expect that, in the face of attacks on NSA by some in the media and by anumber of European parliamentarians, members of Congress will be asked to defend or criticize not only NSA'soperations, but also its statutory roles andmissions. Funding for NSA's efforts to adapt to altered geopolitical and technological environments will have tobe balanced against other competing needs. To amuch greater extent than in the past, observers expect that Congress will continue to involve itself in internalchanges in the Agency designed to acquiretechnological capabilities to acquire information at a time when the volume of communications is expandingexponentially, and access is greatly complicated bythe spread of sophisticated encryption systems. <7. Appendix A. Congressional Oversight of NSA: A Brief Review> Codemaking and signals intelligence (sigint) have long been functions of governments and militaryorganizations. (35) Although the United States gavelessattention to codemaking and codebreaking than the major European powers, U.S. forces during World War Iestablished a fairly extensive military sigint effort. Inthe 1920s and 1930s, the services maintained a small sigint effort and, for a time, the State Department collaboratedwith the Army in operating an American"Black Chamber" that attempted, with limited success, to intercept and decrypt foreign diplomatic communications. By the time the United States entered WorldWar II, U.S. codebreakers were able to decrypt some codes of Japan, Germany, and other foreign countries. Successin breaking Japanese diplomatic codes,achieved through "the exercise of the greatest ingenuity and utmost resourcefulness"was acknowledged publiclyafter the end of the war in the congressionalreport regarding the attack on Pearl Harbor. (36) During the course of World War II, sigint efforts proved to be exceptionally valuable especially in regard to acquiring military information. The crucial victory atMidway in June 1942 that halted Japan's advance in the Pacific was gained through sigint. The Allies' ability tokeep supplies flowing across the North Atlanticdepended on limiting U-boat attacks; this too was accomplished through good sigint. Some observers haveconcluded that sigint enabled the Allies to end the warat least a year earlier than would otherwise have been possible. During World War II, cooperation with the British in sigint collection and analysis proved very fruitful. Although both countries were initially reluctant to sharetheir codebreaking secrets, they gradually came to appreciate the advantages of sharing both collection and analysis. Anglo-American cooperation did not endwith the conclusion of hostilities in 1945, but actually expanded with the beginning of the Cold War and theexpansion of U.S. security interests throughout theworld. The relationship with the British would eventually encompass the Canadians, Australians, and, to a lesserextent, the New Zealanders. After the War, the Army and the Navy, and subsequently the newly independent Air Force all continued sigint collection. An effort was made to coordinate theservices' sigint efforts in a single organization known as the Armed Forces Security Agency established by theSecretary of Defense in 1949. Coordinationproblems were not, however, resolved until October 1952 when President Truman established the National SecurityAgency in an effort to provide a moreeffective structure for coordinating signals intelligence activities. Truman had determined that the sigint functionwas "national," that it would serve civilianpolicymakers in the State Department and the White House as well as the military. This action was taken in a secretmemorandum that was not made public at thetime. NSA became the U.S. focal point of a global sigint effort. Signals are collected at field stations throughout the world, most of which operated by the militaryservices. Some initial processing and analysis may have be performed at the collection site, but in general the "take"is forwarded to NSA, which moved itsheadquarters from Arlington, Virginia to Fort Meade, Maryland in 1957. After decryption and analysis, the resultantdata is provided to "all-source" intelligenceagencies such as the CIA or the Defense Intelligence Agency (DIA). NSA has always been staffed by a combinationof civil servants and active duty militarypersonnel, but the Agency also provides operational guidance to sigint collection stations maintained by thecryptologic elements of the military services(collectively described as the Central Security Service (CSS)). During the Cold War, NSA's operations, along with those of allied countries) were primarily directed at the Soviet Union, its Warsaw Pact allies, and CommunistChina. Massive efforts were made to collect sigint dealing with military threats to the U.S. and its allies. In additionto sigint provided to national-level decisionmakers, tactical sigint collection, analysis and reporting was incorporated in military operations, including thoseoccurring in the Korean and Vietnam Wars. For many years NSA's efforts did not receive much public scrutiny. Congressional oversight was conducted by small sub-committees of armed services andappropriations committees without public hearings. The first major legislation dealing directly with NSA was theNational Security Agency Act of 1959 (P.L.86-36). This Act did not describe the functions of NSA, but dealt with "housekeeping" matters such as pay andallowances, training, property acquisition, andleasing, It exempted NSA from the requirement to provide detailed information regarding organizational andfunctional matters to the Civil Service Commission(the predecessor of the Office of Personnel Management). These authorities are, in general, similar to thoseexercised by the Director of Central Intelligence(DCI) in regard to the CIA. The act has been amended from time to time and serves as the statutory basis for NSA'spersonnel policies that derive from its uniquemission, including special pay and allowances for overseas travel, professional and foreign language training, andproperty leasing, and use of the NSA. An exception to the practice of congressional reticence regarding NSA was a report on a widely publicized defection in 1960 of two NSA employees to the SovietUnion. (37) The committee criticized personnelsecurity procedures as shockingly lax and in part as a result of congressional criticism of the handling of theMitchell/Martin case DOD tightened the security practices at NSA to ensure that background investigations werecompleted prior to granting access to cryptologicmaterials. In 1964 P.L. 88-290 (known as Title III of the Internal Security Act of 1950) was enacted to establishrequirements for security investigations forpersons working at NSA. Observers note that it was an early reflection of the importance of congressional oversight. It gave the NSA Director authority toterminate the employment of NSA personnel "whenever he considers that action to be in the best interest of theUnited States." Such actions can be takennotwithstanding usual civil service procedures for personnel actions. In 1996 these provisions were superseded byenactment of the FY1997 National DefenseAuthorization Act ( P.L. 104-201 , sections 1631-1635) which established intelligence personnel policies for theentire Defense Department, including authority toterminate employees "in the interests of the United States." Appeals of decisions to terminate can only be made tothe Secretary of Defense. (38) In the mid-1970s, public concerns that U.S. intelligence agencies were spying on domestic groups opposed to the Vietnam War led to hearings by selectcommittees in both chambers. (39) Interest in NSAcentered on "watch lists" that had been maintained to collect communications of U.S. citizens who weresuspected of ties to hostile foreign countries and groups. (40) There was also interest in a project, known as Shamrock, by which copies of internationaltelegramswere provided to NSA on a daily basis by three telegraph companies. These practices had been terminated by theearly 1970's, but Members of Congressconsidered that the Agency should be held accountable for them. (41) (The desire to bring such practices under the constraints of statutory law contributed topassage of the Foreign Intelligence Surveillance Act of 1978.) During the hearings conducted by the Senate Select Committee to Study Governmental Operations with respect to Intelligence Activities (known as the ChurchCommittee after its chairman, Senator Frank Church), for the first time a Director of NSA testified in open sessionto give a public overview of NSA'sresponsibilities. Lt. General Lew Allen, Jr., citing the statutory and other authorities under which NSA carried outits responsibilities, stated: This mission of NSA is directed to foreign intelligence, obtained from foreign electrical communications and alsofrom other foreign signals such as radars. Signals are intercepted by many techniques and processed, sorted andanalyzed by procedures which reject inappropriateor unnecessary signals. The foreign intelligence derived from these signals is then reported to various agencies ofthe government in response to their approvedrequirements for foreign intelligence. (42) Allen also explained in some detail the practice of establishing "watch lists" by which "words, including individual names, subjects, locations, etc." could beidentified within a stream of communications to separate useful information from the vast quantities of chatter. Particular attention was paid to retrievinginformation relating to terrorism, narcotics, and-a particular concern of the Johnson and NixonAdministrations-foreign influences on domestic groups suspectedof fomenting civil disturbances in the U.S. in protest against the U.S. role in the Vietnam war. Allen indicated that, pursuant to presidential direction, the Secretary of Defense had established NSA in accordance with his statutory authorities. He noted furtherthat "for the past 22 years [i.e., since circa 1953], Congress has annually appropriated funds for the operation of theNSA, following hearings before the ArmedServices and Appropriations Committees of both Houses of Congress in which extensive briefings of the NSA'ssignals intelligence mission have beenconducted." (43) The Church Committee concluded: The National Security Agency is one of the largest and most technically oriented components of the United Statesintelligence community. Its basic function is collecting and processing foreign communications and signals forintelligence purposes. NSA is also responsible forcreating and supervising the cryptography of all United States Government agencies, and has a special responsibilityfor supervising the military services'cryptologic agencies. Another major responsibility is protecting the security of Americancommunications. The Committee regards these functions as vital to American security. NSA's capability to perform these functionsmust be preserved. The Committee notes that despite the fact that NSA has been in existence for several decades,NSA still lacks a legislative charter. Moreover,in its extensive investigation, the Committee has identified intelligence community abuses in levying requirementson NSA and abuses by NSA itself in carryingout its functions. These abuses are detailed in the domestic portion of the Committee report. The Committee findsthat there is a compelling need for an NSAcharter to spell out limitations which will protect individual constitutional rights without impairing NSA's necessaryforeign intelligencemission. (44) Thus, even a committee widely perceived as antagonistic to intelligence agencies concluded that NSA's sigint mission is "vital to American security." It urged,however, a better statutory framework for the Agency and an enhanced role for congressional oversight to ensurethat NSA was not misused in ways that wouldundermine American liberties. The complete final report of the House Select Committee on Intelligence (known as the Pike Committee) was never made public, but its publishedrecommendations also included a proposal that the existence of NSA be recognized by specific legislation, that suchlegislation provide for civilian control ofNSA, and that the role of NSA with reference to the monitoring of communications of Americans be defined. (45) Many of the most important statutory provisions relating to NSA were enacted in the wake of these congressional investigations. Congress passed the ForeignIntelligence Surveillance Act of 1978 (FISA) (50 USC 1801) which establishes procedures for electronicsurveillance in the United States for foreign intelligencepurposes. (46) It provides that the Attorney Generalmay authorize surveillance in situations wherein the target is communications of foreign powers; in cases inwhich communications of U.S. persons might be acquired, then approval of a court, created pursuant to the FISA,would be required. Information acquired inaccordance with FISA provisions is to be used for foreign intelligence purposes (even though in recent yearsCongress has expanded FISA to permit use of sometypes of information acquired under its provisions to be used for law enforcement purposes in certaincircumstances). FISA, in essence, ensures that foreignintelligence electronic surveillance operations within the United States are conducted in accordance with statutoryauthorities and with supervision by the JusticeDepartment (and with oversight by Congress). Although in the Pearl Harbor investigations, the U.S. Government officially revealed its prewar sigint efforts, ongoing sigint activities had not beenacknowledged. FISA provided authority in U.S. statutory law for electronic surveillance activities to be conductedfor foreign intelligence (rather than lawenforcement) purposes. In enacting the statute the United States Government accepted responsibility for NSA'sactivities no matter how they might be regarded inother countries. FISA does of course provide ample warning to foreign countries and foreign groups that the U.S.undertakes electronic surveillance when itperceives it necessary. While the argument was made that such activities are best undertaken without formal legalauthorization and without the Government'saccepting responsibility for them, Congress specifically rejected that argument in the belief that intelligenceactivities, including electronic surveillance, arenecessary to protect the national security and that the U.S. Intelligence Community should be subject to law and tooversight by Congress. In addition to FISA, there were also efforts to establish a "legislative charter" for the agencies of the Intelligence Community, including NSA. Testifying inFebruary 1980, the then Director of NSA, Vice Admiral Bobby R. Inman, supported charter legislation, noting that"while the Agency has been provided withsignificant Congressional guidance and protection with respect to the information and products produced by theAgency, there was little Congressional guidanceon the functions and responsibilities of the Agency and few Congressionally provided statutory tools to be used toperform those functions." (47) Charter legislationfor the entire Intelligence Community became very complex and ultimately was a victim of partisan disputes in thelate 1970s. (48) It was not until 1992 that theNational Security Act was amended to provide a functional charter for NSA. (49) The Act now gives the Secretary of Defense the responsibility to ensure: through the National Security Agency (except as otherwise directed by the President or the National SecurityCouncil), the continued operation of an effective unified organization for the conduct of signals intelligenceactivities and shall ensure that the product isdisseminated in a timely manner to authorized recipients.... Guidance for NSA's activities has been further detailed in a series of executive orders. (50) E.O. 12333, signed by President Reagan onDecember 4, 1981 afterextensive consultation with Congress, and still in effect, tasks the Secretary of Defense with responsibilities for NSAincluding: (1) Establishment and operation of an effective unified organization for signals intelligence activities, except for thedelegation of operational control over certain operations that are conducted through other elements of theIntelligence Community. No other department or agencymay engage in signals intelligence activities except pursuant to a delegation by the Secretary of Defense; (2) Control of signals intelligence collection and processing activities, including assignment of resources to anappropriate agent for such periods and tasks as required for the direct support of militarycommanders; (3) Collection of signals intelligence information for national foreign intelligence purposes in accordance withguidance from the Director of Central Intelligence; (4) Processing of signals intelligence data for national foreign intelligence purposes in accordance with guidance fromthe Director of Central Intelligence; (5) Dissemination of signals intelligence information for national foreign intelligence purposes to authorized elementsof the Government, including the military services, in accordance with guidance from the Director of CentralIntelligence; (6) Collection, processing and dissemination of signals intelligence information for counterintelligencepurposes; (7) Provision of signals intelligence support for the conduct of military operations in accordance with tasking,priorities, and standards of timeliness assigned by the Secretary of Defense. If provisions of such support requiresuse of national collection systems, thesesystems will be tasked within existing guidance from the Director of Central Intelligence. (8) Executing the responsibilities of the Secretary of Defense as executive agent for the communications security ofthe United States Government; (9) Conduct of research and development to meet the needs of the United States for signals intelligence andcommunications security; (10) Protection of the security of its installations, activities, property, information, and employees by appropriatemeans, including such investigations of applicants, employees, contractors, and other persons with similarassociations with the NSA as arenecessary; (11) Prescribing, within its field or authorized operations, security regulations covering operating practices, includingthe transmission, handling and distribution of signals intelligence and communications security material within andamong the elements under control of theDirector of NSA, and exercising the necessary supervisory control to ensure compliance with theregulations; (12) Conduct of foreign cryptologic liaison relationships, with liaison for intelligence purposes conducted inaccordance with policies formulated by the Director of Central Intelligence; and (13) Conduct of such administrative and technical support activities within and outside the United States as arenecessary to perform the functions described in sections (1) through (12) above, includingprocurement As noted above, in 1976 the Pike Committee urged civilian leadership for NSA. NSA has always been headed by military officers, but they have served under thedirection of both the civilian Secretary of Defense and the (usually) civilian Director of Central Intelligence. Inaccordance with subsequent amendments to theNational Security Act, Directors of NSA are now appointed by the President upon the recommendation of theSecretary of Defense with the concurrence of theDCI (although a recommendation can be submitted without the DCI's concurrence if the fact of non-concurrenceis stated). In recent years, few observers expressconcerns about the NSA Director being a serving officer. The amended National Security Act also provides that the DCI develops budgets for the annual National Foreign Intelligence Program which includes NSA. TheDCI also establishes the requirements and priorities that govern the collection of national intelligence. Theseprovisions provide authority for the DCI to overseeNSA's budget and operations. There are, however, multiple occasions for differences between the roles of theSecretary of Defense and the DCI. The DefenseSecretary is inevitably more focused on aligning NSA closely with the operating forces of DOD and tends toemphasize collection of direct interest to militarycommanders. The DCI, for his part, tends to see NSA as one component of an interagency effort to gatherintelligence for senior policymakers in Washington; heapproves collection and analysis priorities that reflect their requirements. These respective responsibilities are wellunderstood; defense and intelligence staffsattempt to make adjustments to accommodate differing requirements within budgetary constraints. Any majorreorganization or redirection of efforts, however,that could affect NSA's ability to support either national policymakers or military commanders would be sure togenerate criticism from one quarter or another. The Pike and Church Committees also laid the groundwork for permanent intelligence committees. Subsequent to the establishment of the committees (theSenate Select Committee on Intelligence and House Permanent Select Committee on Intelligence) in 1976-1977,Members and staff have regularly reviewed NSAprograms and adjusted budgetary priorities with almost all hearings being conducted in closed sessions. NSAspending (along with the cryptologic activities ofthe services and other agencies) is authorized in annual intelligence authorization laws with funding levels indicatedonly in classified annexes. The two armedservices committees also have oversight of most intelligence programs since they involved Defense Departmentassets. <8. Appendix B. Cooperation with Other Countries and the Echelon Controversy (51)> Although sigint collection and analysis are among the most sensitive activities undertaken by the U.S.Government, close cooperation in these efforts ismaintained with several other countries-principally, but not limited to, the United Kingdom, Canada, Australia, andNew Zealand. These relationships beganduring the Second World War when agreements to share signals intelligence were made between the militaryservices of the United States and Great Britain, withseparate arrangements made with other Commonwealth countries. This cooperation was widely considered by seniormilitary leaders at the time, and by historianssubsequently, with having significantly reduced the amount of time needed to defeat Nazi Germany and Japan aswell as the number of Allied casualties. Although both the United States and Great Britain tackled various communications links of the Japanese andGermans (along with those of other countries),arrangements were worked out whereby the American effort was concentrated on the Japanese and the British onthe Germans. The division of labor reflectedresource limitations-especially among skilled cryptologists-and possession of geographical sites from which enemytransmissions could be intercepted. With the end of hostilities in 1945, both British and American intelligence officials were reluctant to terminate a highly productive cooperative arrangement. There was continued military cooperation between the two countries in occupation duties in various areas and, whenthe Soviet Union began to be considered athreat to both countries, intelligence cooperation continued. Cooperation with Canada was considered essential inview of potential Soviet military activitiesoriginating in Arctic regions. Formal arrangements to cooperate in collecting and analyzing sigint were made by thetwo countries (and others) given sharedgeostrategic interests and limited resources that did not permit expansive unilateral efforts. These agreements wereconducted in great secrecy at the time andremain largely classified a half-century later. (52) The sigint relationship with the British and other Commonwealth countries has attracted criticism from anumber of sources over the years. (53) To an extenta closeintelligence relationships arguably predispose military and political leaders to coordinated policies. Some observersobject to international agreements madewithout the formal advice and consent of the U.S. Senate. The secret relationships have been criticized by observersin the U.S., Britain, Australia and elsewherewho oppose international entanglements. Some observers from European Union countries express concern thatsigint cooperation among the "Anglo-Saxons"might work against their own economic interests. Supporters of the such relationships with other countries point to the advantages in shared efforts that conserve intelligence resources. The United States, Britain,Canada, Australia, and New Zealand often have common policies on important international issues, but theexistence of close intelligence ties has not precludeddifferent policies (or even, as at Suez in 1956, opposing policies) when national leaders felt them necessary. In thepost-Cold War environment, observers believethat sigint cooperation with a number of friendly countries maximizes opportunities to obtain information regardingdisparate regional threats from terroristgroups, narcotics traffickers, and dealers in nuclear and other substances used in making weapons of massdestruction. NSA has long been the target of criticism from those who view intelligence agencies as inevitable threats to civil liberties. In general, however, the Agency's lowpublic profile and the esoteric nature of its work attracted less attention than the more dramatic covert actionsundertaken by the CIA. In the past few years,however, reports prepared under the auspices of the Directorate-General for Research of the European Parliamenthave described U.S. electronic surveillanceefforts. The studies, known as Scientific and Technological Options Assessments (STOA), are prepared bycontractors and not by European Parliament's officialstaff. A series of these reports have severely criticized NSA, charging it with working together with sigintorganizations of the United Kingdom, Canada,Australia, and New Zealand to gather commercial communications and providing the intercepts to U.S. businessinterests to give them advantages over foreignfirms. (54) The criticisms of NSA by these reports have been echoed by media commentary. One account claims that It is the new Cold War. The United States intelligence agencies, facing downsizing after the fall of the Berlin wall,have found themselves a new role spying on foreign firms to help American business in globalmarkets. Echelon is part of a British and American-run world-wide spy system that can "suck up" phone calls, faxes ande-mails sent by satellite. America's intelligence agencies have been able to intercept these vital privatecommunications, often between foreign governments andEuropean businesses, to help the US win major contracts. (55) Some media accounts state that this entire cooperative endeavor has the codename Project Echelon; others believe that Echelon refers only to the process by whichcomputers operated by cooperating sigint agencies sift through many thousands of intercepts for ones containingpre-programmed key words. (56) U.S. intelligence officials have responded to these charges by describing the statutory framework under which NSA operates and the oversight mechanisms inplace in both the Executive and Legislative Branches. There have been categorical denials that intelligence is passedto U.S. companies to provide themcommercial advantages although it is freely acknowledged that sigint is used to provide the U.S. Government withinformation about bribery and other illegalpractices of foreign firms and that this information has been used as the basis for diplomatic complaints. (57) NSA has successfully persuaded the congressional leadership that it faithfully and responsibly conducts its electronic surveillance activities in accordance withlaw and relevant executive orders. Section 309 of the Intelligence Authorization Act for FY2000 ( P.L. 106-120 )required that the Director of NSA submit a report(to be prepared jointly by the Director of NSA, the DCI, and the Attorney General) providing a detailed analysis ofthe legal standards used in conducting signalsintelligence activities, including electronic surveillance. The report was submitted in February 2000 and set forththe legal bases for NSA's activities,emphasizing its commitment to respect the privacy rights of U.S. persons. In a public hearing to discuss the report,Representative Goss, Chairman of the HouseIntelligence Committee, concluded that "our safeguards are in place and are working." (58) Most U.S. observers give credence to the official U.S. position, especially given the absence of evidence that U.S. companies are pressuring the Government forhelp in learning about foreign technologies. Observers suggest, in addition, that any U.S. intelligence assistanceto a U.S. firm in winning a foreign contract wouldprovoke strong criticism by a disadvantaged U.S. competitor. (59) Former DCI R. James Woolsey has maintained that U.S. intelligence agencies do not collectinformation about foreign technology because American technology is, in general, far superior. There is, however,he argues, a real need to seek informationabout corrupt practices by foreign competitors and activities such as transfers of dual-use technologies for use inproduction of weapons of mass destruction aswell as activities in countries subject to U.N. sanctions. (60) Some foreign observers continue to dispute U.S. claims and they will not easily be persuaded that their concerns are ill-founded. Suggestions of NSA electroniceavesdropping have clearly had resonance among members of the European Parliament which voted on July 5, 2000to undertake a lengthy investigation ofEchelon. The investigation will not include the calling of witnesses and, interestingly, an amendment calling foran investigation of eavesdropping by all EUgovernments was not adopted. (61) In part, foreignobjections stem from concern about the capabilities of NSA to monitor their communications and those ofEuropean companies. There is also, especially among some, irritation that the United States has a closer sigintrelationship with some of its allies than withothers. In part, however, observers perceive attacks on NSA's activities as instinctive hostility among politicalelements long skeptical of close U.S.-Europeanrelations and determined to forge a more independent European identity. Some objections also undoubtedly arisefrom deep-seated opposition to the work of allintelligence agencies. There is no question that the worldwide capabilities of NSA cause suspicion and resentment among some foreign elements. U.S. officials justify NSA's activitieson international law, the necessity to acquire information about threats to national security, international terrorism,and the narcotics trade. While the potential forabuse is acknowledged, the United States has a legal structure that regulates electronic surveillance. In addition,intelligence derived from sigint supports manycollective military and diplomatic efforts with European and other allies.

The National Security Agency (NSA), one of the largest components of the U.S. Intelligence Community, has reached a major watershed in its history. Responsible for obtaining intelligence from international communications, NSA's efforts are being challenged bythe multiplicity of new types of communicationslinks, by the widespread availability of low-cost encryption systems, and by changes in the internationalenvironment in which dangerous security threats cancome from small, but well organized, terrorist groups as well as hostile nation states. NSA's efforts to adjust to the changing geopolitical and technological environment have been strongly encouraged by Congress and reflect a major shift incongressional oversight of the Agency. Although Congress has always approved funding for NSA, for decadesroutine oversight was limited to a few Membersand staff. In the 1970s, congressional investigations of intelligence agencies resulted in greater public attention toNSA and criticism of activities that infringed onthe civil liberties of U.S. persons. Subsequently, both the Senate and the House of Representatives establishedintelligence oversight committees that have closelymonitored NSA's operations. The Foreign Intelligence Surveillance Act (FISA) was enacted in 1978 to regulatecollection by foreign intelligence agencies of thecommunications of U.S. persons. The end of the Cold War, the expansion of low-cost encryption and the explosionof communications systems led Congress totake a more public profile in overseeing the large and secretive Agency. Reacting in large measure to congressional concerns, NSA launched two separate management reviews, one by outside experts, the other by longtime Agencyofficials. Both made strong criticisms of Agency personnel policies, an outmoded organizational structure, and anunwillingness to utilize civilian practices thatmore effective than those available in-house. The current NSA Director, Lt. General Michael V. Hayden, USAF,has used these analyses to launch a series ofmajor initiatives designed to improve NSA's operations, to attract and reward more qualified people from outsideindustry, and is developing a major contract foroutside support of its non-sensitive Information Technology (IT) functions. A major renewal effort is underway, but observers believe many challenges lie ahead that will require congressional oversight. Many of the reforms in personnelpolicies recommended are difficult to implement in a government organization, especially in an extremely tightmarket for technical specialists. The technicalcomplexities of dealing with widespread and sophisticated encryption as well as the proliferation of communicationsdevices remain to be resolved. NSA is,along with other intelligence agencies, not well-positioned to analyze developments among the assortment ofterrorist groups and narcotics smugglers around theworld that can seriously affect U.S. interests. NSA has also come under heated criticism in the European Parliamentfor allegedly collecting, in cooperation withthe British, commercial intelligence to benefit U.S. corporations.

<1. Background> The legal framework for international civil aviation rights dates back to the 1919 Convention for the Regulation of Aerial Navigation (Paris Convention), which was a part of the Paris Peace Conference. The hallmark aviation principle recognized by the Paris Convention is that every nation has absolute and exclusive sovereignty over the airspace above its defined territory. This principle was reaffirmed in 1944 at the Chicago International Civil Aviation Conference, which produced the Chicago Convention. The Chicago Convention resulted in an international framework based largely on national interests, favoring bilateral air transport agreements over multilateral accords with respect to issues such as routes, frequency and capacity. The Chicago Convention's accomplishments included an agreement by the signatories to grant each other two of the so-called "five freedoms" of air transport, specifically, the right to fly across other states without landing and the right to land for nontraffic purposes. In addition, the Chicago Convention established the International Civil Aviation Organization (ICAO) to regulate the safety, communications, and technological aspects of international civil aviation. Since the Chicago Convention, international civil aviation rights have developed primarily through a series of bilateral agreements between the United States and foreign countries. Most of these agreements have been "executive agreements" rather than treaties, thereby avoiding the advice and consent requirement of the Constitution, and typically have contained language favorable to the United States. For example, prior agreements permitted the United States to designate both an unlimited number of gateway cities and an unlimited numbers of carriers. In addition, the agreements provided the air carriers the right to determine capacity with only the vaguest of guidelines. As the United States began to deregulate its domestic airline industry, administrations began to seek more liberal, free-market-based international agreements as well. Domestically, however, even as the United States began to adopt more liberal regulations for its aviation industry, several existing laws continue to have a strong impact on international civil aviation. Currently, air transportation and air commerce are governed by the Federal Aviation Act of 1958. Section 401(a)(1) of the Act states that "an air carrier may provide air transportation only if the air carrier holds a certificate issued under this chapter authorizing the air transportation." The statute authorizes the Secretary of Transportation to "issue a certificate of public convenience and necessity to a citizen of the United States ...." Before issuing a certificate, however, the Secretary "must find that the citizen is fit, willing, and able to provide the transportation to be authorized by the certificate and to comply with this part and the regulations of the Secretary." Stated another way, to operate in the United States as an air carrier, an entity must be a U.S. citizen and must be judged by the Secretary to comply with the statute and any other applicable regulations. In addition to the citizenship requirements, U.S. law also contains a general prohibition against cabotage activity. Generally speaking, the term cabotage is defined as "the right of a foreign airline to carry passengers and/or cargo between airports of the same country." The prohibition states that "aircraft may take on for compensation, at a place in the United States, passengers or cargo destined for another place in the United States only if (1) specifically authorized under section 40109(g) of this title; or (2) under regulations the Secretary prescribes authorizing air carriers to provide otherwise authorized air transportation with foreign registered aircraft under lease or charter to them without crew." If neither of those situations exists, foreign aircraft are not permitted to perform cabotage within the United States. In addition, the Secretary of Transportation has general discretionary authority to waive other economic-related statutory provisions listed in section 40109(c) "when the Secretary decides that the exemption is consistent with the public interest." The cabotage prohibition, however, is not among the regulations listed in section 40109(c). Finally, U.S. law has created an incentive program exclusively available to domestic air carriers; namely, the Civil Reserve Air Fleet Program (CRAF). Under this program, domestic air carriers supply aircraft on a voluntary basis to increase the military's airlift capacity. The CRAF allows the U.S. military, in times of need, to demand access to a selected percentage of the civil aircraft fleet to deliver troops and equipment to the battlefield. <2. "Open Skies" Agreements> In August of 1992, the Department of Transportation (DOT) announced its "Open Skies" initiative, which was intended to continue the trend of liberalizing international civil aviation. As defined by the DOT, "Open Skies" consists of the following 11 principles: 1) Open entry on all routes; 2) Unrestricted capacity and frequency on all routes; 3) The right to operate between any point in the U.S. and any point in the European Community without restriction, including service to intermediate and beyond points, and the right to transfer passengers to an unlimited number of smaller aircraft at the international gateway; 4) Flexibility in setting fares; 5) Liberal charter arrangements; 6) Liberal cargo arrangements; 7) The ability of carriers to convert earnings into hard currency and return those earnings to their homelands promptly and without restriction; 8) Open code-sharing opportunities; 9) The right of a carrier to perform its own ground handling in the other country; 10) The ability of carriers to freely enter into commercial transactions related to their flight operations; [and] 11) A commitment for nondiscriminatory operation of and access to computer reservation systems. The "Open Skies" initiative incorporated many elements of the previous bilateral agreements and was designed to be entered into with any country "willing to permit U.S. carriers essentially free access to their markets." However, because "Open Skies" is an executive branch initiative, policies that require legislative changes to U.S. law, such as foreign ownership and control, and cabotage are not included within its principles. Currently, the United States is a party to 74 "Open Skies" Agreements worldwide. In Europe, the first "Open Skies" Agreement was reached in October of 1992 with the Netherlands, and over the next several years, similar agreements were reached with other European countries, including Austria, Czech Republic, Belgium, Denmark, Finland, Germany, Luxembourg, Norway, Sweden, Switzerland, and Iceland. As a result of these agreements, the United States enjoys what can be characterized as quasi-cabotage rights within the European Union (EU). In other words, although U.S. carriers still cannot operate truly domestic routes (e.g., Paris to Marseille), they have created so-called "hub and spoke networks" within Europe; for example, a hub in Frankfurt, Germany, with spokes to Paris and Marseille. On the other hand, it should be noted that U.S. law currently prevents European carriers from enjoying any type of cabotage rights within the U.S. domestic market. The combination of the number of "Open Skies" Agreements between the United States and individual EU Members, and the growing dominance of U.S. air carriers throughout Europe, led the European Commission to seek a mandate to negotiate a bilateral aviation agreement between the United States and the EU. The Commission, however, was unable to obtain such a broad mandate and, in 2002, decided to bring legal action against those Member states that had independently negotiated and entered into "Open Skies" Agreements with the United States. While the European Court of Justice appeared to stop well short of invalidating the existing "Open Skies" Agreements, it did hold that certain specific provisions were discriminatory and therefore contrary to EU law. These included provisions relating to the allocation of airport slots and those governing pricing, fares, and rates of intra-European air services; agreements on computer reservation systems; and the "nationality clauses," which permit the United States to deny access to carriers whose home state has not signed an agreement. As a result of this decision, the legal status of the existing "Open Skies" Agreements has been questioned, and the EU Members have granted the Commission a mandate to negotiate a civil aviation agreement with the United States. Since the European Court of Justice ruling, the United States and the EU have committed to negotiations with respect to a comprehensive air transportation agreement often referred to as an "Open Aviation Area," or the "Transatlantic Common Aviation Area" (TCAA). Until recently, negotiations appeared to stall as the countries' differences on key issues prevented them from moving forward. In November 2005, however, the parties announced a negotiations breakthrough and the completion of text for a preliminary agreement. According to U.S. Transportation Secretary Norman Y. Mineta, the agreement "provides new opportunities for U.S. and European airlines, healthier competition for a growing travel market and greater connections between cities and towns on both sides of the Atlantic." Although a draft agreement is not yet publicly available, according to the State Department, the agreement, if implemented, would, inter alia, allow every EU and U.S. airline to fly between every city in the European Union and every city in the United States and would permit U.S. and EU airlines to determine the number of flights, their routes, and fares according to market demand. In addition, the agreement would allow carriers to freely enter into cooperative arrangements with other airlines, such as code-sharing and leasing. According to some commentators who appear to have seen a version of the text, as comprehensive as the draft agreement appears to be, there cannot be meaningful reform in the international aviation market until Congress repeals the so-called "citizenship test," which limits foreign ownership and control of U.S. air carriers. Based on the information currently available regarding the draft agreement, it does not appear that the proposed agreement addresses foreign ownership or control, thus it appears to be left to each party to determine its own rules and regulations independently. <3. Air Carrier Citizenship> <3.1. Current Law and Legal Precedent> As previously mentioned, U.S. law requires that all air carriers be "citizens of the United States" before they are granted certificates to operate between domestic locations. The Federal Aviation Act specifically defines the phrase "Citizen of the United States" as the following: (A) an individual who is a citizen of the United States; (B) a partnership each of whose partners is an individual who is a citizen of the United States; or (C) a corporation or association organized under the laws of the United States or a State, the District of Columbia, or a territory or possession of the United States, of which the president and at least two-thirds of the board of directors and other managing officers are citizens of the United States, which is under the actual control of citizens of the United States and in which at least 75 percent of the voting interest is owned or controlled by persons that are citizens of the United States. This statutory language has existed in various forms since the Civil Aeronautics Act of 1938. In 2003, Congress amended the statute so as to codify the Department of Transportation's (DOT's) long-standing precedent with respect to requiring actual control of an air carrier for citizenship purposes. Developed primarily through its administrative decisions, the DOT and its predecessor, the Civil Aeronautics Board (CAB), have long interpreted the air carrier citizenship definition to include a requirement of "actual control" by U.S. citizens, even though the specific statutory language has only recently been added. One of the oldest and most frequently cited citizenship determinations occurred in 1940 when the CAB was asked to review Urbana, Medellin and Central Airways' application for a certificate of public convenience and necessity. This review was conducted pursuant to the Civil Aeronautics Act of 1938, which contained a citizenship requirement that was nearly identical in legislative language to the current statute. After reviewing the corporate structure of the airlines, who the various stock holders were, and the citizenship of the corporate officers, the CAB turned its attention to the phrase "two thirds or more of the Board of Directors and other managing officers" contained in the statutory requirement for citizenship. In its interpretation of this phrase, the CAB concluded that [t]he apparent general intent of the statute is to insure that air carriers receiving economic support from the United States and seeking certificates of public convenience and necessity, under section 401 of the Act shall be citizens of the United States in fact, in purpose, and in management. The shadow of substantial foreign influence may not exist. The CAB further stated that "... it may be permissible to look behind the form to the substance of the management to determine whether in fact, as well as in law, it is under the control of citizens of the United States. ..." This interpretation expanded the scope of the CAB's inquiry beyond an entity's apparent compliance with the language of the statute, and the agency announced its intention to conduct a close examination of the internal structure and operation of an airline seeking certification of U.S. citizenship to determine where actual control is vested. The CAB's holding and reading of the citizenship definition established a framework for future Board decisions. With respect to the concept of control by a foreign citizen, in 1971, the CAB was asked to determine whether Interamerican Airfreight qualified as a citizen of the United States pursuant to the Federal Aviation Act. Although Interamerican met the formal requirements of the statute, at issue in the proceeding was whether Wille Peter Daetwyler, a Swiss citizen, exercised sufficient control over the operations of the airline such that it would not qualify for U.S. citizenship. The CAB expanded on the statutory interpretation in Uraba, Medellin and Central Airways and, despite a close examination of the transaction, remained concerned that future corporations would attempt to mask foreign control by arranging corporate structures simply to meet the statutory requirements. In response, the CAB stated that in cases where an applicant has arranged its affairs so as to meet the bare minimum requirements set forth in the Act, it is the Board's view that the transaction must be closely scrutinized and that the applicant bears the burden of establishing that the substance of the transaction is such as to be in accordance with the policy, as well as the literal terms of the specific statutory requirements. In this case, the CAB determined that Mr. Daetwyler was in a position to exert a significant amount of control over the operations of Interamerican. The CAB found significant the fact that the company was created wholly at Mr. Daetwyler's insistence and that Mr. Daetwyler retained "25 percent stock ownership and represents one-third of the board of directors," the maximum amount of control allowed under the statute. In addition, the CAB concluded that foreign control existed because Interamerican was to continue to do business under the Daetwyler system of companies and there was evidence of close personal relationships between Mr. Daetwyler and the Interamerican stock holders. In 1989, the DOT was asked to review the merger between Northwest Airlines and Wings Holdings, Inc. Although both companies were U.S. controlled and operated, a citizenship issue existed because the merger's largest equity holder, with approximately $400 million or 56.74 percent, was KLM, Inc., a Dutch company and foreign air carrier. In addition, KLM's interest provided it with substantial power with respect to numerous stock-related decisions. In discussing the citizenship test, the DOT cited the Daetwyler decision favorably, stating that the control test "has traditionally been a complex matter in past cases." The DOT declined to enumerate specific factors to determine the existence of control, saying instead that the analysis with respect to control "has always necessarily been on a case-by-case basis, as there are a myriad potential avenues to control." The DOT pointed to three specific factors that led it to conclude that this merger resulted in a company that was not a U.S. citizen. First was the equity interest in the new company held by KLM. Although a majority of KLM's interest was held in nonvoting stock, the DOT concluded that it "represent[ed] a genuine ownership interest" and, therefore, significantly increased KLM's incentive to participate in Northwest's business decisions. Second, the corporate structure of the new company, according to DOT, would have allowed KLM to exert influence even without voting rights. Finally, the DOT pointed to the fact that KLM was an actual competitor with Northwest in various markets, and had stated an intention to become involved in the decisions of the new corporation. Taken together, these factors resulted in a finding that, as presented at the time, Wings Holdings, Inc., was not a U.S. citizen as defined by the Federal Aviation Act. Upon review of this decision, the DOT commented on an additional foreign control factor. With respect to equity/debt relationships, the DOT held that "absent a default, unless the loan agreement provides special rights to the debt holder that imply control, we do not anticipate treating debt as a foreign control issue." In sum, these precedents establish DOT's methodology of looking behind the corporate structure or transaction for the purpose of determining whether "actual control" is held by U.S. citizens. With respect to factors that can be utilized in determining actual control, the DOT has specifically considered equity ownership, business and personal relationships, control over the voting rights of stock, veto power, equity/debt agreements, competitive status, and other features of corporate transactions. Most recently, the issue of foreign ownership and control was considered in a case involving DHL Airways, also known as ASTAR Air Cargo. At issue in this case was whether the level of control exerted by DHL Worldwide Express, a foreign company owned in part by Deutsche Post, Germany's national postal service, was sufficient to consider ASTAR not a U.S. citizen. The specific mechanism through which it was alleged that DHL Worldwide exercised control was an agreement between ASTAR and DHL Worldwide Express known as an Aircraft, Crews, Maintenance, and Insurance Agreement (ACMI). Broadly defined, the ACMI agreement was a "wet lease," in which ASTAR agreed to provide DHL Worldwide Express with aircraft, crews, maintenance, and insurance for the purpose of allowing DHL Worldwide to legally transport air cargo within the United States. According to the challengers of ASTAR's citizenship status, the ACMI agreement provided for more than 90% of ASTAR's revenues, contained payment provisions that were integral to both ASTAR's financing and working capital, and shifted all of ASTAR's risks to DHL Worldwide. In addition, the ACMI agreement allegedly gave Deutsche Post/DHL Worldwide the power to veto changes in corporate control, limit third-party business, and audit ASTAR's financial records. The ASTAR case was decided by an Administrative Law Judge (ALJ) who concluded that "[f]rom the record taken as a whole ... ASTAR is a citizen of the United States." Specifically, with respect to the fact that the ACMI agreement produced approximately 90% of ASTAR's revenues, the ALJ provided a two-step analysis for determining if, in fact, such control exists. According to the ALJ, it must first be established that the predominant customer is in a position to control the carrier by threatening to withdraw their business and then that the carrier would believe the threat to be creditable. In ASTAR, the ALJ concluded that because the threats were only available in very limited circumstances and most were controlled by ASTAR, the second prong of the test, credibility of the threats, could not be satisfied; therefore, control by DHL Worldwide on the grounds that they are a predominate customer can not be established. Regarding whether ASTAR is a "captive supplier" because of the ACMI's restrictions on pursuing third-party business, the ALJ held that while the success of ASTAR's expansion of third-party business is not relevant to its citizenship, ASTAR's ability to pursue such business independent of its agreement with DHL Worldwide is crucial. The ALJ concluded that the agreement provided ASTAR with significant incentives to expand it business. For example, the ALJ cited the guaranteed payment of $15 million from DHL Worldwide to ASTAR, which arguably put ASTAR in a better position than if it were to do business elsewhere. Finally, with regard to DHL Worldwide's alleged veto power over administrative and operational functions, as well as the ability to perform audits with respect to reimbursable costs, the ALJ concluded that while there were administrative provisions in the ACMI, ASTAR retained control over all the carrier's essential decisions, as well as the day-to-day operations. <4. The Department of Transportation's Proposed "Actual Control" Rule> On November 7, 2005, the DOT published a Notice of Proposed Rulemaking (NPRM) seeking comments on a proposal to clarify the policy with respect to when "actual control" rests with a citizen of the United States. The DOT has proposed that the "actual control" requirement be interpreted in two ways. The first interpretation involves cases where the foreign investor's home country provides U.S. citizens reciprocal investment access and U.S. air carriers full and fair market access, as evidenced by having entered into an "Open Skies" Agreement with the United States, or where it is necessary for compliance with U.S. international obligations. In these situations, air carriers seeking to be considered U.S. citizens will have to demonstrate that U.S. citizens exercise "actual control" only with respect to (1) organizational documentation, including such things as incorporation charters, corporate by-laws, stockholder agreements and other documents of a similar nature; (2) Civil Reserve Air Fleet (CRAF) commitments; (3) transportation security requirements as implemented by the Transportation Security Administration; and (4) safety requirements as implemented by the Federal Aviation Administration. The second scenario involves situations where the foreign investor's home county refuses to extend reciprocal investment and/or market access rights to U.S. citizens and carriers and there are no other relevant international obligations. In these cases, the traditional case-by-case actual control analysis as determined by DOT precedent would control the citizenship inquiry. In asserting a justification for its new interpretation of the "actual control" requirements, the DOT relies primarily on nonlegal or policy grounds. For example, the DOT asserts that the present interpretation of the actual control requirement "has failed to keep pace with changes in the global economy and evolving financial and operational realities in the airline industry itself, to the determent of U.S. carriers." As a result of these changing global economic demands, "U.S. air carriers seeking to enter the market should similarly be able to obtain the financial capital necessary to launch their businesses. We tentatively do not believe that 'actual control' should be interpreted in a way that needlessly restricts the commercial opportunities of U.S. air carriers and their ability to compete." Legally, it appears that the DOT recognizes that Congress has established objective statutory requirements that an air carrier must satisfy to be considered a U.S. citizen; however, they assert that nothing in this NPRM would alter or in any way circumvent those statutory requirements. Given DOT's assertion that this new interpretation of the actual control requirement is a legitimate exercise of its legal authority, it would appear that should a challenge be brought against this proposal becoming a final rule, a reviewing court would likely address the issue pursuant to the standards delineated by the Supreme Court in Chevron U.S.A. Inc. v. Natural Resources Defense Council ( Chevron ). In Chevron , the Supreme Court established a two-part test for judicial review of agency statutory interpretations. First, a reviewing court must determine "whether Congress has directly spoken to the precise question at issue." If a court finds that there has been an express congressional statement, the inquiry is concluded, as the court "must give effect to the unambiguously expressed intent of Congress." In the event that Congress has not unequivocally addressed the issue, a reviewing court must respect an agency's interpretation, so long as it is permissible. The Court further stated that [i]f Congress has explicitly left a gap for the agency to fill, there is an express delegation of authority to that agency to elucidate a specific provision of the statute by regulation....Sometimes the legislative delegation to an agency on a particular question is implicit rather than explicit. In such a case, a court may not substitute its own construction of a statutory provision for a reasonable interpretation made by the administrator of an agency. The Court went on to note that "[j]udges are not experts in the [technical] field, and are not part of either political branch of the Government," while agencies, as part of the executive branch, appropriately make "policy choices resolving the competing interests which Congress itself either inadvertently did not resolve, or intentionally left to be resolved by the agency charged with the administration of the statute in light of everyday realities." Thus, the rationale for this deference is predicated on the notion that it is not the role of the judiciary to "assess the wisdom" of policy choices and resolve the "struggle between competing views of the public interest," as well as an agency's greater expertise regarding the subject matter of the regulations. The DOT received numerous comments to its NPRM, representing almost every segment of the aviation industry. Many of the comments have focused specifically on the DOT's legal authority to reinterpret the "actual control" requirement. Supporters of the DOT's action generally assert that the phrase "actual control," though it appears in the statute, is vague and undefined. As a result, the language is arguably ambiguous and, therefore, subject to departmental interpretation. Thus, pursuant to Chevron , the DOT has wide latitude and is entitled to substantial deference when rendering an interpretation, provided that it does so reasonably and in a manner that is consistent with the plain meaning of the statute. Conversely, opponents of the NPRM assert that when Congress specifically added the phrase "actual control" to the statute, they were in effect codifying the DOT's long-standing precedent and not granting any additional authority over the interpretation of the phrase than previously existed. In addition, opponents of the NPRM assert that the DOT's interpretation is contrary to the express language of the statute. Specifically, they argue that unlike the four narrow areas of control defined by the DOT, actual control of an air carrier rests with the entity that makes the fundamental economic decisions that determine the nature of the airlines' operations. These decisions include, but are not limited to, the types of airplane flown, markets to be served, flight schedules, fares, and aircraft maintenance and other services. Thus, according to opponents of the NPRM, relinquishing control over these elements of an air carrier renders any other statutory requirements "pointless." Finally, opponents of the proposed NPRM cite the military's continued reliance on the Civil Reserve Air Fleet Program (CRAF). Under this program, domestic air carriers supply aircraft on a voluntary basis to increase the military's airlift capacity. CRAF allows the U.S. military, in times of need, to demand access to a selected percentage of the civil aircraft fleet to deliver troops and equipment to the battlefield. Concern with respect to CRAF is not new; prior to the NPRM, several commentators had noted that changes to the U.S. civil aviation ownership and control requirements could substantially hinder or even destroy CRAF, as aircraft that move from domestic to foreign ownership would not be under any legal obligation to remain available to the program. The NPRM specifically states that for an air carrier to be considered a U.S. citizen, decisions with respect to CRAF are to remain under the control of U.S. citizens; however, at least one commentator has questioned how the DOT will ensure that U.S. citizens are not pressured by their foreign partners to either modify or eliminate their participation in this voluntary program. In addition, both Continental Airlines and Delta Airlines noted that new foreign owners might, as a result of their control over other commercial aspects of an airline, divest the use, upkeep, and maintenance of "long-haul" aircraft that are useful to the CRAF. Divestitures of this type would, argued the commentators, render those airlines of no effective use to CRAF and, therefore, could potentially result in a diminished air fleet from which DOD could call upon. <4.1. Recent Developments> In response to the numerous comments on the NPRM and to the spate of legislative responses from Members of Congress discussed below, on May 5, 2006, the DOT issued a "Supplemental Notice of Proposed Rulemaking" (SNPR) that attempts to clarify the Department's position on several of the major issues raised by the initial NPRM. In light of the fact that several critical comments revolved around the influence that foreign investors may have, the DOT clarified its proposed interpretation by stating that it "would be requiring all delegations to foreign interests ultimately to be revocable by the board of directors or the voting shareholders." According to the DOT, requiring that any delegations of authority to foreign investors be revokable ensures that "actual control" is retained by U.S. citizens, as the Federal Aviation Act requires that both the board of directors and the voting shareholders be controlled by super-majorities of U.S. citizens ( of the board and/or 75% of the shareholders must be U.S. citizens). The DOT also responded at length to the legal arguments presented by the commentators, especially with respect to the agency's legal authority to adopt such an interpretation of the underlying statute. The DOT, in making its arguments, appears to rely on well-established principles of administrative law, especially with respect to its ability to effectively interpret and administer the statute. DOT argues that they have often interpreted the citizenship statute and, in fact, developed the "actual control" test prior to its inclusion in the statute by Congress. In addition, DOT asserts that Congress, in adopting the "actual control" language into the statute, recognized the need for continued agency interpretation and "did not direct us to follow the past interpretations." DOT's position appears to be that the amendment to the Federal Aviation Act, which inserted the phrase "actual control," did not in any way amend or alter the agency's discretionary authority to modify its interpretation as appropriate. In support of its position, the DOT extensively cites the amendment's legislative sponsor and floor manager, who, at the time the Vision 100 legislation was being considered, stated that the amendment "leaves the interpretation of effective control up to DOT, but the department can draw upon its decades of precedents to reach these conclusions." Further, DOT cites to the floor manager's assertion that the amendment "was simply a reflection of existing law" and that the inclusion of the actual control language "will not in any way affect [the Department's] determination of what constitutes a citizen of the United States." In addition to addressing the numerous other legal and policy arguments made by opposition comments, the SNPR specifically addressed the concerns raised with respect to CRAF commitments. First, DOT clarifies and expands its proposal to require that not only CRAF commitments be actually controlled by U.S. citizens, but also that overall airline participation in "national defense airlift operations" be in the actual control of only U.S. citizens. According to the DOT, this requirement means that "the carrier could not allow foreign investors to make decisions that would make participation in CRAF or other national defense airlift operations impossible as a practical matter." Moreover, if there was suspicion that national defense airlift operations were precluded or impaired by decisions of the foreign investor(s), the SPNR indicates that DOT would investigate to determine if the requirements for the actual control test was being satisfied by the carrier. The DOT responds to the concerns about the proposal's potential negative impact on CRAF commitments by noting that participation in the CRAF is a voluntary commercial arraignment in which the airlines commit aircraft in return for access to U.S. government contracts. According to the DOT, because nothing in the NPRM changes or alters that dynamic "DOD can adjust the economic incentives of the program in order to better ensure sufficient military airlift capacity" and, thus, maintaining adequate participation levels. Finally, in direct response to some of the commentators concerns about fleet divestment, DOT argues that because domestic carriers make their fleet decisions based on what is best to ensure a successful commercial operation, foreign owners would "be motivated by the same commercial incentives" and, therefore, in DOT's opinion, there should be no significant changes to CRAF commitment levels. The DOT and DOD have entered into a Memorandum of Understanding (MOU) that appears to be intended to provide a procedural framework for DOD's participation in DOT's consideration of air carrier citizenship issues as they relate to CRAF commitments. This MOU will become effective on the date that the final actual control rule goes into effect. The MOU applies in situations that involve (1) citizenship issues in which the proposed actual control rules may apply and (2) airlines that have existing CRAF commitments or have aircraft that could be operated as part of the "Long-Range International Segment of the CRAF program." According to the MOU, DOT agrees to notify DOD of all air carrier fitness requests and, upon request from DOD, will share with DOD all documents relating to fitness reviews that implicate CRAF commitments. DOT further agrees to consult with DOD with respect to an ultimate disposition in those reviews where DOD has expressed an interest. In cases where DOT and DOD disagree, and DOD so requests, meetings can be arranged to discuss and solicit input prior to a final decision. Moreover, in situations where DOD can demonstrate "good cause," which, while not specifically defined, appears to include "a significant reduction or proposed significant reduction in a carrier's capability to meet its CRAF commitments," DOT agrees to "commence a review to determine the continuing fitness of an identified air carrier within the scope of this agreement...." In cases where DOD requests a continuing fitness review, it agrees to provide all information and documents, necessary to support its position, in a manner that can be provided to the air carrier so that it may properly respond. Finally, DOD agrees to "expeditiously provide any input to DOT so as not to delay DOT's processing of the case...." <4.2. Legislative Responses> Several Members of Congress have taken an interest in this rulemaking and have even filed written comments with DOT expressing concerns with respect to CRAF commitments, airline employees, and consumer protection issues. In addition, companion House and Senate bills have been introduced in the 109 th Congress to address this issue. H.R. 4542 and S. 2135 both contain provisions that would prevent the DOT from issuing a decision on the NPRM for a period of one year after the date of enactment. The House and Senate bills both require that at least 180 days prior to issuing a final decision, the DOT shall submit to Congress a report assessing the impact of the proposed rule on various aspects of domestic and international aviation law. In addition, both the House and Senate attempted to address this issue by adopting language in their respective versions of the 2006 Emergency Supplemental Appropriations Bill. While the House of Representatives' version did not contain any legislative language with respect to the DOT rulemaking, the committee report made express mention of the issue. According to the committee's report, the committee considers airlines to be part of the United States' critical infrastructure and, as such, believes that it is "critical that any final rule regarding foreign control of U.S. airlines not only comply with current laws regarding foreign ownership, but also comply with statutes recently passed by the Congress which require that all U.S. airlines be under the 'actual control' of U.S. citizens." The committee, therefore, inserted language directing the Secretary of Transportation "to refrain from issuing a final rule for 120 days." While this suggestion is a clear expression of the views of the House Appropriations Committee, it would not have been legally binding on the DOT and, absent some other legislative action, would likely not have prevented the promulgation of a final rule with respect to foreign ownership. The Senate version, on the other hand, did contain explicit legislative language that would have effectively prevented the DOT from promulgating a final rule. Ultimately, however, neither version was included in the final bill. Subsequently, both the House of Representatives and the Senate have included the following identical language into the Transportation, Treasury, and Housing and Urban Development, the Judiciary, District of Columbia Appropriations Bill ( H.R. 5576 ): None of the funds made available in this Act may be used by the Department of Transportation to finalize or implement the policy proposed in the notice of proposed rulemaking published in the Federal Register on November 7, 2005 (70 Fed. Reg. 67389), or the supplemental notice of proposed rulemaking published in the Federal Register on May 5, 2006 (71 Fed. Reg. 26425), in Docket No. OST-2003-15759. This language, if included in the final appropriations measure, would appear to prohibit the DOT from promulgating the final rule using any funds made available for fiscal year (FY) 2007. In addition, if DOT were to issue a final rule prior to the enactment of this language, it would appear to prevent the use of any FY2007 funds from being used to implement the rule's provisions. While it is difficult to conceive of any statutory interpretation arguments that DOT could use to avoid the plain meaning of this language, it is important to note that the language does not contain any independent enforcement mechanism. As such, to ensure compliance, Congress would likely have to rely on its oversight functions or other general laws governing the use of appropriated funds, such as the Anti-Deficiency Act. <5. Cabotage> Another major issue facing international civil aviation law is cabotage. As previously mentioned, cabotage is the right of a foreign airline to carry passengers and/or cargo between airports of the same country (e.g., from New York to Los Angeles). Currently, the Federal Aviation Act contains a general prohibition against cabotage activity by foreign air carriers. The prohibition states that "aircraft may take on for compensation, at a place in the United States, passengers or cargo destined for another place in the United States only if (1) specifically authorized under section 40109(g) of this title; or (2) under regulations the Secretary prescribes authorizing air carriers to provide otherwise authorized air transportation with foreign registered aircraft under lease or charter to them without crew." If neither of those situations exists, foreign aircraft are not permitted to perform cabotage within the United States. In addition, the Secretary of Transportation has general discretionary authority to waive other economic-related statutory provisions listed in section 40109(c) "when the Secretary decides that the exemption is consistent with the public interest." The cabotage prohibition, however, is not among the regulations listed in section 40109(c). Congress last amended the cabotage laws as part of the Vision 100 Century of Aviation Authorization Act. The enacted changes permit "eligible cargo" to be removed from aircraft, including foreign aircraft, in Alaska and "not be deemed to have broken its international journey in, be taken on in, or be destined for Alaska." The statute defines "eligible cargo" as cargo "transported between Alaska and any other place in the United States on a foreign air carrier (having been transported from, or thereafter being transported to, a place outside the United States on a different air carrier or foreign air carrier) that is carried (A) under the code of a United States air carrier providing air transportation to Alaska; (B) on an air carrier way bill of an air carrier providing air transportation to Alaska; (C) under a term arrangement or block space agreement with an air carrier; or (D) under the code of a United States air carrier for purposes of transportation within the United States." These provisions provide for a very limited statutory exception to the general prohibition against cabotage activities. While it does not appear that the current draft "Open Skies" Agreement with the European Union requires the granting of more cabotage rights to foreign-owned or controlled carriers, it appears to remain a major issue in international civil aviation. It appears, however, that statutory changes would be required before the executive branch can enter into any sort of agreement purporting to liberalize the cabotage rules. Although foreign aircraft are allowed to navigate within U.S. airspace, unless specifically authorized either by statute or DOT regulations, they are not permitted to perform any form of cabotage within the United States. While it is unclear what, if any, economic effect a more liberal cabotage policy would have on the domestic airline industry, only Congress has the legal authority to amend the Federal Aviation Act and permit foreign carriers to have cabotage rights.

Much of the law regarding civil aviation has been developed through a combination of domestic laws and international agreements between the United States and other nations. In 1992, the United States Department of Transportation (DOT) introduced the "Open Skies" initiative and began negotiating and entering into modern civil aviation agreements with foreign countries, as well as individual members of the European Union (EU). As a result of a 2002 European Court of Justice ruling that several portions of these "Open Skies" Agreements violated EU law, the United States and the EU have been negotiating a new Open Skies Agreement. A tentative agreement appears to exist between the parties that if enacted would, among other things, allow every EU and U.S. airline to fly between every city in the European Union and every city in the United States and would permit U.S. and EU airlines to determine the number of flights, their routes, and fares according to market demand. Despite this development, there appears to remain several areas of international civil aviation law that the tentative agreement does not address. Among them are the issues of foreign ownership and control, participation in the Civil Reserve Air Fleet Program, and cabotage. Presently, U.S. law requires that to operate as an air carrier in the United States, an entity must be a citizen of the United States. To be considered a citizen for civil aviation purposes, an entity must be owned either by an individual U.S. citizen, a partnership of persons who are each U.S. citizens, or a corporation (1) whose president and at least two-thirds of the board of directors and other managing officers are U.S. citizens, (2) that is under the actual control of U.S. citizens, and (3) has at least 75 percent of its stock owned or controlled by U.S. citizens. Recently, however, the DOT released a Notice of Proposed Rulemaking (NPRM) that would change its interpretation of what constitutes "actual control." If adopted, this new interpretation could have major implications for U.S. and international civil aviation. Several issues relating to this NPRM are currently being debated, including the consistency with the operative statutes and the viability of the Civil Reserve Air Fleet Program (CRAF), should more extensive foreign ownership be permitted. In addition, Members of Congress have taken a significant interest in this DOT rulemaking, both through direct participation in the rulemaking process and by introducing legislation ( H.R. 4542 and S. 2135 ) that would prohibit the adoption of a final rule for one year and require the DOT to submit reports and analysis on the impact of the new interpretation on the domestic industry and national security concerns. Furthermore, both the House and Senate have adopted amendments to the proposed Transportation, Treasury, Housing and Urban Development, the Judiciary, the District of Columbia and Independent Agencies Appropriations Act of 2007 ( H.R. 5576 ) that would effectively forestall the DOT from adopting a final rule. U.S. law also contains a general restriction on cabotage, defined as the transportation of passengers or cargo by foreign air carriers from one point in the United States to another. This report provides background on U.S. civil aviation agreements, updates the current status of U.S. "Open Skies" negotiations with the EU, and addresses the legal debate concerning both the foreign ownership and control rules and the cabotage laws. It will be updated as events warrant.

<1. Introduction> The Supplemental Nutrition Assistance Program (SNAP) is the nation's largest domestic food assistance program, serving about 42.2 million recipients in an average month at a federal cost of over $68 billion in FY2017. It is jointly administered by the federal government and the states and provides means-tested benefits to recipients who are deemed eligible. These benefits may be used only for eligible foods at any of the approximately 260,000 authorized retailers, which range from independent corner stores to national chain supermarkets. In a program that operates with so many different stakeholders, detecting, preventing, and addressing errors and fraud is a complex undertaking. Among the complexities are the monitoring of retailer acceptance and recipient use of benefits, the accuracy of information provided by applicant households, and states' performance administering the program. Many governmental entities federal and state agencies, including both human services and law enforcement play a role in efforts to detect, prevent, and punish fraudulent SNAP activities and to reduce inadvertent errors. SNAP has typically been reauthorized in a farm bill approximately every five years; this occurred most recently in 2014 ( P.L. 113-79 ). Policymakers have long been interested in reducing fraud and improving accuracy in the program, and provisions related to these goals are frequently included in farm bills. In preparation for the next farm bill, up for reauthorization in September 2018, policymakers have again begun to discuss error and fraud in the program. The Trump Administration has also announced related policy changes. At the same time, some policymakers defend the program against criticism of its integrity. To help policymakers navigate this complex set of policy issues, this report seeks to define terms related to errors and fraud; identify problems and describe what is known of their extent; summarize current policy and practice; and share recommendations, proposals, and pilots that have come up in recent years. The report answers several questions around four main types of inaccuracy and misconduct: (1) trafficking SNAP benefits (by retailers and by recipients); (2) retailer application fraud; (3) errors and fraud in SNAP household applications; and (4) errors and fraud committed by state agencies (including a discussion of states' recent Quality Control (QC) misconduct). The report then discusses challenges to combating errors and fraud across the four areas and potential strategies for addressing those challenges. Certain key ideas that are fundamental to discussion of SNAP errors and fraud are explored further in the report: Errors are not the same as fraud. Fraud is intentional activity that breaks federal and/or state laws, but there are also ways that program stakeholders particularly recipients and states may inadvertently err, which could affect benefit amounts. Certain acts, such as trafficking, are always considered fraud, but other acts, such as duplicate enrollment, may be the result of either error or fraud depending on the circumstances of the case. SNAP fraud is relatively rare, according to available data and reports. While this report discusses illegal or inaccurate activities in SNAP, they represent a relatively small fraction of SNAP activity overall. There is no single data point that reflects all the forms of fraud in SNAP. The most frequently cited measure of fraud is a national estimate of retailer trafficking, which is a significant, but not the only, type of fraud in the program. While retailer trafficking and retailer application fraud are pursued primarily by a single federal entity, recipient violations are pursued by 53 different state agencies. This leads to disparate approaches and disparate reporting. The national payment error rate (NPER) is the most-often cited measure of nationwide SNAP payment accuracy, but it has limitations. For example, it only reflects errors above an error tolerance threshold. Policies to reduce fraud and increase accuracy can be in tension with other policy objectives, and may have unintended consequences. Policies that make retailer authorization more onerous, for instance, have the potential to decrease participants' access to SNAP-authorized stores. Making eligibility determinations more complex for recipients can impede recipients' access to the program and could strain states' eligibility determination operations. Implementing better data collection and accountability systems could require more staff and could incur more costs than it reduces. This report provides a foundation for discussing error and fraud in SNAP and for evaluating policy proposals. It does not make independent CRS findings, but rather synthesizes the many available resources on error and fraud in SNAP. It relies, in particular, on reports and data from the United States Department of Agriculture's Food and Nutrition Service (USDA-FNS) as well as the published audits of the USDA's Office of the Inspector General (USDA-OIG) and the Government Accountability Office (GAO). For a list of abbreviations used in this report, see Appendix A . <2. Types of Errors and Fraud> This section defines each of the types of intentional fraud and unintentional errors committed by recipients, retailers, and state agencies, including retailer trafficking (fraud), recipient trafficking (fraud), retailer application fraud, recipient application fraud, recipient errors, agency errors, state agency employee fraud, and state agency fraud. <2.1. Trafficking: Retailer and Recipient> USDA-FNS is responsible for administering the retailer side of SNAP and for pursuing retailer fraud; while states are responsible for administering the recipient side of SNAP (with federal oversight) and for pursuing recipient fraud. "Trafficking" usually means the direct exchange of SNAP benefits (formerly known as food stamps) for cash, which is illegal, and both retailers and recipients can engage in this form of fraud. Although SNAP benefits have a dollar value, they are not the same as cash because they can only be spent on eligible food for household consumption at authorized stores equipped with Electronic Benefit Transfer (EBT) point of sale (POS) machines . Trafficking can also include the exchange of SNAP benefits for controlled substances, firearms, ammunition, or explosives. Additionally, trafficking includes indirect exchanges, such as obtaining cash refunds for products purchased with SNAP benefits or reselling products purchased with SNAP benefits. Trafficking SNAP benefits includes recipient trafficking and retailer trafficking. Retailer trafficking of SNAP benefits usually occurs when a SNAP recipient sells their benefits for cash, often at a loss, to an owner or employee of a store participating in SNAP. Recipient trafficking usually coincides with retailer trafficking, but it may take other forms (e.g., if a recipient were to sell their benefits, or food purchased with benefits, to another individual). Trafficking is one of the most serious forms of SNAP fraud, and although it does not increase costs to the federal government (as overpayments do), it does divert federal funds from their intended purpose. <2.2. Retailer Application Fraud> Retailers misrepresenting themselves or circumventing disqualification in the application process can be a source of fraud. To obtain SNAP authorization, applicant retailers must meet certain requirements, including stocking and business integrity standards. When a retailer initially applies to receive authorization to participate in SNAP or applies for reauthorization to continue SNAP participation, the store owner must submit personal and business information and documentation to USDA-FNS in order to verify eligibility for SNAP participation. If a retailer deliberately submits false or misleading information of a substantive nature in order to receive SNAP authorization despite their ineligibility, then they have committed falsification retailer application fraud. Another kind of retailer application fraud involves a store owner attempting to circumvent disqualification from SNAP by engaging in a purported sale or transfer of ownership of their store to a spouse or relative; after which the new purported owner applies to participate in SNAP, claiming that the former disqualified owners are no longer associated with the store. This practice is often referred to as "straw ownership," and USDA-FNS does not consider such sales or transfers of ownership to be bona fide. Such actions by the disqualified retailer are considered circumvention retailer application fraud. Retailer application fraud does not increase costs to the federal government (as overpayments can), but it does enable retailers who may be more likely to engage in trafficking to enter the program. <2.3. Errors and Fraud in Benefit Issuance to Households> In addition to retailer trafficking and retailer application fraud, errors and fraud can arise in determining eligibility and benefit amounts for recipients. <2.3.1. Recipient Errors> When a household initially applies to receive or recertifies to continue receiving SNAP benefits, the applicant household must submit personal information and documentation to their state agency for eligibility determination, and for benefit calculation if found to be eligible. During this application process, an applicant may misunderstand SNAP rules, make a miscalculation, otherwise unintentionally provide incorrect information, or accidentally omit certain information. If this error results in an overpayment to the household and there is no proof that this error was intentional , then this error is designated as an inadvertent household error (IHE). <2.3.2. Recipient Application Fraud> If an applicant is found to have intentionally submitted false or misleading information during the initial application or recertification process that leads to an incorrect eligibility or allotment determination (resulting in an overpayment), then that applicant has committed an intentional program violation (IPV) recipient application fraud. <2.3.3. Agency Errors> SNAP overpayments or underpayments that are not the result of recipient actions (i.e., not the result of recipient errors or recipient fraud) are generally the result of agency errors (AEs). Agency errors include overpayments or underpayments caused by the action of, or failure to take action by, any representative of a state agency. <2.4. Fraud Conducted by State Agencies or Their Agents> "State agency employee fraud" and "state agency fraud" are not terms defined in statute, regulation, or agency guidance. As used in this report, "state agency employee fraud" and "state agency fraud" include forms of fraud often referred to as "insider threats" a threat to SNAP integrity that comes from within entities that administer SNAP (i.e., state agencies). <2.4.1. State Agency Employee Fraud> State agency employee fraud is any intentional effort by state employees to illegally generate and benefit from SNAP overpayments. State agency employee fraud usually involves eligibility workers who abuse their positions and access to the SNAP certification process in order to unlawfully generate SNAP accounts that materially benefit individuals not entitled to such benefits. <2.4.2. State Agency Fraud> State agency fraud is any intentional effort by state officials to mislead USDA-FNS or other federal authorities in order to illegally obtain federal funds or avoid federal monetary penalties. State agency fraud cases are very infrequent and generally center on a state's falsification of program-related data. Of interest to policymakers, the state agency fraud case examined in this report, first identified in 2017, deals with multiple states' falsification of Quality Control (QC) data in order to obtain monetary bonuses and avoid monetary penalties, with some actions dating back to 2008. (For more information, see " State Agency Fraud: SNAP Quality Control .") <3. Extent of Errors and Fraud> <3.1. Extent of Retailer Trafficking> USDA-FNS publishes an annual report that summarizes their annual administrative activities pertaining to retailers participating in SNAP, including detailed retailer data on participation and redemptions, retailer applications and authorizations, investigations and sanctions, and administrative review. According to this Retailer Management Report, in FY2016 there were 260,115 retailers participating in SNAP, and USDA-FNS permanently disqualified 1,842 stores for retailer trafficking (less than 1% of all stores). Roughly every three years, USDA-FNS publishes a study estimating the extent of retailer trafficking in SNAP over about three years of SNAP redemption data. The retailer trafficking studies referenced in this report were issued in 2017 (covering 2012-2014), 2013 (covering 2009-2011), and 2011 (covering 2006-2008). By examining a representative sample, these studies determined two national rates that reflect the prevalence of retailer trafficking. The national retailer trafficking rate represents the proportion of SNAP redemptions at stores that were estimated to have been trafficked. The national store violation rate represents the proportion of authorized stores that were estimated to have engaged in trafficking. The national retailer trafficking rate is the most-cited measure of fraud in SNAP, although it does not capture all types of fraud (i.e., it represents only retailer trafficking). According to the September 2017 USDA-FNS Retailer Trafficking Study, the national retailer trafficking rate for 2012-2014 was 1.50%, up from 1.34% in the 2009-2011 study. This means that, during this period, USDA-FNS estimates that 1.50% of all SNAP benefits redeemed were trafficked at participating stores. This constitutes about $1.1 billion in estimated benefits trafficked each year at stores during this period. Additionally, this study estimated that the national store violation rate for this period was 11.82%, up from 10.47% in the 2009-2011 study. This means that, during this period, USDA-FNS estimates that 11.82% of all SNAP-authorized retailers engaged in retailer trafficking at least once. The September 2017 USDA-FNS Retailer Trafficking Study found that the increase in retailer trafficking was due to increased program participation by smaller stores, which have a higher rate of retailer trafficking. While stores enter and leave the program from year to year, the overall growth in SNAP-authorized stores over the last 10 years (FY2007-FY2016) was about 93,000, and about 63% of this growth came from convenience stores in the program (see Table D-1 in Appendix D ). As of FY2016, convenience stores constitute about 46% of all stores in the program, up from 36% in FY2007. According to the September 2017 USDA-FNS Retailer Trafficking Study, covering 2012-2014, convenience stores account for about 5% of total SNAP redemptions, but about 57% of retailer trafficking (see Table D-3 in Appendix D ). Also according to this study, about 18% of all SNAP benefits used at authorized convenience stores are trafficked by these stores (i.e., the convenience store trafficking rate), and about 19% of all authorized convenience stores are engaged in trafficking (i.e., the convenience store violation rate). These rates are significantly higher than the national rates for all stores (see Table D-2 in Appendix D ). The increase in SNAP participation by smaller stores appears to correlate to an overall increase in retailer trafficking, according to USDA-FNS. Figure 1 displays some of these data from the three most recent trafficking studies. <3.2. Extent of Retailer Application Fraud> There is no standard measure of retailer application fraud. However, USDA-FNS does report annually on actions taken against business integrity violations, and a retailer engaged in application fraud (including falsification and circumvention) is generally considered to be in violation of business integrity standards. In FY2016, USDA-FNS sanctioned 126 stores for business integrity violations. This number includes sanctions not related to retailer application fraud and amounts to less than 1 store sanctioned for every 2,064 stores participating in the program. During the same period, USDA-FNS permanently disqualified about 15 times as many stores for retailer trafficking. <3.3. Extent of Errors and Fraud in Benefit Issuance to Households> <3.3.1. National Payment Error Rate> The SNAP Quality Control (QC) system measures improper payments in SNAP. This system was first established by the Food Stamp Act of 1977. Under the QC system, every state agency conducts a monthly review of a sample of its households, comparing the amounts of overpayments and underpayments to total issuance. From this review, state agencies calculate their state payment error rate (SPER). USDA-FNS conducts annual reviews of a sample of each state's reviews to validate state findings and determine national rates developing the national payment error rate (NPER). The NPER is the most-often cited measure of payment accuracy in SNAP. Unlike the national retailer trafficking rate, the NPER is not a measure of fraud. The NPER reflects improper payments, but not the cause of these overpayments and underpayments. The NPER estimates all overpayments and underpayments resulting from recipient errors, recipient application fraud, and agency error. Per current federal law, only overpayments and underpayments of $38 or more (inflation-adjusted annually) in the sample month are counted when calculating the payment error rate this is called the Quality Control threshold. Additionally, the NPER combines both the overpayment rate and the underpayment rate, so it does not reflect only excess expenditures. For example, in FY2017, the NPER was 6.30% which included a 5.19% overpayment rate and a 1.11% underpayment rate. In discussions regarding SNAP payment accuracy, the NPER is sometimes misunderstood to be a measure of the federal dollars lost to fraud and waste in the program. The NPER instead reflects the extent of inaccurate payments that exceed the Quality Control threshold in a given year. Regardless of the cause of an overpayment, SNAP agencies are required to work towards recovering excess benefits from households that were overpaid. Recovery of overpayments involves, first, the establishment (or determination) of a claim against a household, and, second, the actual collection of that claim. Applying the FY2017 NPER to total benefit issuance, in FY2017 an estimated $3.3 billion in benefits were overpaid, an estimated $710 million in benefits were underpaid. In FY2016, the most recent year available, states established over $684 million in claims to recover overpayments. <3.3.1.1. Context for Comparing FY2017 NPER to Prior Years> Recent years' NPERs are listed in Table 1 , showing rates from FY2011-FY2014 and then skipping to FY2017. SNAP national payment error rates were not released by USDA-FNS in FY2015 or FY2016, due to data quality concerns. In 2014, USDA found data quality issues in 42 of 53 state agencies' Quality Control data reporting. These data quality issues are not, in and of themselves, proof of wrongdoing. In some cases, states had not followed protocol, while in other cases states had been found to have deliberately covered up errors (fraudulent actions). (A more detailed discussion of Quality Control as well as these audits and investigations can be found in " State Agency Fraud: SNAP Quality Control "). USDA-FNS suspended error reporting for FY2015 and FY2016, and also used this time to examine and improve state quality control procedures. In June 2018, USDA-FNS published FY2017 state and national error rates (NPER). USDA-FNS's accompanying materials describe that this NPER was determined "under new controls to prevent any recurrence of statistical bias in the QC system," which includes "a new management evaluation process to examine state quality control procedures on a regular basis." The agency also described that the FY2017 rate stems from "a modernized review process, which includes updated guidance, revisions to [the relevant FNS handbook], extensive training for State and Federal staff, and modifications to State procedures to ensure consistency with Federal guidelines." As displayed ( Table 1 ) and discussed earlier, the FY2017 NPER of 6.30% is a substantial increase from the FY2014 of 3.66%. USDA-FNS states the FY2017 rate "is higher than the previous rate ... but it is more accurate." However, changes to data collection and related oversight since FY2014 make it difficult to reliably compare FY2017 rates to earlier years, as it is possible that earlier years include systemic under-reporting. <3.3.2. Differentiating Between Recipient Fraud, Recipient Errors, and Agency Errors> The SNAP overpayment rate (component of the national payment error rate) estimates the extent of all SNAP overpayments, including overpayments resulting from recipient errors, recipient fraud, and agency errors (estimated to total about $3.3 billion overpaid in FY2017). The NPER does not , however, differentiate between the relative extents of each of these types of errors and fraud (i.e., the NPER cannot tell us what percentage of this $3.3 billion is due to, for example, agency errors). There is currently no single standard measurement that individually quantifies the extent of recipient errors, recipient fraud, or agency errors. State agencies are, however, responsible for administering the recipient side of SNAP, and every year states report data on these activities which USDA-FNS publishes in the SNAP State Activity Report (SAR). This report includes detailed data on state-level program operations including benefit issuance, participation, administrative (i.e., non-benefits) costs, recipient disqualification, and claims. When a recipient error, an act of recipient fraud, or an agency error results in an overpayment to a household (and that overpayment is detected by the state agency), the household is generally required by the state agency to repay the overpaid amount (i.e., a claim is established). Data on the establishment of claims resulting from recipient errors, recipient fraud, and agency errors is provided in the state report (subdivided by type). The extent of claims establishment, therefore, can serve as a proxy for the extent of these types of errors and fraud. In addition, when a recipient commits fraud (and that act of fraud is detected and proven by the state agency), that recipient is generally punished with disqualification from SNAP. The extent of recipient disqualifications, therefore, can serve as a proxy for the extent of recipient fraud. Before examining these claims and disqualification data, however, it is important to understand the limitations of this approach. Claims are not established in all instances of overpayments resulting from recipient errors, recipient fraud, or agency errors. For example, claims may not be established when overpayment amounts fall below state agencies' claims thresholds or when overpayments are not detected by state agencies. Likewise, not all acts of recipient fraud are detected, proven, and punished with disqualification. Also, these claims establishment and disqualifications data are not based on representative samples and, therefore, these data may not fully reflect the prevalence of recipient errors, recipient fraud, or agency errors in the SNAP caseload. Despite these shortcomings, these claims and disqualification data are the only available measures which reflect, albeit imperfectly, the extent of recipient errors, recipient fraud, or agency errors in SNAP. The following calculations of the extent of these types of errors and fraud are based on SNAP State Activity Report FY2016 data including the following: total issuance of $66,539,351,219; average monthly participation of 21,777,938 households; an average monthly participation of 44,219,363 persons; total claims established of 884,301; and total claims dollars established of $684,197,891. <3.3.2.1. Recipient Fraud> Unlike retailer trafficking, which is handled by one federal entity (USDA-FNS), recipient fraud is detected and punished by 53 different SNAP agencies (50 states, DC, Guam and the U.S. Virgin Islands) and, as noted in the September 2012 USDA-OIG report, "FNS cannot estimate a recipient fraud rate because it has not established how States should compile, track, and report fraud in a uniform manner." This lack of standardization is a reason why a national recipient fraud rate does not exist. Both recipient trafficking and recipient application fraud are included in these figures. According to the FY2016 SNAP State Activity Report for every 10,000 households participating in SNAP, about 14 contained a recipient who was investigated and determined to have committed fraud that resulted in an overpayment that the state agency required the household to repay (30,274 claims established); for every $10,000 in benefits issued to households participating in SNAP, about $11 were determined by state agencies to have been overpaid due to recipient fraud and were required to be repaid by the overpaid household ($73,403,758 in fraud claims established); about 3% of the total number of claims established were established due to recipient fraud; about 11% of the total claims dollars established were established due to recipient fraud; for every 10,000 recipients participating in SNAP, about 13 were disqualified from the program for violating SNAP rules (e.g., committing fraud; 55,930 disqualified); about 1.5% of disqualification entries made into the USDA-FNS electronic Disqualified Recipient System (eDRS) in FY2016 were permanent disqualifications; and for every $10,000 in benefits issued to households participating in SNAP, about $21 were determined by state agencies to have been lost (overpaid due to recipient application fraud or trafficked) to recipient fraud associated with disqualified recipients ($136,475,242 in program loss associated with disqualified recipients). <3.3.2.2. Recipient Errors> According to the FY2016 SNAP State Activity Report for every 10,000 households participating in SNAP, about 181 were overpaid due to a recipient error and the state agency required the household to repay the overpaid amount (394,883 recipient error claims established); for every $10,000 in benefits issued to households participating in SNAP, about $63 were determined by state agencies to have been overpaid due to recipient errors and were required to be repaid by the overpaid household ($421,934,288 in recipient error claims established); about 45% of the total number of claims established were established due to recipient errors; about 62% of the total claims dollars established were established due to recipient errors; about 65% of FY2016 claims were established by four states; about 55% of FY2016 claims amounts were established by these four states; and these four states accounted for about 30% of SNAP participants. <3.3.2.3. Agency Errors> According to the FY2016 SNAP State Activity Report for every 10,000 households participating in SNAP, about 47 were overpaid due to agency errors, and the state agency required the household to repay the overpaid amount (459,144 agency error claims established); for every $10,000 in benefits issued to households participating in SNAP, about $28 were determined by state agencies to have been overpaid due to agency errors and were required to be repaid by the overpaid household ($188,859,846 in agency error claims established); about 52% of the total number of claims established were established due to agency errors; about 28% of the total claims dollars established were established due to agency errors; about 80% of the total number of agency error claims established were established by California; about 64% of the total agency error claims dollars established were established by California; and California accounted for about 10% of SNAP participants. Although the total volume of claims established has increased over time, the majority of claims established have been the result of recipient errors, with agency errors being second most common, and recipient fraud claims being least common as illustrated by Figure 2 . <4. Detection and Correction of Errors and Fraud> State and federal efforts to detect and correct errors, as well as efforts to detect and deter fraud, are detailed in this section. <4.1. Retailer Fraud> USDA-FNS is responsible for administering the retailer side of SNAP and for pursuing retailer fraud. USDA-OIG, in collaboration with the Federal Bureau of Investigations (FBI), U.S. Secret Service, and other federal, state, and local law enforcement entities, is responsible for pursuing criminal charges against retailers found to be engaging in retailer trafficking. <4.1.1. Detection of Retailer Trafficking> Retailer trafficking can be detected through a variety of means, including the following: Analysis of EBT Transaction Data Whenever a SNAP EBT card is swiped, the transaction data is captured and analyzed by USDA-FNS for suspicious patterns. USDA-FNS use these data to develop a case against a retailer when the transactions indicate retailer trafficking is occurring at their store. In FY2016, USDA-FNS reviewed the transactions of nearly 9% of participating stores. Over 80% of retailer trafficking detected by USDA-FNS are found primarily through EBT transaction analysis. Undercover Investigations USDA-FNS performs undercover investigation of stores suspected of violating SNAP rules (e.g., trafficking), and in FY2016, USDA-FNS investigated over 1% of participating stores. State Law Enforcement Bureau (SLEB) Agreements Some state agencies enter into state law enforcement bureau (SLEB) agreements with law enforcement entities in their jurisdictions in order to further their efforts to detect trafficking. These agreements are typically focused on recipient trafficking, but they can have implications for retailer trafficking. Tips and Referrals USDA-FNS receives tips, complaints, and referrals, which can lead to cases of retailer trafficking. These referrals come from SNAP retailers, SNAP recipients, members of the public, state agencies, SLEBs, USDA-OIG, or other law enforcement entities. USDA-OIG operates a website and hotline for members of the public to report instances of fraud. In FY2016, USDA-OIG referred 4,320 complaints to USDA-FNS. <4.1.2. Correction of Retailer Trafficking> If a store is found to have committed trafficking, then all of the owners of the store may be subject to penalties. Major penalties associated with retailer trafficking include the following: Disqualification If USDA-FNS finds that a SNAP-authorized retailer violated any SNAP rules, then that retailer may be subject to a period of disqualification from program participation. Trafficking SNAP benefits is considered one of the most severe violations of SNAP rules, and a retailer found by USDA-FNS to have trafficked SNAP benefits (regardless of the amount) is generally subject to a permanent disqualification (PDQ) from program participation. Reciprocal WIC Disqualification Stores that are disqualified for violations of the rules of SNAP are disqualified for an equal (but not necessarily concurrent) period of time from participation in the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). Likewise, stores disqualified from WIC are disqualified from SNAP for an equal (but not necessarily concurrent) period of time. PDQs, such as PDQs for trafficking, are also reciprocal between the programs. Restitution of Benefits Trafficked (Claims) When a retailer accepts or redeems SNAP benefits in violation of the Food and Nutrition Act of 2008 (FNA), such as engaging in retailer trafficking of SNAP benefits, that retailer may be compelled to repay the amount that they illegally redeemed. This is called a claim and is considered a federal debt. USDA-FNS has the authority to collect such claims by offsetting against a store's SNAP redemptions as well as a store's bond or letter of credit (LOC), where applicable. Public Disclosure of Disqualified Retailers USDA-FNS has the authority to publicly disclose the store and owner name for disqualified retailers. A December 2016 USDA-FNS Final Rule asserted USDA-FNS's intent to disclose this information in order to deter retailer trafficking. Transfer of Ownership Civil Money Penalty (TOCMP) If a retailer under a period of disqualification sells or transfers ownership of their store, then USDA-FNS is to assess that disqualified retailer a "transfer of ownership civil money penalty" (TOCMP). This means that retailers permanently disqualified from SNAP for committing retailer trafficking are to be assessed this penalty whenever they sell or transfer ownership of their stores (regardless of how much time has passed since the disqualification occurred). In FY2016, USDA-FNS assessed 257 such penalties with a mean value of $29,284. Exclusion from the General Service Administration's System for Award Management (GSA-SAM) This GSA system tracks individuals and entities that do business with the federal government. An individual or entity excluded from this system is prohibited from doing business with the federal government for the duration of the exclusion. All of the owners of a store permanently disqualified from SNAP participation for trafficking benefits are permanently listed as exclusions in GSA-SAM. As of September 2017, 10,307 permanently disqualified retailers have been listed by USDA-FNS in GSA-SAM as exclusions due to SNAP and WIC violations. This type of exclusion can have collateral consequences for the excluded party. Criminal Charges and Penalties Retailers engaged in trafficking may be criminally charged and penalized with fines up to $250,000 and imprisonment up to 20 years. In addition, other adverse monetary penalties (e.g., asset forfeitures, recoveries, collections, and restitutions) may be assessed against those convicted. USDA-OIG, in collaboration with federal, state, and local law enforcement entities, pursues charges against retailers who traffic SNAP benefits. USDA-OIG usually criminally pursues only retailers who traffic in high dollar amounts of benefits and/or retailers who also engaged in other criminal activity. In some cases, state law enforcement bureaus may pursue criminal charges against individuals engaged in retailer trafficking under state or local statutes. In FY2016, USDA-OIG opened 208 SNAP fraud investigations, and obtained 600 indictments, 510 convictions, and $95.3 million in monetary penalties. <4.1.3. Detection of Retailer Application Fraud> USDA-FNS reviews all information and materials submitted by applicant retailers in order to identify suspicious items and documentation that may indicate retailer application fraud. Where such suspicions arise, USDA-FNS may require additional supporting documentation from the applicant retailer and may contact other federal, state, or local government entities (e.g., entities that administer business licensure, taxation, or trade) to verify questionable items. <4.1.4. Correction of Retailer Application Fraud> Denial of Application If USDA-FNS finds during the application process that a retailer fails to meet requirements such as stocking and business integrity standards, then the retailer's application is to be denied. If USDA-FNS determines that an applicant retailer has falsified the application, then that retailer's application is to be denied the period of denial ranges from three years to permanent depending on the severity and nature of the falsification. A retailer denied authorization to participate in SNAP is not generally subject to any penalties other than denial. Permanent or Term Disqualification Retailers who knowingly engage in falsification of substantive matters (e.g., falsification of ownership or eligibility information) may be subject to a permanent disqualification from program participation. Retailers who engage in falsification of a lesser nature (e.g., falsification of store information such as store name or address) are generally subject to a term disqualification of three years. Retailers that are permanently disqualified for falsification may be subject to all of the penalties associated with permanent disqualification (as discussed previously in the context of retailer trafficking penalties), including reciprocal WIC disqualification, claims, public disclosure, TOCMP, GSA-SAM exclusion, and criminal charges and penalties where appropriate. <4.2. Errors in Benefit Issuance to Households> SNAP certification is the process of evaluating an application, determining if an applicant is eligible to receive SNAP benefits, and the appropriate size of the benefit allotment if the applicant is found to be eligible. This is one of the primary responsibilities of state agencies (with federal oversight). Errors (i.e., recipient errors and agency errors) that occur during this process can result in underissuance or overissuance of SNAP benefits. <4.2.1. Detection of Recipient Errors Data Matching> The primary sources for information needed to make certification determinations are generally the applicants themselves, but the eligibility worker may also utilize collateral contact with other entities when necessary. In addition, an eligibility worker may perform additional checks using federal, state, local, or private data systems in order to verify information provided by applicants. A visual overview of data matching in the certification process is presented in Figure 3 . In FY2016, about 62% of overpayment dollars identified through the claims establishment process (i.e., after overpayments have already occurred) were due to inadvertent household errors made by recipients when applying for benefits. With a caseload of about 22 million households, recipient errors (sometimes stemming from simple misunderstanding of federal SNAP regulations) can add up quickly and create a serious payment accuracy problem for states. Although the upfront cost and effort required of a state agency to implement a data match as part of the SNAP certification process can be considerable, data matches using federal, state, local, or private systems can allow agencies to quickly identify recipient errors that could affect applicants' eligibility or benefit amount. Over the years, policymakers have been interested in data matching systems to reduce overpayments. <4.2.1.1. Mandatory Data Matches> The following six data matches have been statutorily mandated as part of the SNAP certification process: U.S Department of Health and Human Services, Administration for Children and Families, National Directory of New Hires (HHS-ACF-NDNH) New Hire File This system is used to verify household employment information. The 2014 Farm Bill mandated state use of the New Hire File and this requirement was implemented in a January 2016 USDA-FNS Interim Final Rule. Social Security Administration, Prisoner Verification System (SSA-PVS) This system is used to verify if household members are incarcerated. The Balanced Budget Act of 1997 mandated that all SNAP agencies match against the SSA's Prisoner Verification System. Social Security Administration, Death Master File (SSA-DMF) This system is used to verify if household members are deceased. In 1998, P.L. 105-379 mandated that all SNAP agencies match against the SSA-DMF. USDA-FNS Electronic Disqualified Recipient System (USDA-FNS-eDRS) This system is used to verify if household members are disqualified from SNAP. U.S. Department of Homeland Security U.S. Citizenship and Immigration Services Systematic Alien Verification for Entitlements (DHS-USCIS-SAVE) This system is used to verify household members immigration status. The 2014 Farm Bill mandated that SNAP agencies utilize an immigration status verification system as a part of the certification process; a December 2016 USDA-FNS notice of proposed rulemaking (NPRM) regarding the requirement to utilize this data match was published, but the rule has not yet been finalized. Income and Eligibility Verification System (IEVS) SNAP agencies are required to verify the income and eligibility of all applicants during the SNAP certification process. They generally fulfill this requirement through the use of an income and eligibility verification system (IEVS). An IEVS is not a single data match, but rather a state system that may use multiple federal, state, and local data sources to confirm the accuracy of eligibility and income information provided by the applicant and to locate pertinent information that may have been omitted by the applicant. The specific data matches used in an IEVS, however, will vary from state to state. The 2014 Farm Bill made states' use of IEVS mandatory in accordance with standards set by the Secretary of Agriculture. This policy is pending implementation, as USDA-FNS published an NPRM in December 2016, but a final rule has not yet been published. <4.2.1.2. Optional Data Matches> States also use optional data matches and incorporate these into their processes. Several key eligibility data examples, such as income and program disqualifications, are discussed below: Income matches A household's income and related SNAP deductions are basic determinants of eligibility and an applicant's benefit allotment. As a result, in addition to the mandatory matches discussed above, most states utilize several optional federal and state data matches to verify earned and unearned income. For examples of optional income matches, see Appendix C . SNAP disqualification matches In addition to the mandatory USDA-FNS-eDRS match, states maintain their own internal databases of recipients disqualified within the state, and a match from such state databases indicates that a member of an applicant household is ineligible. Other d ata m atch es In addition, state agencies use data sources to assess a number of other aspects of a household's application or recertification. For instance, state criminal justice or correctional agency system matches and state department of health vital information system or burial assistance program matches can ensure that a household does not include incarcerated or deceased members. Likewise, state department of children's services or foster care matches can ensure that a household does not include children that have been removed. Such state matches to verify that household size is correct are generally considered verified upon receipt. Matches against state and federal crime databases can ensure that individuals subject to crime-related restrictions are correctly excluded in eligibility determination. Data matches between SNAP and other public benefit programs can also help a state agency ensure that states are accurately implementing their comparable disqualification policies. These data matches are discussed in more detail in the October 2016 GAO report. <4.2.2. Detection of Agency Errors> State agencies are responsible for preventing, detecting, and correcting agency errors. Agency errors are generally the product of human error, so training and supervision of eligibility workers is the primary means of mitigating them (e.g., something as simple as an eligibility worker transposing two digits during data entry). Agency errors can be detected by ongoing, independent process improvements (e.g., quality control or quality assurance), supervisory case review, eligibility workers, and recipients. Agency errors may also result from state system technical glitches, so states may detect these errors through system audits and mitigate them through system improvements. <4.2.3. Correction of Recipient and Agency Errors Claims> If a household receives an overpayment, and that overpayment is detected by the state agency, then the agency generally establishes a claim against the household, requiring the adult members of the household to repay the amount that was overpaid. Claims are considered federal debt and must be repaid by the adult members of overpaid households regardless of the cause of the overpayment (i.e., recipient error, recipient fraud, or agency error) except in the case of a major systems failure. Agencies must also correct underpayments that they identify. State agencies may elect not to establish claims on low dollar overpayments when such overpayments fall below the agency's claims threshold, explained below. Claims are not always established in the year that the overpayment occurs and claims are not always collected in the year that they are established. State agencies are entitled to retain 35% of the amount they collect on recipient fraud claims and certain recipient error claims, 20% of the amount they collect on all other recipient error claims, and none of the amount they collect on agency error claims. <4.3. Recipient Fraud> <4.3.1. Detection of Recipient Fraud> State agencies are responsible for administering the recipient side of SNAP (with federal oversight) and for pursuing recipient fraud. State agencies must, furthermore, establish and operate a SNAP recipient fraud investigation unit. These units detect and punish recipient trafficking, as well as other forms of recipient fraud. USDA-FNS supports state agencies in this capacity by providing technical assistance and setting policy. USDA-OIG, in collaboration with other federal and state law enforcement entities, sometimes criminally pursues recipients who traffic SNAP benefits when such recipients traffic in high dollar amounts of benefits and/or such recipients also engage in other criminal activity. Recipient fraud, like retailer fraud, can be detected through a variety of means, including the following: Analysis of EBT Transaction Data Once USDA-FNS has completed the process of administratively penalizing a retailer for retailer trafficking, and the retailer has exhausted their appeal rights, then USDA-FNS provides the retailer trafficking case to the appropriate state agency including EBT card numbers which can be used to identify SNAP recipients who may be trafficking. Social Media State agencies use automated tools and manual monitoring to detect postings on social media and online commerce websites by individuals attempting to traffic SNAP benefits. Undercover Investigations As is done with retailer trafficking cases, state agencies perform undercover investigations to detect recipient trafficking and recipient application fraud. Multiple Card Replacement Recipients who frequently request replacement EBT cards are flagged for review as potentially involved in trafficking benefits, because they would request replacements after selling their cards. This recipient trafficking detection mechanism was established by an April 2014 USDA-FNS Final Rule. In December 2017 USDA-FNS granted a waiver for one state to contact recipients who request a replacement card more than two times in a 12-month period, as opposed to the current regulations' standard of four requests in a 12-month period. State Law Enforcement Bureau (SLEB) Agreements Some state agencies enter into state law enforcement bureau (SLEB) agreements with law enforcement entities in their jurisdictions in order to further their efforts to detect recipient trafficking and recipient application fraud. There are advantages to such arrangements for state agencies; for example, under SLEB agreements, the agency could be notified whenever an individual is arrested in possession of multiple EBT cards, allowing the agency to flag the recipients associated with those EBT cards for potential recipient trafficking. Tips and Referrals As is done in detecting retailer trafficking, agencies use tips and referrals to detect recipient trafficking and recipient application fraud. Data Matching and Other Verification As is done in detecting recipient errors when applying for SNAP benefits, the data matching and certification process may also provide information useful in detecting recipient application fraud. <4.3.2. Correction of Recipient Fraud> Whenever a SNAP recipient is found to have committed fraud, that individual is subject to individual penalties, such as disqualification. The other members of the SNAP household will not automatically be subject to such penalties, but the adult members of the household will generally be obligated to repay the amount established by the state agency as a claim for overpayment or trafficking. Major penalties associated with recipient fraud include the following: Disqualification Trafficking and recipient application fraud are types of intentional program violations, and a SNAP recipient found to have committed fraud is generally subject to a period of program disqualification varying from one year to permanent. Figure 4 below compares the number of FY2016 SNAP recipient disqualifications to the monthly average number of participating recipients in the state in FY2016. Performing investigations and proving that recipients have committed intentional program violations (in order to disqualify them from SNAP) can require a considerable amount of state agency resources. This chart illustrates the extent to which agencies have prioritized this aspect of SNAP administration relative to their SNAP caseload. Restitution of Benefits Defrauded (Claims) A SNAP household must generally repay benefits amounts that are overpaid due to recipient application fraud or are trafficked. Comparable Disqualification If a SNAP recipient is disqualified from any federal, state, or local means-tested public assistance program, then the state agency may impose the same period of disqualification on the individual under SNAP. This comparable disqualification is mandatory for the Food Distribution Program on Indian Reservations (FDPIR). Criminal Charges and Penalties Generally, if criminal charges are pursued against recipients who traffic benefits or commit recipient application fraud, it is the states that will pursue and prosecute. State fraud laws vary in their penalties for recipient fraud. Additionally, as stated in a GAO report from August 2014, each state exercises its discretion differently with respect to filing criminal charges in cases of recipient fraud. As with retailer trafficking, USDA-OIG sometimes pursues criminal charges in collaboration with federal and state law enforcement entities against recipients engaged in SNAP fraud. <4.4. State Agency Employee Fraud Detection and Correction> U.S. Department of Agriculture, Office of the Inspector General (USDA-OIG), in conjunction with local, state, and other federal law enforcement entities, investigates cases of state agency employee fraud and penalizes state agency employees engaged in it. Criminal penalties for state agency employee fraud vary from state to state, and individuals who commit state agency employee fraud may be prosecuted for other crimes (e.g., identity theft) that occurred during the commission of the state agency employee fraud. Penalties for this type of criminal fraud vary but may include imprisonment, probation, and/or monetary restitutions. <5. State Agency Fraud: SNAP Quality Control> SNAP has long had policies and procedures in place for measuring improper payments largely, the program's Quality Control (QC) system. QC is currently the basis for levying financial penalties from low-performing states and providing financial performance incentives for the higher-performing and most improved states. In June 2018, following concerns that there had been misreporting of errors, USDA-FNS released a FY2017 NPER under new quality control procedures. This section reviews QC and these developments. <5.1. Quality Control: Incentives and Penalties Overview> This section discusses false claims by state agencies with regard to Quality Control (QC) data and state payment error rates (SPERs). As discussed earlier in this report, since 1977, the SNAP Quality Control system has measured improper payments in SNAP, comparing the amounts of overpayments and underpayments that exceed the error tolerance threshold ($38 adjusted annually for inflation) to total benefits issuance. The Quality Control process starts with state agency analyses that determine state payment error rates, which are then reviewed by USDA-FNS to develop the SNAP national payment error rate (NPER). After conducting this annual Quality Control review, USDA-FNS awards bonuses to high-performing state agencies and assigns penalties to low-performing state agencies. USDA-FNS annually awards high-performance bonuses to up to 10 states with the lowest or most improved state payment error rates. High-performance bonuses must be used by states to improve their administration of SNAP. The total annual amount awarded for SPER high-performance bonuses is $24 million. The bonuses awarded in FY2014 are summarized in Table 2 . Awards for FY2017 have not yet been announced, as of the date of this report. State sanctions known as "liabilities" are used to punish states that have comparatively high payment error rates. If there is a 95% probability that a state makes payment errors 5% more frequently than the national average, then that state has "exceeded the liability level". If a state exceeds the liability level for two years in a row, then it is assessed a penalty known as a "liability amount". Liability amounts are assessed for only that portion of the state payment error rate that is above 6% (e.g., a state that exceeds the liability level with a state payment error rate of 5.99% would be assessed a $0 liability amount). Once assessed, states have the option to pay the liability amount in full or enter into a settlement agreement with USDA-FNS. From FY2005 to FY2014, 42 of 53 state agencies have exceeded the liability level at least once, but only 9 state agencies have ever been compelled to actually repay an at-risk penalty amount to USDA-FNS. This is because most states improve their state payment error rates within one or two years and avoid being required to make a payment to USDA-FNS. Over these 10 years, these 9 states repaid about $1.5 million to USDA-FNS (see Table 3 ). <5.2. State Agency Misreporting and Falsification of Quality Control Data> State agencies perform Quality Control reviews to determine state payment error rates and then submit these rates to USDA-FNS for its annual review; and agencies may be awarded or sanctioned according to these rates. This combination of positive and negative reinforcement is intended to incentivize high payment accuracy among states. USDA-FNS oversees state agencies through the management evaluation process and the Quality Control system, in addition to other federal oversight mechanisms. USDA-OIG performs regular audits of and investigations into state agency compliance with a range of SNAP rules. Through this oversight, USDA-OIG and USDA-FNS identified concerns in state-reported Quality Control data. In order to examine this issue, USDA-OIG began a series of audits in March 2013, which culminated in a September 2015 USDA-OIG report. USDA-OIG looked at eight states and determined that all eight state agencies had deliberately weakened the integrity of the Quality Control process with the aid of hired consultants. USDA-FNS responded in the September 2015 USDA-OIG report that USDA-OIG drew its conclusions on the basis of unconfirmed information, misunderstandings of SNAP policy, and insufficient statistical analysis. As a result, USDA-FNS contends that the concerns identified over these eight states' QC efforts were largely the result of administrative issues rather than fraud. According to 2017 U.S. Department of Justice (DOJ) findings, at least three state agencies (Virginia, Wisconsin, and Alaska) engaged in state agency fraud related to Quality Control data falsification since at least 2008. These three state agencies, with the help of their third-party consultants, were found to have mitigated errors, fraudulently improving their state payment error rates. USDA-FNS and USDA-OIG testified on this subject in two hearings, one before the Senate Committee on Agriculture, Nutrition, and Forestry in August 2017 and one before the House Committee on Agriculture in July 2016. Entities, including state agencies, found to have defrauded federal programs are required to repay funds obtained through fraud, plus interest, under the False Claims Act (31 U.S.C. 3729). As of the date of this report, these three state agencies have admitted to the DOJ that they engaged in falsifying QC data and violating the False Claims Act in their administration of SNAP. As part of their settlements with DOJ, the Virginia state agency agreed to pay $7,150,436, the Wisconsin state agency agreed to pay $6,991,905, and the Alaska state agency agreed to pay $2,489,999. These $16.6 million in payments represent the share of the high-performance bonuses awarded to these states for low state payment error rates while they were engaged in fraudulent practices, plus interest. For FY2015, USDA-FNS determined that data quality issues existed for 79% of state agencies; however, such issues are not in and of themselves proof of fraud. All three states that settled with DOJ had hired the same Quality Control consultant firm. As of the date of this report, the USDA-OIG investigation into this state agency fraud is still ongoing and Mississippi is known to be under investigation for Quality Control fraud. In her comments at the August 2017 Senate Agriculture Committee Hearing, Ann M. Coffey, Assistant Inspector General of Investigations at USDA-OIG, stated that a "significant number" of states were still under investigation and that the scale of this state fraud was "unique." <6. Combating Errors and Fraud: Issues and Strategies> Over time, USDA-FNS, SNAP state agencies, USDA-OIG, GAO, and other stakeholders have identified issues that may complicate or impede the detection and correction of errors and fraud in SNAP. These kinds of issues can stem from shortcomings or gaps in existing regulation and law, as well as complexities in the fundamental design of the program itself. In addition, stakeholders have proposed strategies to address these kinds of issues and further curb errors and fraud in SNAP. These include, for example, proposed rulemaking actions, proposed statutory changes, and state pilots. Changes that strengthen payment accuracy and punishments against fraud can be in tension with other policy objectives, such as preserving recipient access to the program, and may have unintended consequences such as incurring costs greater than their savings. Balancing program objectives such as these is always a consideration for policymakers in this area. <6.1. Retailer Trafficking> <6.1.1. Certain Store Owners Remain Active in SNAP Despite Permanent Disqualification for Trafficking> According to SNAP rules, if a store is permanently disqualified from participating in SNAP and later that store's owner applies to participate in SNAP at a new store, then USDA-FNS will deny the new store's application. Due to a longstanding USDA-FNS policy, however, store owners who own multiple stores that participate in SNAP have been able to remain in the program with some of their stores despite a permanent disqualification at another of their stores. This USDA-FNS policy, identified and examined in the July 2013 USDA-OIG report, was intended to prevent the elimination of whole chains of stores from the program as a result of violations at one store. However, the policy has been applied beyond chain stores, and USDA-OIG identified it as a weakness in efforts to combat trafficking. In the July 2013 report, USDA-OIG identified 586 store owners who remained in SNAP due to this policy despite their association with a permanently disqualified store; 66 of these owners were found to have obtained SNAP authorization at new stores. In the July 2013 report, USDA-OIG proposed that USDA-FNS make a change to SNAP regulations and USDA-FNS policy to allow for the permanent disqualification or denial of all current or future stores, respectively, associated with an owner of a store that is permanently disqualified for retailer trafficking unless the retailer can meet certain criteria. USDA-FNS responded to USDA-OIG with an alternative policy that would impose collateral requirements for these owners. (Under current law, collateral bonds or letters of credit are required as a condition of participation in SNAP for stores that have been subjected to a term disqualification. These are held as collateral against the retailer committing future violations.) USDA-FNS suggested requiring a bond or letter of credit for all authorized stores associated with a permanently disqualified owner and for new stores when such stores have an owner associated with a store permanently disqualified for trafficking. USDA-OIG indicated that it considered this USDA-FNS alternative to its disqualification recommendations inadequate, noting "[w]e believe that continuing to allow known traffickers to participate in SNAP will undermine program integrity." As of the date of this report, none of these proposed policy changes have been implemented. <6.1.2. Strengthening Monetary Penalties against Trafficking Retailers> An estimated $1.1 billion in SNAP benefits were trafficked annually at stores, but in FY2016, USDA-FNS fined trafficking retailers only about $7.5 million. Monetary penalties can discourage retailers from engaging in trafficking and also help recoup federal funds lost to fraud. For these reasons, changes to SNAP rules have been proposed to augment the monetary penalties assessed against trafficking retailers. Increasing Transfer of Ownership Civil Money Penalties The 2008 Farm Bill modified the FNA to increase civil monetary penalties against retailers that break SNAP rules to a maximum of $100,000 per violation. If a retailer that has been permanently disqualified for trafficking SNAP benefits subsequently sells or transfers ownership of a store, then USDA-FNS assesses that retailer a "transfer of ownership civil money penalty" (TOCMP). This is currently the primary financial penalty assessed by USDA-FNS against retailers found to have engaged in trafficking. In August 2012, USDA-FNS published a notice of proposed rulemaking (NPRM) to implement the 2008 Farm Bill change. This notice stated that existing limits used by USDA-FNS were $11,000 per violation and $59,000 per investigation, and that this rulemaking action would increase these limits to up to $100,000 per violation per the intent of Congress expressed in the 2008 Farm Bill. As of the date of this report, this rulemaking action is inactive (see Table B-1 in Appendix B ). Because this change in the limits on TOCMPs has not been implemented, USDA-FNS continues to assess TOCMPs according to the limits in place before the passage of the 2008 Farm Bill (i.e., $11,000 per violation and $59,000 per investigation). In FY2016, the mean value of TOCMPs assessed by USDA-FNS was $29,284, about half of the limit per investigation. Implementation of these changes in the maximum limits on TOCMPs could represent a nearly tenfold increase in the penalty amounts for permanently disqualified retailers engaged in a high volume of SNAP business, potentially increasing the penalties' deterrent effect. Creating Additional Civil Money Penalties Currently, USDA-FNS only fines a limited share of trafficking retailers. Firms permanently disqualified for trafficking are subject to a TOCMP when USDA-FNS becomes aware that the permanently disqualified store owner has sold a store, but USDA-FNS can only become aware of such a sale when, and if, the new store owner applies for SNAP authorization. For every retailer assessed a TOCMP in FY2016, more than seven retailers were permanently disqualified for trafficking. Ultimately this means that the overwhelming majority of store owners found by USDA-FNS to have committed and materially benefited from retailer trafficking are subject to no monetary penalty at all. USDA-FNS proposed to create a new kind of monetary penalty, the trafficking civil penalty (TCP), in the August 2012 USDA-FNS NPRM. Under this proposal, a retailer permanently disqualified for trafficking would be subject to this new kind of fine, the size of which would be based on the retailer's volume of fraud, as it is for a TOCMP. Establishing this new fine would provide an immediate monetary penalty at the time of permanent disqualification to further deter retailers from engaging in trafficking activity and recoup misappropriated federal funds. As of the date of this report, this rulemaking action is inactive (see Table B-1 in Appendix B ) and USDA-FNS is not assessing this new kind of fine. <6.1.3. Changes in EBT Transaction Processing since 2014> Prior to September 2014, about half of all SNAP-authorized retailers (including many smaller independent retailers) used free EBT-only point of sale (POS) devices provided by their state's EBT host processors. Transaction data for purchases made at these free EBT-only POS devices went directly to EBT host processors and then to USDA-FNS. USDA-FNS uses this transaction data to detect retailer trafficking activity. The 2014 Farm Bill modified the FNA to require that all nonexempt retailers pay for their own EBT equipment and services. Since this change, most stores now work with third-party companies that provide POS equipment and services for a fee. The introduction of these unregulated intermediary entities has complicated USDA-FNS's efforts to detect retailer trafficking, and has also facilitated new forms of fraud. For example, in 2017, an account executive for a third party processor was sentenced to prison, to be followed by supervised release, and was ordered to pay restitution for his role in illegally providing 50 unauthorized stores with active SNAP EBT point-of-sale devices which were used to redeem about $6.5 million in benefits (at least eight of these stores were found to engaged in retailer trafficking). <6.1.4. Enhancing Retailer Stocking Standards> Since 1994, retailers applying to participate in the program have been required to meet stocking standards which mandate a minimum of 12 food items. In an October 2006 GAO report on trafficking, these minimal stocking requirements were identified as a factor potentially contributing to retailer trafficking, as the standards may make it easier for small, fraud-prone retailers that do not primarily sell food to enter the program. In addition, the September 2017 USDA-FNS Retailer Trafficking Study identified a correlation between an increase in small stores (e.g., convenience stores) in the program and an increase in retailer trafficking (for more information, see Appendix D ). As a result, increasing stocking standards has been proposed as a strategy to curb retailer trafficking. The 2014 Farm Bill modified the FNA to enhance retailer stocking standards for participating stores. The December 2016 USDA-FNS Final Rule implemented these changes and included several other provisions that would have significantly increased stocking standards for retailers; however, Section 765 of the Consolidated Appropriations Act of 2017 (2017 Omnibus, P.L. 115-31 ) prevented full implementation of this rule. On January 17, 2018, USDA-FNS began implementing the remaining provisions of the December 2016 USDA-FNS Final Rule. Current implementation requires a modest increase to the number of items stocked (from 12 to 36 food items) but not as much as would have been required by the final rule before the 2017 Omnibus (84 food items). <6.1.5. Suspending "Flagrant" Retailer Traffickers> Some retailers have been found to have delayed the disqualification process for their stores, enabling them to continue trafficking. Between the USDA-FNS official notification of trafficking charges and the permanent disqualification for trafficking, there are a number of administrative steps. Until final implementation of a permanent disqualification, the retailer may continue to participate in the program, accepting and redeeming SNAP benefits. According to USDA-FNS, some charged retailers exploit the delay created by these administrative steps in order to continue (or even accelerate) their trafficking of SNAP benefits, sometimes remaining in the program for months. The 2008 Farm Bill modified the FNA to require USDA-FNS to utilize the EBT system to immediately suspend the payment of redeemed SNAP benefits to stores determined to be engaged in this "flagrant" retailer trafficking. A February 2013 USDA-FNS NPRM included a provision to implement this 2008 Farm Bill requirement, but, as of the date of this report, this rulemaking action is inactive (see Table B-1 in Appendix B ). <6.1.6. Increasing Requirements for High-Risk Stores> When a store applies for authorization to participate in SNAP, USDA-FNS internally assigns that store a risk status (i.e., high, medium, or low) based on retailer trafficking data for the location and area. If a new store applies at a physical address associated with past retailer trafficking, that new store is more likely to be considered "high risk." In a July 2013 report, USDA-OIG noted that certain high-risk store locations evidence a pattern of retailer trafficking that continues under new ownership. USDA-OIG recommended requiring a bond or letter of credit as a precondition of SNAP authorization at high-risk store locations, which would require statutory changes. <6.2. Recipient Trafficking> <6.2.1. Requiring Recipient Photographs on EBT Cards> While some have argued that placing recipient photographs on EBT cards would reduce trafficking, specifically the sale of cards between recipients and unauthorized use of cards at authorized stores, there are operational and access challenges to this strategy. Since 1996, state agencies have had the option to require photographs of one or more SNAP household members on the household's EBT card(s). This state option is known as "photo EBT." Like SNAP benefits, EBT cards are issued to households, not to individuals. Also, households may appoint authorized representatives (outside of the household) to use their EBT cards to shop on the households' behalf. As a result, a photo EBT card might only bear the image of the head of a household despite the fact that all members of the household can use the card. Similarly, an authorized representative may use a card that does not have the representative's picture on it. Retailers therefore cannot legally deny a SNAP transaction just because the user does not match the photo on the card. Additionally, some advocates point out that photo EBT has shown some adverse effects on recipient access. A number of states have considered or implemented photo EBT since 1996. States' evaluations of photo EBT have generally concluded that the option has or would have little to no effect on recipient trafficking. Though evidence of reduced trafficking is lacking, two states, Maine and Massachusetts, currently implement photo EBT. Maine contended that it "[strengthens] the integrity of our public assistance programs." The implementation of photo EBT in a state requires both upfront and ongoing costs to the state and federal government. Upfront costs generally exceed ongoing costs, and ongoing costs generally increase over time. State estimates and actual expenditures on the cost of photo EBT vary widely. As an example, in 2000, Missouri enacted a state law mandating photo EBT, and the Office of the Missouri State Auditor evaluated the option in August 2001. This audit determined that in the first year of implementation, photo EBT effected no fraud reduction, cost $1,801,858 ($947,280 federal costs and $854,578 state costs), and should be discontinued. In 2001, Missouri discontinued its use of photo EBT. In reviewing 14 states that have considered photo EBT implementation since 2001, upfront costs range from about $1.6 million in New Hampshire (2016) to about $25.1 million in North Carolina (2011). Estimates of ongoing annual costs vary across an even wider range, from approximately $65,000 in Virginia (2017) to $8.4 million in Arizona (2016). <6.2.2. State Agency Reporting on Recipient Fraud> There is currently no single standard measurement of recipient fraud (neither recipient trafficking nor recipient application fraud). In the absence of a national recipient trafficking rate, it is difficult to observe trends and evaluate the effectiveness of enforcement strategies. Both GAO and USDA-OIG have commented on the significance of this shortcoming and recommended changes to allow for the creation of a national recipient trafficking rate akin to the national retailer trafficking rate. Based on USDA-FNS analysis, however, GAO found it is infeasible to create a uniform methodology for states to calculate a national recipient trafficking rate without statutory changes to require and enable USDA-FNS and state agencies to assign sufficient resources to this issue. USDA-FNS echoed these feasibility concerns in a May 2014 evaluation. Additional authority and resources to develop a recipient trafficking rate might allow USDA-FNS to do some or all of the following: conduct and publish a study of recipient trafficking of SNAP benefits using currently existing data, including a national recipient trafficking rate; determine and document what changes must be made to current regulations, forms, policies, and practices to standardize state agency reporting and calculation of recipient trafficking, including at minimum the definition of relevant terms (e.g., definition of "investigation"), the annual timeframes, and the data sources for compilation of recipient trafficking data; and implement the identified changes necessary to reliably and accurately document the national recipient trafficking rate. <6.2.3. Enhancing Federal Financial Incentives for State Agencies to Fight Fraud> USDA-FNS provides financial incentives to state agencies to reward high performance. These bonuses reward states with low error rates but do not reward states that effectively detect and penalize recipient trafficking. In April 2014, USDA-FNS published a Request for Information (RFI) soliciting comment on ways to modify performance bonuses for state agencies, including creating bonuses related to activities targeting recipient trafficking. The July 2016 GAO report also found that USDA-FNS does not sufficiently incentivize state agencies to pursue recipient trafficking cases. The report stated, "to help address the increased caseloads and the resources needed to conduct investigations, we recommended that USDA explore ways that federal financial incentives could be used to better support cost-effective anti-fraud strategies. At this time, FNS has decided not to pursue bonus awards for anti-fraud and program integrity activities." Establishing a standard to measure performance for these bonuses would likely require the establishment of a national recipient trafficking rate as discussed earlier in this section. Additionally, as stated earlier, state agencies establish and collect claims against recipients who traffic SNAP benefits. If a state agency collects on a claim resulting from fraud, such as recipient trafficking, the state agency is entitled to retain 35% of the amount collected. The August 2014 GAO report suggested that increasing this retention rate and restricting the use of retained funds to state agency anti-fraud activities could significantly enhance efforts to combat recipient trafficking, noting that the strategy "may result in a net savings for SNAP if increased collections in payment recoveries outweigh the increased amount states receive in retentions." Implementation of this strategy may require statutory change. <6.2.4. Federal Oversight of State Agencies Management Evaluations (MEs)> USDA-FNS oversees state agency administration of SNAP, and one of the primary tools used in this federal oversight is the management evaluation (ME). USDA-FNS conducts annual management evaluations on high priority areas and triennial reviews on lower priority areas. If a state agency is found to be out of compliance with SNAP rules, then a corrective action plan (CAP) will be developed and USDA-FNS will work with the state agency to improve compliance. A January 2012 USDA-OIG report noted that USDA-FNS did not utilize management evaluations to assess the effectiveness of state agencies' efforts to detect and penalize recipient trafficking. In response, USDA-FNS created a "recipient integrity" management evaluation in FY2012 which it currently uses to evaluate state agencies every three years. <6.2.5. Delayed State Agency Notification of Retailer Trafficking Cases> State agencies are responsible for investigating recipient trafficking, and USDA-FNS is responsible for investigating retailer trafficking. A large share of trafficking, however, results from collusion between recipients and retailers. If a state agency is made aware that a store in its jurisdiction is engaged in retailer trafficking, it can place the store under surveillance and build cases against recipients engaged in trafficking at that location. Usually, however, state agencies have no such opportunity. USDA-FNS provides retailer trafficking cases to state agencies only after completing the agency administrative and appeal process. By the time the state agency is made aware of a retailer trafficking case, the store has ceased accepting SNAP and has often closed. At that point, meaningful surveillance of the store cannot be performed and EBT transaction data cannot be corroborated with other forms of hard evidence. It is important to note, however, that providing state agencies with advance notification regarding ongoing USDA-FNS investigations of retailers may jeopardize these investigations. <6.2.6. Difference in Burden of Proof for Retailer Trafficking versus Recipient Trafficking> Retailer and recipient trafficking proceedings have different burdens of proof; therefore, governments will not necessarily prevail in both cases with the same evidence. Accepting SNAP benefits as a form of payment is not an entitlement for retailers. To disqualify a SNAP retailer for a violation of SNAP rules, USDA-FNS must only meet a lower-level burden of proof the "preponderance of the evidence" standard. Receiving SNAP benefits is an entitlement for eligible individuals. To disqualify a SNAP recipient for fraud, a state agency must meet a higher-level burden of proof the "clear and convincing evidence" standard. This means that evidence deemed sufficient to prove retailer trafficking may not be sufficient to prove recipient trafficking. Indeed, over 84% of the USDA-FNS retailer trafficking cases that resulted in a permanent disqualification in FY2016 relied primarily on an analysis of suspicious transaction patterns based on Anti-fraud Locator using EBT Retailer Transactions (ALERT) system data. These EBT transaction data, on their own, are not generally considered sufficient grounds for the disqualification of SNAP recipients. For this reason, state agencies often have difficulty disqualifying recipients whose EBT cards were used in transactions flagged as trafficking by ALERT transaction data analysis, absent other evidence of recipient trafficking. <6.2.7. Best Practices for Fighting Recipient Fraud the SNAP Fraud Framework> Grants to states for integrity activities, established by Section 4029 of the 2014 Farm Bill, were awarded in FY2014 and FY2015 but not in FY2016 or FY2017. USDA-FNS is currently developing a "SNAP Fraud Framework," which combines best practices for fraud prevention gathered by USDA-FNS over several years from federal, state, and private partners. USDA-FNS plans to launch the SNAP Fraud Framework in FY2018 and to offer states grant opportunities using this funding to implement the framework. <6.3. Retailer Application Fraud> USDA-FNS is responsible for reviewing the applications submitted by retailers and ensuring that retailers authorized to participate in SNAP meet all eligibility requirements. Included in these applications are store owners' personal information, including but not limited to owners' Social Security Numbers (SSNs), but USDA-FNS is statutorily limited in how it can use these SSNs. <6.3.1. Verification and Use of Retailer Submitted Social Security Numbers (SSNs)> During the application process, retailers provide USDA-FNS with the SSNs of all store owners. USDA-OIG compared these retailer-submitted SSNs to the Social Security Administration's Death Master File to identify store owners using SSNs that matched the SSNs of deceased individuals. In a January 2017 USDA-OIG report, 3,394 stores were found to have at least one owner using an SSA-DMF matched SSN, and 346 of these stores were found to have all owners using SSA-DMF matched SSNs. USDA-OIG recommended that USDA-FNS follow up with these 3,394 retailers and implement a new workflow process to check retailer-submitted SSNs on an ongoing basis. In the agency response to the report, USDA-FNS addressed these 3,394 identified retailers, but also identified the statutory barrier to this proposed change, stating: "FNS recognizes the value in conducting a DMF match on an on-going basis. As such, should FNS be granted future authority to use SSN for matching purposes, FNS will match to the SSA DMF using SSN on an on-going basis." As of the date of this report, USDA-FNS does not verify retailer-submitted SSNs or match against the SSA-DMF due to this statutory restriction. Implementation of this change would require modification to the Social Security Act. <6.3.2. Other Verification of Retailer Submitted Information> In the July 2013 report, USDA-OIG recommended that USDA-FNS use other methods to verify applicant retailer information such as memoranda of understanding (MOUs) with state licensing agencies. USDA-FNS proposed instead to test the use of data brokers to complement existing techniques used to verify retailer applicant information. In 2014, USDA-FNS conducted four pilots testing the use of data brokers and determined that it had low return on investment, in part due to USDA-FNS's inability to utilize applicant retailers' SSNs in data matches. <6.3.3. Mandating Background Checks on High-Risk Retailer Applications> Store owners who have been convicted of certain crimes will be denied authorization to participate in SNAP for lack of business integrity if they declare the past conviction when applying. However, USDA-FNS is not currently able to verify the information provided by the retailer if he/she chooses to falsify the application and conceal past criminal convictions. A September 2008 USDA-OIG report suggested that USDA-FNS utilize the Interstate Identification Index (III) of the National Crime Information Center (NCIC) to perform background checks on retailers applying to participate in SNAP. The July 2013 USDA-OIG report repeated this recommendation, finding three owners who failed to disclose past criminal convictions on their application for SNAP authorization out of a sample of 212 owners (all three were later permanently disqualified for retailer trafficking). In response, USDA-FNS agreed to initiate a proposed rulemaking action to require retailer applicants and currently authorized retailers deemed "high risk" to provide USDA-FNS with a self-initiated background check. However, USDA-FNS does not currently have the statutory authority to compel retailer applicants to submit background checks. As of the date of this report, this rulemaking action is "inactive" (see Table B-1 in Appendix B). <6.3.4. Additional Retailer Application Vulnerabilities Identified in 2012 and 2013 USDA-FNS Proposed Rules> The August 2012 and February 2013 USDA-FNS NPRMs contained four provisions addressing shortcomings in existing retailer application regulations. These proposed rules are currently "inactive" (see Table B-1 in Appendix B ). Proposed changes included the following: Retailers failing to report changes in ownership Currently, authorized retailers are required to report any changes in the ownership of their stores, but there is currently no penalty for noncompliance. To deter retailer noncompliance, USDA-FNS proposed to subject to a six-month disqualification any retailer that failed to report ownership changes to USDA-FNS within 10 days of the change. Disqualified SNAP recipients applying to become SNAP-authorized retailers Under current SNAP rules, USDA-FNS may not deny the application of a retailer who was permanently disqualified from SNAP as a recipient for fraud on business integrity grounds. USDA-FNS proposed to add recipient fraud to the definition of business integrity standards, "because a person, who violates program rules as a recipient, lacks the necessary business integrity and responsibility expected of a store owner who must train employees and oversee operations to ensure that SNAP EBT transactions are conducted in accordance with Department rules." Data matches with the USDA-FNS electronic Disqualified Recipient System (eDRS) are needed to determine whether individuals are disqualified from receiving SNAP benefits, and such matches rely on the use of individuals' SSNs; therefore, USDA-FNS would have difficulty implementing this provision due to statutory restrictions on allowable uses of applicant retailers' SSNs. Illegal retailer-to-retailer transfers of SNAP authorization Authorized retailers are prohibited from transferring the SNAP authorization of their stores to a new owner in the event of a sale, and retailers are prohibited from accepting SNAP benefits without first applying for and obtaining SNAP authorization. Under current regulations, if a retailer sells the authorization and a retailer buyer uses it, USDA-FNS penalizes the buyer but not the seller. To address illegal collusion on the part of the seller and curtail unauthorized SNAP redemptions, USDA-FNS proposed to subject the seller to two penalties: permanent SNAP retailer ineligibility (for all current and future stores) and a fine equal to that of the buyer (under current regulations). Retailers' failure to pay fines, claims, or fiscal penalties Current SNAP regulations allow USDA-FNS, on the basis of business integrity, to deny or withdraw the authorization of retailers who fail to pay certain fiscal claims or fines. USDA-FNS proposed to allow the agency to deny or withdraw the authorization of retailers who fail to pay any fine, claim, or fiscal penalty assessed against them under 7 C.F.R. 278 when such debts become delinquent. <6.4. Recipient Application Errors and Fraud> <6.4.1. Establish Federal Incentives to Conduct Pre-certification Investigations> In the June 2016 GAO report, GAO recommended that federal financial incentives should be restructured to encourage effective pre-certification investigations "because some investigative agencies were not rewarded for cost-effective, anti-fraud efforts that could prevent ineligible people from receiving benefits." As this report noted, "when fraud by a recipient is discovered, the state may generally retain 35 percent of the recovered overpayment, but when a state detects potential fraud by an applicant and denies the application, there are no payments to recover." According to FY2016 State Activity Report data, about half of the state agencies dedicated minimal resources to pre-certification investigations. The five state agencies that engaged in the most extensive pre-certification investigation activity represented 96% of these investigations despite serving only 32% of all SNAP participants in FY2016. Together, the five states reported about $369 million in prevented improper federal expenditure through these efforts. With incentives, it is possible that more states would dedicate resources to conducting pre-certification investigations to find error and fraud on a regular basis. <6.4.2. Difficulties in Collecting Amounts Overpaid to or Trafficked by Recipients> As one might expect, it is challenging to recover overpayments from poor and near-poor households. Establishing and collecting claims is the primary way that overpayments are recovered; and, while state agencies have improved the rate of claims establishment since FY2005, states' efforts to actually collect on these claims have not likewise improved. From FY2005 to FY2014: the total annual dollar value of claims established has increased from about 20% to about 28% of the total annual dollar value of estimated overpayments; this improvement indicates increased claims establishment activity by state agencies. the total annual dollar value of claims collected has remained around 16% of the total annual dollar value of estimated overpayments; this reflects persistent difficulties in claim collection. Figure 5 reflects these trends. This was a finding in the August 2014 GAO report and, furthermore, "[s]tates' difficulty collecting overpayments compounds their concerns about having adequate resources for investigations because some states use recovered overpayments for this purpose." The GAO report did not provide strategies for how states might address this concern. <6.4.3. Duplicate Enrollment and the National Accuracy Clearinghouse (NAC)> Individuals are not allowed to apply for or receive benefits from more than one state agency at a time. It is important to note, however, that duplicate enrollment may be indicative of either an error or fraud depending on the circumstances of the case. Duplicate enrollment (or "dual participation") results in a 10-year disqualification from SNAP if it is due to intentional fraud. Some state agencies detect duplicate enrollment through exchanging enrollment data with neighboring states. As of the October 2016 GAO report, Massachusetts and New York, for example, had such an arrangement. The National Accuracy Clearinghouse (NAC) is a significant effort to detect and prevent duplicate enrollment. The NAC was funded as a pilot by the U.S. Office of Management and Budget (OMB) Partnership for Program Integrity and Innovation from April 2013 until May 2015. The NAC gathers and analyzes SNAP state enrollment data from five participating states. Since the conclusion of the pilot in May 2015, these five states have continued NAC operations. In practice, the NAC is another data match performed during certification. NAC matches are not considered verified upon receipt, so additional steps are necessary to confirm matches. An evaluation of NAC published in October 2015 documented several elements of NAC's performance, outcomes, and costs, including the following: In May 2014, prior to implementation, 10,076 instances of duplicate enrollment across the five states were identified. One year later, in May 2015, duplicate enrollment in these five states had been reduced by almost 50% (5,464 instances identified). Using NAC is estimated to have prevented about $548,336 in monthly overpayments during the pilot year, with monthly state agency work effort costs totaling $81,913 (resulting in about $6.69 in monthly overpayments prevented for every $1.00 spent monthly). In the first year, using NAC produced an estimated annualized savings of $5,597,076 (less the $669,331 spent on one-time startup costs). Nationalizing NAC has been estimated to result in $114,072,753 in annual savings. Costs of setting up and utilizing NAC for the first year came to about $1,652,287 for all five participating states. USDA-FNS provides federal matching funds for states' program administration costs, including costs of NAC participation. During the 115 th Congress, the House passed an emergency supplemental appropriations bill, which included a provision that would have required the expansion of NAC to all states (Section 3003 of H.R. 4667 ; however, this provision was not included in the emergency supplemental appropriations which became law (Bipartisan Budget Act of 2018, P.L. 115-123 ). <6.4.4. Considerations for Data Matching> As discussed earlier, states are required to conduct certain data matches to verify household application information, and many opt to include additional data sources. There are arguments for and against expanding states' use of additional data matches. While verifying household data to high-fidelity sources seems compelling, the use of matching to less authoritative data can require additional employee hours and might introduce the errors it seeks to prevent. Implementing new data matches may require large upfront investments and ongoing costs to state agencies. Non-verified upon receipt data matches may necessitate additional manual follow-up, which can create even more cost and delay. As a result, state agencies prefer to use verified upon receipt data matches whenever possible. However, only one of the six federally required databases is considered verified upon receipt. In comments published in response to USDA-FNS rulemaking implementing the statutorily mandated data matches, some states pointed out that the implementation of these data matches is burdensome on state agencies while providing minimal cost avoidance due to the rarity of matches and the effort needed to verify them. A range of anecdotal evidence also points to the limited return on investment for the non-verified upon receipt of federally mandated data matches. In a 2017 series of USDA-OIG audits of five states' compliance with federal requirements for state agencies, USDA-OIG found that all five were improperly handling a mandatory SSA-PVS data match. At least one state explicitly stated that it elected not to perform the mandatory match due to perceived low return on investment. Some optional data matches are widely used and considered worthwhile by state agencies, while other verified upon receipt and useful non-verified upon receipt data matches are arguably underutilized. Although not federally mandated, SSA benefit program databases were utilized and considered useful by all state agencies surveyed in the October 2016 GAO report, because these data matches provide verified upon receipt data on unearned income. Matches with state systems that provide verified upon receipt data on eligibility and income were used by many, but not all, state agencies. In some cases, statutory obstacles prevent using existing federal data sources, such as the Centers for Medicare and Medicaid Services (CMS) federal data services hub (the Hub), which consolidates various sources of earned and unearned income data matching. Some state agencies were concerned that the same data match services are being paid for twice, once for SNAP and once for Medicaid, often for the same beneficiaries. In 2017, certain states have piloted data sharing agreements to utilize these federal data services hubs for SNAP. Earned income may be especially difficult to verify through data matching, and the costs associated with these matches may be prohibitive. Currently, state agencies contract individually with The Work Number, but USDA-FNS has proposed negotiating a single contract that would make the service available for all state agencies at a greatly reduced cost per match. According to the October 2016 GAO report, USDA-FNS has not done enough to encourage state agencies to adopt best practices in data matching. This includes explaining technical improvements such as unifying data sources into a centralized portal (data brokering) and publicizing the methods and successes of pilot projects like NAC. <6.5. State Agency Errors and Fraud> <6.5.1. Modifying State Involvement in the Quality Control System> The September 2015 USDA-OIG report stated that the primary vulnerability of the QC system was its "two-tier" structure. USDA-OIG argued that because a state calculates its own SPER, it has the means to manipulate the outcome of the QC process, and because a state stands to benefit from a low SPER, it has the motive to commit this fraud. USDA-OIG recommended the adoption of a "one-tier" QC process conducted exclusively by USDA-FNS. USDA-FNS noted that a one-tier QC system could create additional federal cost. Appendix A. Glossary of Abbreviations Appendix B. "Inactive" USDA-FNS Rules In the last 10 years, the U.S. Department of Agriculture Food and Nutrition Service (USDA-FNS) had started to draft new rules in response to direction in federal law and USDA Office of the Inspector General (USDA-OIG) audit findings, and at their own initiative. Currently, none of the regulatory initiatives discussed in this appendix have been completed. Before USDA-FNS's actions were suspended, they were in various stages of the regulatory process, which occurs as follows: In order to codify a federal regulation in the Code of Federal Regulations (C.F.R.), the following steps must generally be completed: a regulatory work plan must be submitted to the Office of Management and Budget (OMB) and OMB must assign the rulemaking action a Regulatory Identification Number (RIN), adding the RIN to OMB's Unified Agenda (UA); a notice of proposed rulemaking (NPRM) generally must be published by the rulemaking agency in the Federal Register (FR) with a comment period open to the public; and the rulemaking agency must consider the comments, make necessary changes to the rulemaking action, and then publish the final rule in the FR. Along with other rulemaking actions, USDA rules had been in a "pending" status and had not been made available to the public. The Trump Administration made these rules public in July 2017 and termed them "inactive." Appendix C. Optional Income Data Matches Data matching is used during the SNAP certification process to help make SNAP eligibility determinations and, if appropriate, designate the benefit allotment amounts for applicant households. In addition to the mandatory data matches discussed earlier in this report, states have many additional federal, state, and local data sources that they might use to verify household income data. This appendix lists some additional data matches that are discussed in related audit reports and state-specific policy manuals. Their verified upon receipt status varies. Optional Federal Income Data Matches Social Security Administration (SSA) Benefit Programs Databases State agencies can match with SSA databases to verify an applicant's unearned income from these SSA programs. These are verified upon receipt data matches. They are conducted and considered moderately or extremely useful by 51 of the 51 state agencies surveyed (50 states plus D.C.) in October 2016. SSA Beneficiary Earnings Exchange Record (BEER) State agencies can match with SSA-BEER to verify income based on Internal Revenue Service (IRS) earnings and tax data. This is a non-verified upon receipt data match. It is conducted by 24 of the 51 state agencies and considered moderately or extremely useful by only 10 of those using it. U.S. Department of Health and Human Services Administration for Children and Families (HHS-ACF) Public Assistance Reporting Information System (PARIS) State agencies can match with HHS-ACF-PARIS to verify an applicant's earned and unearned income from public assistance and federal employment or retirement. These are non-verified upon receipt data matches. The HHS-ACF-PARIS Interstate Match File is conducted by 40 of the 51 state agencies and considered moderately or extremely useful by 31 of those using it. The HHS-ACF-PARIS Federal/VA File matches are conducted by 31 of the 51 state agencies and considered moderately or extremely useful by 20 of those using them. The Work Number State agencies can match with this commercial verification service operated by Equifax, Inc. (for a fee) to obtain payroll information from participating retailers (covering about 35%-40% of working population) to verify an applicant's earned income. This is a non-verified upon receipt data match. It is used by 45 of the 51 state agencies and considered moderately or extremely useful by 43 of those using it. HHS-ACF National Directory of New Hires (NDNH) Unemployment Insurance and Quarterly Wage Files These data matches are distinct from the mandatory HHS-ACF-NDNH New Hire File match. The Unemployment Insurance File compiles information from state workforce agencies regarding unearned income, and the Quarterly Wage File compiles information from state workforce agencies regarding earned income. These are non-verified upon receipt data matches. The former is used by 9 of the 51 state agencies and the latter by 4 of the 51. Optional State Income Data Matches State Unemployment Insurance Benefits (UIB) Database State agencies can match with state workforce agencies that administer UIB to verify applicants' unearned income. This is generally a verified upon receipt data match. It is conducted by 49 of the 51 state agencies surveyed in October 2016 and considered moderately or extremely useful by 48 of those using it. Child Support Payments Database State agencies can match with state human or social services agencies that administer and enforce child support payments to verify applicants' unearned income. This is generally a verified upon receipt data match. It is conducted by 47 of the 51 state agencies and considered moderately or extremely useful by 46 of those using it. State Wage Information Collection Agency (SWICA) Database State agencies can match with SWICAs that gather quarterly wage and new hire data from employers to verify applicants' earned income. This is the state equivalent of the HHS-ACF-NDNH. These are non-verified upon receipt data matches. The former is conducted by 45 of the 51 state agencies and considered moderately or extremely useful by 31 of those using it; the latter is conducted by 36 of the 51 state agencies and considered moderately or extremely useful by 23 of those using it. State Day Care License Database State agencies can match with state human or social services agencies that license day care workers and facilities to verify applicants' earned income. This is generally a verified upon receipt data match. It is conducted by 11 of the 51 state agencies. State Taxpayer Database State agencies can match with state taxation agencies to verify applicants' unearned and earned income. This is generally a verified upon receipt data match. It is conducted by 7 of the 51 state agencies. Database of Income Verified by Other State Programs State agencies can match with state human or social services agencies that administer other means-tested programs to verify applicants' unearned and earned income. This is generally a verified upon receipt data match. It is conducted by 42 of the 51 state agencies and considered moderately or extremely useful by 38 of those using it. Appendix D. Trends in Retailer Trafficking and Convenience Store Participation in SNAP The following three tables include CRS calculations based on data from U.S. Department of Agriculture Food and Nutrition Service (USDA-FNS) Retailer Management Reports, the last three Retailer Trafficking Studies, and other agency sources. Table D-1 compares the growth in total stores participating in SNAP with the growth of convenience stores ("c-stores") participating in the program. From FY2007 to FY2016, convenience stores have grown from about 36% of all stores in the program to about 46%. The national retailer trafficking rate represents the proportion of SNAP benefits redeemed that were trafficked at stores, and the national store violation rate represents the proportion of authorized stores that were estimated to have engaged in trafficking. Table D-2 compares these two rates for all stores with these rates for convenience stores. Across the nine years examined in the three studies, the convenience store retailer trafficking rates have been more than 1000% of the national retailer trafficking rates, and the convenience store violation rates have been more than 150% of the national store violation rates. Table D-3 displays data regarding the convenience store share of total redemptions and data regarding the estimated convenience store share of total trafficking. Across the nine years examined in these three studies, convenience stores' shares of redemptions have not exceeded 5% of total redemptions and convenience store shares of trafficking have averaged more than half of total trafficking. Appendix E. Payment Error Rate Information This appendix provides a state-by-state summary of payment-error related data from FY2010-FY2014, including state payment error rates (SPERs), high-performance bonuses, and liabilities for low performance. Table E-1 shows the states' annual rates and whether the state received an award or a sanction, while Table E-2 displays the amounts of awards and sanctions. Using Alabama as an example, according to the first table the state received a bonus in FY2012 based on a 1.85% SPER, and according to the second table that award amount was approximately $1.9 million.

The Supplemental Nutrition Assistance Program (SNAP) is the nation's largest domestic food assistance program, serving over 42.1 million recipients in an average month at a federal cost of over $68 billion in FY2017. SNAP is jointly administered by state agencies, which handle most recipient functions, and the federal government—specifically, the U.S. Department of Agriculture's Food and Nutrition Service (USDA-FNS)—which supports and oversees the states and handles most retailer functions. In a program with diverse stakeholders, detecting, preventing, and addressing errors and fraud is complex. SNAP has typically been reauthorized in a farm bill approximately every five years; this occurred most recently in 2014 (P.L. 113-79). Policymakers have long been interested in reducing fraud and improving payment accuracy in the program. Provisions related to these goals have been included in past farm bill reauthorizations and may be considered for the next farm bill, expected in 2018. There are four main types of inaccuracy and misconduct in SNAP: Trafficking SNAP benefits is the illicit sale of SNAP benefits, which can involve both retailers and recipients. Retailer application fraud generally involves an illicit attempt by a store owner to participate in SNAP when the store or owner is not eligible. Errors and fraud by households applying for SNAP benefits can result in improper payments. Errors are unintentional, while fraud is the intentional violation of program rules. Errors and fraud by state agencies—agency errors can result in inadvertent improper payments; the discussion of agency fraud largely focuses on certain states' Quality Control (QC) misconduct. Certain key ideas are fundamental to any discussion of SNAP errors and fraud: Errors are not the same as fraud. Fraud is intentional activity that breaks federal and/or state laws, while errors can be the result of unintentional mistakes. Certain acts, such as trafficking SNAP benefits, are always considered fraud; other acts, such as duplicate enrollment, may be the result of either error or fraud depending on the circumstances of the case. SNAP fraud is relatively rare, according to available data and reports. There is no single measure that reflects all the forms of fraud in SNAP. There are some frequently cited measures that capture some parts of the issue, and there are relevant data from federal and state agencies' enforcement efforts. The most frequently cited measure of fraud is the national retailer trafficking rate, which, estimated that 1.5% of SNAP benefits redeemed from FY2012-FY2014 were trafficked. While the national retailer trafficking rate (which is issued roughly every three years) estimates the extent of retailer trafficking, there is not a standard recipient trafficking rate, nor is there an overall recipient fraud rate. USDA-FNS is responsible for identifying stores engaged in retailer trafficking—using transaction data analysis, undercover investigations, and other tools—and imposing penalties on store owners who commit violations. Retailers found to have trafficked may be subject to permanent disqualification from participation in SNAP, fines, and other penalties. USDA-FNS also works to identify fraud by retailers applying to accept SNAP benefits. Retailers found to have falsified their applications may be subject to denial, permanent disqualification, and other penalties. While retailer trafficking and retailer application fraud are primarily pursued by a single federal entity (USDA-FNS), recipient violations (i.e., recipient trafficking and recipient application fraud) are pursued by 53 different state agencies. Recipients found to have trafficked may be required to repay the amount trafficked and may be subject to disqualification from receiving SNAP benefits and other penalties. State agencies' efforts to reduce and punish recipient fraud vary, which is evident, for instance, in state-submitted data on recipient disqualification activities. The national payment error rate (NPER) is the most-cited measure of nationwide payment accuracy. Using USDA-FNS's Quality Control (QC) system, the NPER estimates states' accuracy in determining eligibility and benefit amounts. The NPER has limitations, though; for instance, it only reflects errors above a threshold amount ($38 in FY2017). After publishing a FY2014 NPER, USDA Office of the Inspector General (OIG ) and USDA-FNS identified data quality issues that prevented the publication of an NPER in FY2015 and FY2016, but USDA-FNS published a NPER for FY2017 in June 2018. For FY2017, it was estimated that 6.30% of SNAP benefit issuance was improper—including a 5.19% overpayment rate and a 1.11% underpayment rate. Regardless of the cause of an overpayment, SNAP agencies are required to work toward recovering excess benefits from households that were overpaid (this is referred to as "establishing a claim against a household"). Applying these rates to benefits issued in FY2017 (over $63.6 billion), an estimated $3.30 billion in benefits were overpaid, and about $710 million in benefits were underpaid. Overpayments and underpayments to households can be the result of recipient errors, recipient fraud, or agency errors during the certification process. State agencies rely on household-provided information in applications, but also employ a range of data matches—some required by federal law, some optional that vary by state—to promote accuracy and double-check information. According to the USDA-FNS FY2016 State Activity Report, of states' established claims for overpayment, approximately 62% of overpayment claim dollars were for recipient errors, about 28% were for agency errors, and about 11% were due to recipient fraud. In addition to inadvertent agency errors, state agencies and their agents have been involved in isolated instances of fraud. Beyond cases of fraud conducted by state agency employees for personal gain, in FY2017 the Department of Justice obtained False Claim Act settlements from three state agencies accused of falsifying their Quality Control data and unlawfully obtaining federal bonuses. Investigations into this matter, conducted by the USDA-OIG, are ongoing. Across all types of fraud, oversight entities such as the Government Accountability Office and USDA-OIG have identified issues and strategies relevant to combating errors and fraud in SNAP. USDA-FNS has also proposed related regulatory changes that were not finalized. On the retailer side, issues identified focus on opportunities to prevent and more promptly punish trafficking. On the recipient side, issues identified include the nonexistence of a recipient fraud rate, states'varied levels of anti-fraud efforts (which may be better incentivized), and improvements to data matching in the application process. During the 115th Congress, Members voted on farm bill proposals that contained some changes to SNAP program integrity policy; these proposals are summarized in CRS Report R45275, The House and Senate 2018 Farm Bills (H.R. 2): A Side-by-Side Comparison with Current Law. Changes that might strengthen payment accuracy and punishments against fraud can be in tension with other policy objectives such as preserving recipient access to the program, and may have unintended consequences such as incurring costs greater than their savings. Balancing program objectives such as these are considerations for policymakers in this area.

<1. Introduction> Section 504 of the Rehabilitation Act of 1973 prohibits discrimination against an otherwise qualified individual with a disability solely by reason of disability in any program or activity receiving federal financial assistance or under any program or activity conducted by an executive agency or the U.S. Postal Service. Section 504 was the first federal civil rights law generally prohibiting discrimination against individuals with disabilities. The concepts of Section 504 and its implementing regulations were used in crafting the Americans with Disabilities Act (ADA) in 1990. The ADA and Section 504 are, therefore, very similar and have some overlapping coverage but also have several important distinctions. For example, Section 504 is limited to programs receiving federal funds or the executive agencies and the Postal Service while the ADA broadly covers the private sector regardless of whether federal funds are involved and does not cover the executive agencies or the Postal Service. The ADA Amendments Act of 2008, P.L. 110-325 , amended the definition of disability in the ADA and the definition of disability applicable to Section 504. This report examines Section 504, the recent amendments to the definition of disability, Section 504's regulations, and Supreme Court interpretations. Section 504's differences with the ADA, and its relationship to the Individuals with Disabilities Education Act (IDEA), are also discussed. <2. Overview of Section 504> <2.1. Historical Background> Although Section 504 was the first federal statute that provided broad civil rights protections for individuals with disabilities, there was very little discussion of its meaning or importance during its enactment in 1973. The most detailed discussion was during congressional debate when Senator Humphrey observed, I am deeply gratified at the inclusion of these provisions which carry through the intent of original bills which I introduced, jointly with the Senator from Illinois (Mr. Percy), earlier this year, S. 3044 and S. 3458, to amend, respectively, Titles VI and VII of the Civil Rights Act of 1964, to guarantee the right of persons with a mental or physical handicap to participate in programs receiving Federal assistance, and to make discrimination in employment because of these handicaps, and in the absence of a bona fide occupational qualification, an unlawful employment practice. The time has come to firmly establish the right of these Americans to dignity and self-respect as equal and contributing members of society, and to end the virtual isolation of millions of children and adults from society. The implementation of Section 504 was not performed expeditiously. The then Department of Health, Education, and Welfare (HEW) published regulations in 1978 only after a federal court held that HEW was required to promulgate regulations and after demonstrations at HEW offices. The year 1978 also saw major amendments to Section 504. These amendments expanded Section 504 nondiscrimination requirements to programs or activities conducted by executive agencies, and added a new section 505 which applied the remedies, procedures and rights of Title VI of the Civil Rights Act of 1964 to Section 504 actions. <2.2. Statutory and Regulatory Provisions> <2.2.1. Section 504 Statutory Provisions> Section 504 has been amended numerous times since its original enactment in 1973. The core requirement of the section is found in subsection (a). This subsection was amended by P.L. 95-602 which added the provisions regarding the regulations. Section 504(a) currently states the following: (a) No otherwise qualified individual with a disability in the United States, as defined in section 705(20), shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance or under any program or activity conducted by any Executive agency or by the United States Postal Service. The head of each such agency shall promulgate such regulations as may be necessary to carry out the amendments to this section made by the Rehabilitation, Comprehensive Services, and Developmental Disabilities Act of 1978. Copies of any proposed regulation shall be submitted to appropriate authorizing committees of Congress, and such regulations may take effect no earlier than the thirtieth day after the date on which such regulation is so submitted to such committees. Subsection (b) of Section 504 defines the term "program or activity." This subsection was added by P.L. 100-259 in 1988 in response to the Supreme Court's narrow interpretation of the phrase "program or activity" in Title IX of the Education Amendments of 1972. The amendment clarified that discrimination is prohibited throughout the entire institution if any part of the institution receives federal financial assistance. Subsection (c) of Section 504 was also added by P.L. 100-259 in 1988. It contains an exception for small providers so they are not required to make significant structural alterations to their existing facilities to render them accessible if alternative means of providing the services are available. This subsection was added to clarify that P.L. 100-259 does not add new requirements for architectural modification. Subsection (d) of Section 504 requires that the standards used to determine whether there has been a violation of Section 504 regarding employment discrimination complaints are the same as those in the Americans with Disabilities Act. This subsection was added by P.L. 102-569 in 1992. P.L. 102-569 also substituted the term "disability" for the term "handicap." <2.2.2. Definition of Disability> The definition of disability applicable to Section 504 was amended by the ADA Amendments Act of 2008 to conform with the new definition of disability for the ADA. The Senate Statement of Managers noted the importance of maintaining uniform definitions in the two statutes so covered entities "will generally operate under one consistent standard, and the civil rights of individuals with disabilities will be protected in all settings." The ADA definition defines the term disability with respect to an individual as "(A) a physical or mental impairment that substantially limits one or more of the major life activities of such individual; (B) a record of such an impairment; or (C) being regarded as having such an impairment (as described in paragraph (3))." Although this is essentially the same statutory language as was in the original ADA, P.L. 110-325 contains new rules of construction regarding the definition of disability, which provide that the definition of disability shall be construed in favor of broad coverage to the maximum extent permitted by the terms of the act; the term "substantially limits" shall be interpreted consistently with the findings and purposes of the ADA Amendments Act; an impairment that substantially limits one major life activity need not limit other major life activities to be considered a disability; an impairment that is episodic or in remission is a disability if it would have substantially limited a major life activity when active; and the determination of whether an impairment substantially limits a major life activity shall be made without regard to the ameliorative effects of mitigating measures, except that the ameliorative effects of ordinary eyeglasses or contact lenses shall be considered. The ADA Amendments Act specifically lists examples of major life activities including caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working. The act also states that a major life activity includes the operation of a major bodily function. <2.2.3. Regulations> The first Section 504 regulations were promulgated by the then department of Health, Education, and Welfare (HEW) in January of 1978. Soon after this, the 1978 amendments to Section 504 were passed which applied Section 504 nondiscrimination requirements to programs or activities conducted by executive agencies, and added language requiring the promulgation of regulations. Each executive agency and the Postal Service now has its own Section 504 regulations which are tailored to the particular recipients of that agency's programs. In addition, each executive agency and the Postal Service have regulations which delineate the coverage of Section 504 with regard to that agency's own programs. In 1980, President Carter issued Executive Order 12250 which provided that the Department of Justice shall coordinate the implementation and enforcement of certain nondiscrimination provisions, including those of Section 504. <3. Selected Supreme Court Decisions> The Supreme Court has examined Section 504 in numerous contexts and, since the enactment of the ADA in 1990, has often referenced Section 504 in its analysis of ADA cases. The first Section 504 case to reach the Supreme Court was Southeastern Community College v. Davis. In Southeastern , the plaintiff was a student with a serious hearing disability and who sought to be trained as a registered nurse. The college argued that she was not "otherwise qualified" as she could not understand speech except through lip reading and that this limitation made it unsafe for her to participate in the normal clinical program. The Supreme Court agreed with the college, noting that it was unlikely that she "could benefit from any affirmative action that the regulations reasonably could be interpreted as requiring." The Court concluded that there was no violation of 504 when Southeastern concluded that respondent did not qualify for admission to its program. Nothing in the language or history of 504 reflects an intention to limit the freedom of an educational institution to require reasonable physical qualifications for admission to a clinical training program. Nor has there been any showing in this case that any action short of a substantial change in Southeastern's program would render unreasonable the qualifications it imposed. Similarly, in Alexander v. Choate the Supreme Court found no violation of Section 504 where Medicaid recipients with disabilities claimed that a proposed 14-day limitation on in-patient coverage had a discriminatory effect on individuals with disabilities. The Court found that the limitation was neutral on its face as it would provide Medicaid users with or without disabilities with "identical and effective hospital services." Section 504 did not require the state to alter its definition of the Medicaid benefit because individuals with disabilities have greater medical needs. Citing Southeastern , the Court observed that Section 504 requires even-handed treatment and an opportunity for individuals with disabilities to participate and benefit from programs receiving federal funds. "The Act does not, however, guarantee the handicapped equal results from the provision of state Medicaid, even assuming some measure of equality of health could be constructed." Consolidated Rail Corporation v. Darrone raised the issue of whether an employment discrimination action under Section 504 was limited to situations where the primary objective of the federal financial assistance was to provide employment. The Supreme Court held that such actions were not limited since the primary goal of the Rehabilitation Act is to increase employment of individuals with disabilities. The fact that Congress chose to ban such employment discrimination only by the federal government and recipients of federal funds did not require that Section 504 be further limited. In Bowen v. American Hospital Association the Supreme Court addressed the issue of whether Section 504 regulations requiring the provision of health care to infants with disabilities were authorized by Section 504. This case began when the parents of a child with Down Syndrome requested that life-saving surgery not be performed. In response to the death of the child, HHS promulgated a regulation under Section 504 stating that Section 504 required that nourishment and medically beneficial treatment should not be withheld from infants with disabilities. Striking down these regulations, the Court noted that the legislative history of the Rehabilitation Act did not support the argument that federal officials can intervene in treatment decisions traditionally left by state law to the parents and attending physicians. School Board of Nassau County v. Arline examined the issue of when an individual with a disability is "otherwise qualified" for a job if the individual has a contagious disease. Gene Arline taught elementary school until her employment was terminated after she suffered a third relapse of tuberculosis within two years. The Supreme Court held that an individual with a contagious disease may be a person with a disability under Section 504 but that a person who poses a significant risk of communicating an infectious disease to others that cannot be alleviated by reasonable accommodation will not be otherwise qualified for a job. This should be determined by findings of fact based on reasonable medical judgments about the nature of the risk, the duration of the risk, the severity of the risk, and the probabilities the disease will be transmitted and will cause harm. In Traynor v. Turnage the Supreme Court examined the application of Section 504 to an executive agency, more specifically to the Veterans' Administration (VA). The veterans who brought the suit had been denied an extension of the time limit for the use of educational benefits due to disability on the ground that their alleged disability was due to alcoholism unrelated to a psychiatric condition. VA regulations prohibited the granting of a time extension because alcoholism unrelated to a psychiatric condition was considered willful misconduct. 38 U.S.C. 211(a) bars judicial review of the Veterans' Administrators' decision "on any question of law or fact under any law administered by the Veterans' Administration providing benefits for veterans." The first question the Court addressed, then, was whether 38 U.S.C. 211(a) foreclosed the Court from considering whether the VA regulation violated Section 504. Holding that such suits were not precluded, the Supreme Court noted that Section 211(a) insulates from review decision of law and fact 'under any law administered by the Veterans' Administration,' that is, decisions made in interpreting or applying a particular provision of that statute to a particular set of facts... But the cases now before us involve the issue whether the law sought to be administered is valid in light of a subsequent statute whose enforcement is not the exclusive domain of the Veterans' Administration. The Court then examined the second issue in Traynor : whether the regulation was inconsistent with the requirements of Section 504. Finding that the regulation did not violate Section 504, the Court observed, "There is nothing in the Rehabilitation Act that requires that any benefit extended to one category of handicapped persons also be extended to all other categories of handicapped persons." The Court also noted that "Congress is entitled to establish priorities for the allocation of the limited resources available for veterans' benefits, ... and thereby to conclude that veterans who bear some responsibility for their disabilities have no stronger claim to an extended eligibility period than do able-bodied veterans." The Supreme Court in Barnes v. Gorman held in a unanimous decision that punitive damages may not be awarded under Section 202 of the ADA and Section 504 of the Rehabilitation Act. Jeffrey Gorman uses a wheelchair and lacks voluntary control over his lower torso which necessitates the use of a catheter attached to a urine bag. He was arrested in 1992 after fighting with a bouncer at a nightclub and during his transport to the police station suffered significant injuries due to the manner in which he was transported. He sued the Kansas City police and was awarded over $1 million in compensatory damages and $1.2 million in punitive damages. The eighth circuit court of appeals upheld the award of punitive damages but the Supreme Court reversed. Although the Court was unanimous in the result, there were two concurring opinions, and the concurring opinion by Justice Stevens, joined by Justices Ginsburg and Breyer, disagreed with the reasoning used in Justice Scalia's opinion for the Court. Justice Scalia observed that the remedies for violations of both Section 202 of the ADA and Section 504 of the Rehabilitation Act are "coextensive with the remedies available in a private cause of action brought under Title VI of the Civil Rights Act of 1964." Neither Section 504 nor Title II of the ADA specifically mention punitive damages, rather they reference the remedies of Title VI of the Civil Rights Act. Title VI is based on the congressional power under the Spending Clause to place conditions on grants. Justice Scalia noted that Spending Clause legislation is "much in the nature of a contract" and, in order to be a legitimate use of this power, the recipient must voluntarily and knowingly accept the terms of the "contract." "If Congress intends to impose a condition on the grant of federal moneys, it must do so unambiguously." This contract law analogy was also found to be applicable to determining the scope of the damages remedies and, since punitive damages are generally not found to be available for a breach of contract, Justice Scalia found that they were not available under Title VI, Section 504, or the ADA. <4. Section 504 and the ADA> The Americans with Disabilities Act was modeled on the statutory language, regulations, and case law of Section 504. The ADA and Section 504 are, therefore, very similar and have some overlapping coverage but also have several important distinctions. Most significantly, Section 504 is limited to programs receiving federal funds or the executive agencies and the Postal Service while the ADA broadly covers the private sector regardless of whether federal funds are involved and does not cover the executive agencies or the Postal Service. There are several other distinctions between the ADA and Section 504. For example, the ADA contains specific exemptions for religious entities. There are no corresponding provisions in Section 504. Therefore, if a faith-based organization receives federal funds, it is prohibited from discriminating against an individual with a disability. Title I of the ADA prohibits employment discrimination which is also prohibited with regard to the entities covered by Section 504. However, the enforcement procedures for the two statutes are somewhat different. Enforcement of Title I of the ADA parallels that of Title VII of the Civil Rights Act of 1964 and includes the requirement that persons alleging discrimination file a charge with the EEOC. However, under Section 504 an employment discrimination complaint may be filed with the Office of Civil Rights for the agency that provided the federal financial assistance or the Department of Justice. Administrative procedures do not have to be exhausted prior to filing suit in federal court. <5. Section 504 and Education> Several federal statutes, notably the Individuals with Disabilities Education Act (IDEA), Section 504, and the ADA, address the rights of individuals with disabilities to education. Although there is overlap, particularly with Section 504 and the ADA, each statute plays a significant part in the education of individuals with disabilities. Generally, although there are some differences regarding K-12 schools, the Department of Education (ED) has interpreted the Section 504 compliance standards for schools to be the same as the basic requirements of IDEA. As discussed previously, the Rehabilitation Act is amended by the ADA Amendments Act to reference the definition of disability in the ADA. Section 504's coverage of education was a subject of discussion during the passage of the ADA Amendments Act, and the Senate Statement of Managers observed: We expect that the Secretary of Education will promulgate new regulations related to the definition of disability to be consistent with those issued by the Attorney General under this Act. We believe that other current regulations issued by the Department of Education Office of Civil Rights under Section 504 of the Rehabilitation Act are currently harmonious with Congressional intent under both the ADA and the Rehabilitation Act. The implications of the changes in the definition of disability under Section 504 and the ADA for the coverage of children in K-12 schools is not entirely clear. Perry Zirkel, a Lehigh University education and law professor, argues that the ADAAA would result in more students in K-12 education being given Section 504 plans, especially students with diabetes, asthma, food allergies, dyslexia, and attention deficit disorder (ADD). Another commentator noted that the addition of "reading" in the list of major life activities may be problematic since "there is no easy way to distinguish children who are unable to read because they have a disability from those who have simply received poor instruction."

Section 504 of the Rehabilitation Act of 1973 prohibits discrimination against an otherwise qualified individual with a disability solely by reason of disability in any program or activity receiving federal financial assistance or under any program or activity conducted by an executive agency or the U.S. Postal Service. Section 504 was the first federal civil rights law generally prohibiting discrimination against individuals with disabilities. This report examines Section 504, recent amendments to the definition of disability, Section 504's regulations, and Supreme Court interpretations. Section 504's differences with the ADA, and its relationship to the Individuals with Disabilities Education Act (IDEA), are also discussed.

<1. Background> Home and community-based services refer to a range of health and supportive services (delivered in non-institutional settings) that are needed by individuals who lack the capacity for self-care because of a physical, cognitive, or mental disability or chronic condition resulting in functional impairment(s) for extended time periods. Medicaid has covered home- and community-based services (HCBS) since the program's inception in 1965 through various service categories. From the start, Medicaid allowed states to cover a range of home health services and required states to cover those services for individuals who otherwise would require treatment in nursing facilities. Home health services include skilled nursing, aide services, medical equipment and supplies, and, often, therapy. States also are permitted to cover rehabilitation and private duty nursing services. Rehabilitation can include a range of medical or remedial services recommended by a physician or other licensed practitioner to reduce the degree of physical or mental disability and restore functioning. Private-duty nursing is skilled nursing care for individuals who require services beyond what is available under Medicaid's home health or personal care benefits. Over time, Congress and the Centers for Medicare and Medicaid Services (CMS) authorized states to cover other types of HCBS services as optional benefits. States could offer HCBS services, such as personal care and case management , by including these services in their state plans. Personal care and case management services were added as optional Medicaid benefits in 1978 and 1986, respectively. Through personal care, beneficiaries are assisted with activities of daily living (e.g., dressing, bathing, eating), while case management includes services to assist Medicaid beneficiaries in gaining access to needed medical, social, educational, and other services. In addition to the Medicaid state plan benefits, in 1981, Congress authorized HCBS waivers under Section 1915(c) of the Social Security Act (SSA). HCBS, 1915(c) waivers, enable states to cover a range of services for beneficiaries who otherwise would require institutional levels of care (i.e., nursing facility, hospital, or intermediate care facility for individuals with mental retardation). Under HCBS-waivers, the Secretary of the Department of Health and Human Services is permitted to waive Medicaid's federal "statewideness" requirement to allow states to cover HCBS services in limited geographic areas. The Secretary also may waive the requirement that services be comparable in amount, duration, or scope for individuals in particular eligibility categories. HCBS waivers authorize states to limit the number of individuals served and to target certain populations (e.g., individuals with developmental disabilities, brain injuries, or the aged). For HCBS waivers to be approved, states also must meet other requirements, such as a cost-effectiveness test, where average Medicaid expenditures for waiver participants do not exceed costs that would have been incurred if these individuals resided in institutions. All states cover HCBS for certain groups of Medicaid beneficiaries. In 2005, 35 states and the District of Columbia used the Medicaid personal care state plan benefit to provide services for individuals with disabilities. Forty-nine states and the District of Columbia have at least one HCBS-waiver for elderly individuals, younger adults with physical disabilities, or individuals with mental retardation or developmental disabilities. States also use HCBS waivers to provide services for other groups, such as individuals with HIV/AIDS or brain injuries. Table 1 summarizes the number of states offering HCBS benefits, the number of beneficiaries receiving services, and total expenditures. <2. Home and Community-Based Services State Plan Option: Section 6086 of the Deficit Reduction Act> Section 6086 of the Deficit Reduction Act of 2005 (DRA, P.L. 109-171 ) authorized a new optional benefit that allows states to cover limited HCBS without waivers. The requirements of this new optional benefit, Section 1915(i) of SSA, differ from other Medicaid state plan benefits (e.g., home health and personal care) and the Section 1915(c) HCBS-waivers. Table 2 compares key features of the new HCBS benefit with existing Medicaid program authorities. Section 1915(i) authorizes states to offer HCBS without a waiver beginning in January 2007. States can define beneficiaries' needs, and do not have to require that beneficiaries meet institutional levels of care to qualify for services. Also under 1915(i), states may amend their Medicaid plans without demonstrating budget neutrality as they do under 1915(c) waivers. Section 1915(i) permits states to offer fewer HCBS services than are permitted under 1915(c) waivers and to restrict eligibility to beneficiaries whose incomes fall below 150% of FPL. States also may offer self-direction under the 1915(i) option and may cap enrollment. CMS is developing regulations to guide states that want to offer HCBS under 1915(i) and plans to issue a notice of proposed rule making in early 2008. CMS also conducted training on the new state plan option for its regional office staff and for states' Medicaid staff as well as drafting a state plan amendment (SPA) preprint. Four states have submitted SPAs to provide HCBS services as permanent Medicaid benefits. Three HCBS-SPAs are under review by CMS. Iowa was the first state to submit a HCBS-SPA and was approved in April 2007 to provide HCBS services to 3,700 seriously mentally ill beneficiaries in the first year and 4,500 beneficiaries by year five. State utilization of the 1915(i) option may lag behind expectations created by the recent rapid growth of HCBS waivers and program cost estimates. Data on states' plans for adopting the 1915(i) HCBS option are limited, but an October 2007 survey of states on their LTC plans indicates that two states planned to submit HCBS-SPAs, while 16 other states and a territory (Guam) were considering the option. The remainder of this section discusses issues that could affect states' utilization of the Section 1915(i) option. Under 1915(c) waivers, states may use higher income standards for determining beneficiaries' eligibility for services than income standards under 1915(i) up to 300 % of SSI for 1915(c) versus 150% of the federal poverty level (FPL) for 1915(i). The more restrictive income eligibility standards under 1915(i) limits states from "converting" beneficiaries in existing 1915(c) waivers to 1915(i)-SPAs, because many states' permit beneficiaries to have higher incomes than 150% of the FPL in 1915(c) waivers. In addition to more restrictive eligibility standards, 1915(i) is limited to covering only services described in Section 1915(c) paragraph 4(B). The 1915(i) SPA option prevents states from adding other services requested by states on a case-by-case basis, as permitted under 1915(c) waivers. Under 1915(c) waivers states have used the "other services clause" to address the needs of specific beneficiary groups. For example, HCBS-waivers have been used to expand services to include transportation, apartment deposits, and even home modifications necessary for community living. Under 1915(c) waivers, states may define eligibility based on diseases or conditions, such as brain injury or HIV/AIDS, or geographic area, such as a city or county. Under 1915(i), however, states must create different ways to measure qualification for services that rely on individuals' needs for service. Under HCBS-waivers, Medicaid may use common medical measures, such as diagnoses, but assessing individuals' support needs using activities of daily living can be more difficult to measure for some populations.

Section 6086 of the Deficit Reduction Act of 2005, (DRA, P.L. 109-171), established a optional Medicaid benefit giving states a new method with which to cover home- and community-based (HCBS) services for Medicaid beneficiaries, starting in January 2007. Prior to DRA's enactment, states needed HCBS waivers authorized in Section 1915(c) of the Social Security Act (SSA) to cover these services. The HCBS-state plan optional benefit, Section 1915(i), differs from both existing Medicaid state plan benefits and Section 1915(c) waivers. This report outlines requirements of the new 1915(i) benefit and compares key features of this benefit with other Medicaid state plan benefits and 1915(c) waivers. It will be updated periodically.

RS21311 -- U.S. Use of Preemptive Military Force Updated April 11, 2003 <1. Background> During the summer and fall of 2002, the question of the possible use of "preemptive" military force by the United States to defend its security was raised byPresident Bush and members of his Administration, including possible use of such force against Iraq. Inmid-September 2002, the Bush Administrationpublished The National Security Strategy of the United States which explicitly states that the UnitedStates is prepared to use preemptive military force toprevent U.S. enemies from using weapons of mass destruction (WMD) against it or its friends or allies (1) The following analysis reviews the historical recordregarding the uses of U.S. military force in a preemptive manner. It examines and comments on military actionstaken by the United States that could bereasonably interpreted as preemptive in nature. For purposes of this analysis a preemptive use of military force isconsidered to be the taking of military actionby the United States against another nation so as to prevent or mitigate a presumed military attack oruse of force by that nation against the United States. Thedeployment of U.S. military forces in support of U.S. foreign policy, without their engaging in combat, is not deemed to be a preemptive use of military force. Preemptive use of military force is also deemed to be an action addressed at a specific and imminentmilitary threat, requiring timely action (2) By contrast, a "preventive war" would be a significant use of military force against a nation as a "preventive"action, to forestall a presumed military threat fromthat nation at some point in the future, whether months or years. Such an action would be outside the traditionalparameters of the concept of preemptive use ofmilitary force. It would be a significant expansion of the customary understanding of the elements that define suchan action. However, such an expansiveview of military preemption is contained in the Bush Administration's September 2002 U.S. National Strategydocument, and in related public policystatements by senior Bush Administration officials. Thus, various instances of the use of force that are examinedherein could, using a less stringent definition,be argued by some as examples of preemption by the United States.CRS:Logo: The discussion below is based uponour review of all noteworthy uses ofmilitary force by the United States since establishment of the Republic. Historical overview. The historical record indicates that the United States has never, to date, engaged in apreemptive military attack, as traditionally defined, against another nation. And only once has the United Statesever unilaterally attacked another nationmilitarily prior to its first having been attacked or prior to U.S. citizens or interests firsthaving been attacked. That instance was the Spanish-American War of1898. In that military conflict, the principal goal of United States military action was to compel Spain to grant Cubaits political independence. An act ofCongress, passed in April 1898, just prior to the U.S. declaration of war against Spain, explicitly declared Cuba tobe independent of Spain, demanded thatSpain withdraw its military forces from the island, and authorized the President to use U.S. military force to achievethese ends, if necessary. (3) Spain rejectedthese demands, and an exchange of declarations of war by both countries soon followed thereafter. (4) Although U.S. military actions against Spain werebasedon special U.S. foreign policy considerations, they occurred after war was formally declared, and cannot be fairlycharacterized as preemptive in nature. During the Cuban Missile crisis of 1962, preemptive use of military force to destroy Soviet missiles that had beenintroduced into Cuba was very seriously consideredin the early days of the crisis, but the matter was ultimately resolved diplomatically. Although the United Statesdid not use military force "preemptively," it diddeploy military forces as an adjunct to its diplomacy, while reserving its right to take additional military actions asit deemed appropriate. The circumstances surrounding the origins of the Mexican War are somewhat controversial in nature-but the term preemptive attack by the United States doesnot apply to this conflict. During, and immediately following the First World War, the United States, as part ofallied military operations, sent military forcesinto parts of Russia to protect its interests, and to render limited aid to anti-Bolshevik forces during the Russian civilwar. In major military actions since theSecond World War, the President has either obtained congressional authorization for use of military force againstother nations, in advance of using it, or hasdirected military actions abroad on his own initiative in support of multinational operations such as those of theUnited Nations or of mutual securityarrangements like the North Atlantic Treaty Organization (NATO). Examples of these actions include participationin the Korean War, the 1990-1991 PersianGulf War, and the Bosnian and Kosovo operations in the 1990s. The use of military force against Iraq in 2003,while controversial within the internationalcommunity, was justified by the United States, the United Kingdom and others, as an action necessary to enforceexisting U.N. Security Council resolutions thatmandated Iraqi disarmament. Yet in all of these varied instances of the use of military force by the United States,such military action was a "response," afterthe fact , and was not preemptive in nature, as traditionally defined. Central American and Caribbean interventions. This is not to say that the United States has not used its militaryto intervene in other nations in support of its foreign policy interests. However, U.S. military interventions,particularly a number of unilateral uses of force inthe Central America and Caribbean areas throughout the 20th century were not preemptive in nature. What led the United States to intervene militarily innations in these areas was not the view that the individual nations were likely to attack the United Statesmilitarily . Rather, these U.S. military interventionswere grounded in the view that they would support the Monroe Doctrine, which opposed interference in the Westernhemisphere by outside nations. U.S.policy was driven by the belief that if stable governments existed in Caribbean states and Central America, then itwas less likely that foreign countries wouldattempt to protect their nationals or their economic interests through their use of military force against one or moreof these nations. Consequently, the United States, in the early part of the 20th century, established through treaties with the Dominican Republic (in 1907) (5) and withHaiti (in1915) (6) , the right for the United States to collect anddisperse customs income received by these nations, as well as the right to protect the Receiver General ofcustoms and his assistants in the performance of his duties. This effectively created U.S. protectorates for thesecountries until these arrangements wereterminated during the Administration of President Franklin D. Roosevelt. Intermittent domestic insurrectionsagainst the national governments in bothcountries led the U.S. to utilize American military forces to restore order in Haiti from 1915-1934 and in theDominican Republic from 1916-1924. But thepurpose of these interventions, buttressed by the treaties with the United States, was to help maintain or restorepolitical stability, and thus eliminate thepotential for foreign military intervention in contravention of the principles of the Monroe Doctrine. Similar concerns about foreign intervention in a politically unstable Nicaragua led the United States in 1912 to accept the request of its then President AdolfoDiaz to intervene militarily to restore political order there. Through the Bryan-Chamorro treaty with Nicaragua in1914, the United States obtained the right toprotect the Panama Canal, and its proprietary rights to any future canal through Nicaragua as well as islands leasedfrom Nicaragua for use as militaryinstallations. This treaty also granted to the United States the right to take any measure needed to carry out thetreaty's purposes. (7) This treaty had the effect ofmaking Nicaragua a quasi-protectorate of the United States. Since political turmoil in the country might threatenthe Panama Canal or U.S. proprietary rights tobuild another canal, the U.S. employed that rationale to justify the intervention and long-term presence of Americanmilitary forces in Nicaragua to maintainpolitical stability in the country. U.S. military forces were permanently withdrawn from Nicaragua in 1933. Apartfrom the above cases, U.S. militaryinterventions in the Dominican Republic in 1965, Grenada in 1983, and in Panama in 1989 were based uponconcerns that U.S. citizens or other U.S. interestswere being harmed by the political instability in these countries at the time U.S. intervention occurred. While U.S.military interventions in Central Americaand Caribbean nations were controversial, after reviewing the context in which they occurred, it is fair to say thatnone of them involved the use of "preemptive" military force by the United States. (8) Covert action. Although the use of preemptive force by the United States is generally associated with the overt use of U.S. military forces, it is important to note that the United States has also utilized "covert action" by U.S.government personnel in efforts to influencepolitical and military outcomes in other nations. The public record indicates that the United States has used this formof intervention to prevent some groups orpolitical figures from gaining or maintaining political power to the detriment of U.S. interests and those of friendlynations. For example, the use of "covertaction" was widely reported to have been successfully employed to effect changes in the governments of Iran in1953, and in Guatemala in 1954. Its use failedin the case of Cuba in 1961. The general approach in the use of a "covert action" is reportedly to support localpolitical and military/paramilitary forces ingaining or maintaining political control in a nation, so that U.S. or its allies interests will not be threatened. Noneof these activities has reportedly involvedsignificant numbers of U.S. military forces because by their very nature "covert actions" are efforts to advance anoutcome without drawing direct attention tothe United States in the process of doing so. (9) Suchprevious clandestine operations by U.S. personnel could arguably have constituted efforts at preemptiveaction to forestall unwanted political or military developments in other nations. But given their presumptive limitedscale compared to those of majorconventional military operations, and also that they were not used to preempt an imminent military attack on theUnited States, it seems more appropriate toview U.S."covert actions" as adjuncts to more extensive U.S. military actions in support of U.S. foreign policy. Assuch, these U.S. "covert actions" do notappear to be true case examples of the use of preemptive military force by the United States. Cuban missile crisis of 1962. The one significant, well documented, case of note, where preemptive militaryaction was seriously contemplated by the United States, but ultimately not used, was the Cuban missile crisis ofOctober 1962. When the United States learnedfrom spy-plane photographs that the Soviet Union was secretly introducing nuclear-capable, intermediate-rangeballistic missiles into Cuba, missiles that couldthreaten a large portion of the eastern United States, President John F. Kennedy had to determine if the prudentcourse of action was to use U.S. military airstrikes in an effort to destroy the missile sites before they became operational, and before the Soviets or the Cubansbecame aware that the U.S. knew they werebeing installed. While the military preemption option was seriously considered, after extensive debate among hisadvisors on the implications of such anaction, President Kennedy undertook a measured but firm approach to the crisis that utilized a U.S. naval"quarantine" of the island of Cuba to prevent receiptof additional missile shipments from the Soviet Union as well as military supplies and material for the existingmissile sites, while a diplomatic solution wasaggressively pursued. At the same time, the U.S. reserved the right to employ the full range of military actionsshould diplomacy fail. This approach wassuccessful, and the crisis was peacefully resolved. (10) Iraq War of 2003. In the case of the Iraq War of 2003, the United States has used significant military forceagainst that nation even though the U.S. was not attacked first by Iraq. Various public speeches made by the BushAdministration during the summer and fallof 2003 noted that the United States was prepared to engage in "preemptive" military action against unfriendlynations in advance of their becoming an"imminent" military threat to the U.S. In September 2002, the Bush Administration published The NationalSecurity Strategy of the United States of America which explicitly states that the United States is prepared to use preemptive military force to prevent enemies of theUnited States from using weapons of massdestruction (WMD) against it or its allies and friends. The timing of the release of this strategy document, togetherwith statements of senior BushAdministration officials regarding the potential threat to the U.S. that Iraq's WMD program posed, led to speculationthat Iraq could be the first case where theexpansive approach to use of preemptive military force would be applied. Subsequently, the Bush Administrationsought and obtained passage of U.N. SecurityCouncil Resolution 1441 on November 8, 2002, which, among other things, noted that Iraq was still in materialbreach of its obligations under prior U.N.Security Council resolutions to destroy and not to seek to obtain various proscribed weapons and capabilities. UNSCR 1441 further noted that "seriousconsequences" would result from failure of Iraq to comply unconditionally with its obligations contained in the U.N.Resolutions. (11) When President Bush launched U.S. military action against Iraq on March 19, 2003, he stated he was doing so, with coalition forces, to enforce existing UNSecurity Council Resolutions that had been violated by Iraq since the Gulf War of 1990-1991--Security CouncilResolutions that expressly contemplated theuse of force should Iraq not comply with them--and also to protect the security of the U.S. In a March 19, 2003report to Congress on the issue, President Bush noted his conclusion and determination that further diplomatic efforts to enforce the U.N. imposed obligation thatIraq destroy its WMD would not succeed,thus requiring the use of military force to achieve Iraqi disarmament. The President did not explicitly characterizehis military action as an implementation ofthe expansive concept of preemptive use of military force against rogue states with WMD contained in his NationalSecurity Strategy document of September2002. (12) However, as U.S. military action wasjustified to protect the security of the United States from a prospective , but not imminent threat of military actionby Iraq, it could be argued that, measured against the traditional concept of preemptive use of military force, thiswas an act of "preventive war"by the UnitedStates.

This report reviews the historical record regarding the uses of U.S. military force ina "preemptive" manner, anissue that emerged during public debates prior to the use of U.S. military force against Iraq in 2003. It examinesand comments on military actions taken by theUnited States that could be reasonably interpreted as preemptive in nature. For purposes of this analysis apreemptive use of military force is considered to bethe taking of military action by the United States against another nation so as to prevent or mitigate a presumedimminent military attack or use of force by thatnation against the United States. The deployment of U.S. military forces in support of U.S. foreign policy, withouttheir engaging in combat, is not deemed tobe a preemptive use of military force. This review includes all noteworthy uses of military force by the UnitedStates since the establishment of the Republic. A listing of such instances can be found in CRS Report RL32170, Instances of Use of United States ArmedForces Abroad, 1798-2003. For an analysis ofinternational law and preemptive force see CRS Report RS21314, International Law and the Preemptive Useof Force Against Iraq. This report will be updatedif significant events warrant.

<1. Introduction> The executive branch has exercised control over agency rulemaking through executive orders such as E xecutive O rder 12866 . This Executive Order requires executive agencies to submit significant rules to the Office of Information and Regulatory Affairs (OIRA) at the Office of Management and Budget (OMB) for review; however, it does not require the independent regulatory commissions (IRCs) to comply with these requirements. This report discusses the constitutionality and the potential legal effects of extending centralized review of rulemaking to the IRCs. <2. Overview of Federal Rulemaking> Federal agencies adopt rules to implement statutes that Congress has enacted. These rules, although established by an administrative agency, maintain the force of law. In order to be able to promulgate rules, Congress must grant that agency the power to do so through statute. To control the process by which agencies create these rules, Congress has enacted statutes, such as the Administrative Procedure Act (APA), that dictate what procedures an agency must follow to establish a final, legally binding rule. Unless an agency's authorizing statute provides for different procedures, the APA provides the default practice that all agencies must follow in order to promulgate rules. The APA provides for both formal and informal rulemaking procedures. The formal rulemaking procedures only need to be followed when an authorizing statute requires that a rulemaking proceed "on the record" after an opportunity for a hearing. These formal rulemaking procedures are rare and most agencies follow the informal, "notice and comment" rulemaking procedures outlined in the APA and discussed below. Under informal rulemaking procedures, an agency must first publish a notice of proposed rulemaking (NPRM) in the Federal Register . The NPRM must include "(1) a statement of the time, place, and nature of public rule making proceedings; (2) reference to the legal authority under which the rule is proposed; and (3) either the terms or substance of the proposed rule or a description of the subjects and issues involved." After providing notice through the Federal Register , the agency must allow "interested persons an opportunity" to comment on the proposed rule. Typically an agency will provide at least 30 days for public comment and this time period may be extended if the agency deems necessary. After the comment period has ended, the agency is required to review the public comments and may then issue a final rule. When publishing the final rule in the Federal Register , the agency must provide a "concise general statement" of the rule's "basis and purpose." The final rule may not go into effect until at least 30 days after it is published in the Federal Register , with certain exceptions. In addition to the APA, Congress has enacted numerous statutes that impose obligations on agencies when they engage in rulemaking procedures. Statutes such as the National Environmental Protection Act (NEPA), the Regulatory Flexibility Act (RFA), the Congressional Review Act (CRA), and the Paperwork Reduction Act (PRA) establish additional procedures and practices that the agencies must follow prior to establishing a finalized rule. Furthermore, the President has issued executive orders and guidance documents establishing additional requirements and procedures that agencies must follow before a rule can be finalized. <3. Executive Control of Agency Rulemaking> Numerous presidential administrations have attempted to maintain control over the agencies by establishing a centralized review process for certain agency rules. Notably, President Reagan's issuance of Executive Order (E.O.) 12291 required agencies to have proposed and final rules reviewed by OMB prior to publication. Upon election, President Clinton revised and replaced Reagan's order with E.O. 12866 but maintained the centralized review process for "significant regulatory actions." Clinton's E.O. 12866 was maintained by both the George W. Bush and Obama Administrations and remains in force today. When both the Reagan and Clinton Administrations issued their respective executive orders, they exempted statutorily designated IRCs from this centralized review process. Before discussing the requirements imposed by E.O. 12866, it is helpful to review briefly some of the features that make the IRCs generally insulated from presidential control. <3.1. What Are Independent Regulatory Commissions (IRCs)?> As mentioned, the centralized review portions of E.O. 12866 do not apply to the statutorily designated IRCs, also known as "independent regulatory agencies," identified in the PRA. These IRCs share several traits that arguably insulate the agencies from the President's direct control. These characteristics include (1) "for cause" removal; (2) structural designs; (3) bypass of OMB legislative clearance; (4) bypass of OMB review of agency rulemaking; (5) bypass of OMB budget submissions; and (6) independent litigating authority. For purposes of this report, we will only review the following traits "for cause" removal, structural designs, and OMB bypass. <3.1.1. "For cause" Removal and Structural Design> "For cause" removal protection provides an element of insulation from presidential direction, as opposed to those officers who serve at the pleasure of the President and may be removed at will. Typically, a removal provision may state that a member may be removed only "for cause" or for "inefficiency, neglect of duty, or malfeasance in office." Structural design also provides insulation from presidential control. Congress has established numerous commissions with several members that serve "set terms expiring at staggered intervals, [and] who could be removed by the President only upon a showing of sufficient cause." Other structural features may include an odd number of members of the commission, with no more than a simple majority appointed from one political party, who serve terms that tend to exceed the president's four-year term. A bipartisan composition of a board and fixed terms set at staggered intervals attempt to create a collegial body that is insulated from outside political pressure. <3.1.2. OMB Bypass (Legislative/Rules/Budget)> OMB acts as a coordination center for a variety of agency activities, which include reviewing legislative proposals and testimony to Congress; overseeing agency rulemaking; and approving budget requests. The primary purpose of these OMB clearance procedures is to ensure that any legislative proposals, rules issued, or budgetary requests are consistent with the President's policies and programs. Despite OMB's coordinative and supervisory role, the IRCs may be exempted by statute or executive order from OMB clearance procedures, thereby providing these agencies with greater independence from the President. For instance, Congress exempts many of the financial regulatory agencies from submitting their legislative recommendations to any other agency prior to their submission to Congress "if such recommendation, [or] testimony ... include[s] a statement indicating that the views expressed ... are those of the agency ... and do not necessarily represent the views of the President." As mentioned earlier, the IRCs are exempt from submitting their regulatory actions for OIRA review under E.O. 12866. Additionally, some of the IRCs, like the U.S. International Trade Commission (USITC) and Federal Communications Commission (FCC), are statutorily shielded from having their annual budget requests revised by OMB. <3.2. Executive Order 12866> Executive Order 12866 (Executive Order or E.O. 12866) has numerous components, one of which includes the establishment of "Centralized Review of Regulations" by OIRA within OMB. Only executive agencies are subject to the centralized review of agency rulemaking provisions, while the IRCs have been exempt from this process. The Executive Order defines an "agency" as "any authority of the United States that is an 'agency' under 44 U.S.C. 3502(1), other than those considered to be independent regulatory agencies, as defined in [44 U.S.C. Section 3502(5).]" For purposes of this report, agencies to which centralized review applies shall be referred to as "executive agencies." Section 6 of E.O. 12866, which establishes the centralized review process, requires an executive agency to submit to OIRA a list of its planned regulations and to identify all planned regulatory actions that the agency "believes are significant regulatory actions within the meaning of this Executive order." The Executive Order defines "significant regulatory action" to be any regulatory action that is likely to result in a rule that may: (1) Have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) Create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) Materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) Raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in this Executive order. OIRA, not the promulgating agency, makes the ultimate determination of whether a rule should be considered a "significant" rule. Executive agencies must submit all planned regulations, whether they determine them to be significant or not, and OIRA will make its own determination within 10 days of receiving the information on the proposed action. All "significant regulatory actions" are subject to review by OIRA prior to their promulgation. For any rulemaking that is deemed "significant," executive agencies must provide to OIRA the text of the regulation, a statement explaining the need for the regulation, an explanation of how the proposal will satisfy the need, and "an assessment of the potential costs and benefits of the regulatory action." Additionally, executive agencies must also submit a statement establishing that the regulatory action is consistent with established law and the President's priorities without unduly interfering with state and local governments. Any rule that is determined to be "economically significant" must meet further requirements. For these rules, executive agencies must provide a detailed cost-benefit analysis (CBA) of the proposed rule and must attempt to quantify those costs and benefits to the best of their ability. They must also perform a CBA for any reasonable alternatives and provide "an explanation why the planned regulatory action is preferable to the identified potential alternatives." OIRA generally has 90 days to complete its review of the proposed agency action to ensure it comports with the principles of E.O. 12866. An executive agency, to the extent permitted by law, is not allowed to finalize a rule by publishing it in the Federal Register until OIRA completes the review process. OIRA may return a proposed regulatory action to the executive agency "for further consideration" with an explanation detailing why OIRA believes the action fails to meet the requirements of E.O. 12866. This may be because the executive agency failed to provide an adequate CBA or, in the case of an economically significant action, failed to adequately consider reasonable alternatives to the proposed action. Additionally, OIRA could return the regulation for further consideration if it feels that the proposed action may conflict with the President's priorities or an action already taken or planned by another agency. Upon return, the executive agency must then reconsider the rule and address OIRA's concerns before publishing the rule. Any conflicts between OIRA and the executive agency are to be resolved by the President of the United States. <3.3. Authority to Subject Agency Rulemakings to Centralized Review> Two factors have caused questions to arise when evaluating the President's authority to unilaterally require executive agencies to submit their rules to OIRA for review. First, Congress has delegated to the various executive agencies, not the President himself, the authority to implement federal programs through the creation of rules. Second, Congress has not by statute authorized the President to establish a centralized review of the rules agencies are statutorily authorized to promulgate. Given this, could the President be exceeding his constitutional authority by taking such action without direct approval from the legislative branch? Under what authority is the President taking such action? One argument in support of the President's authority to require centralized review of agency rulemaking is the unitary executive theory. This theory is based on the argument that the founders vested all executive power in the President of the United States alone and gave him the power to "take Care that the Laws be faithfully executed." Proponents of the unitary executive theory generally maintain that the President should thus have full control over the executive branch and should be able to direct officers in fulfilling their statutory obligations. One proponent argues that "even if a statute grants discretion to the Secretary of State and explicitly prohibits presidential intervention in the decisionmaking process, the President retains the constitutional authority to substitute his own judgment for the Secretary's determination." Proponents of a strong unitary executive theory, therefore, have little difficulty in justifying the constitutionality of a centralized review process. The Department of Justice (DOJ) Office of Legal Counsel (OLC) issued an opinion in support of the Reagan Administration's E.O. 12291 that draws from some of the same principles of the unitary executive theory while acknowledging certain limits to the President's authority over executive officers. The crux of OLC's argument rests on the President's constitutional power to "take Care that the Laws be faithfully executed." The OLC opinion argues that the President's responsibility to ensure that all legislation is "faithfully executed" requires him to coordinate among the executive agencies as they implement a vast array of legislation through the rulemaking process. The Supreme Court, in Myers v. United States , interpreted the Take Care Clause to mean that the President shall have the authority to "supervise and guide" the executive officers in the administration of the statutes to ensure "unitary and uniform execution of the laws." By requiring the executive agencies to submit rules and CBAs for review, OLC concludes that the President is only acting in a supervisory capacity to "take Care" that the laws are being faithfully executed. The opinion argues that E.O. 12291 does not exceed the President's Article II powers because he is not divesting the executive agencies of their statutory authority to exercise their congressionally delegated powers; he is merely ensuring that the executive agencies under his control are implementing their statutes in a uniform manner, consistent with the President's priorities. Moreover, when adhering to E.O. 12291 would conflict with statutory obligations, OLC notes that agencies are only required to comply with the Executive Order "to the extent permitted by law." Another argument offered to support the President's authority to require centralized review of agency rulemaking is based on statutory interpretation, rather than a clear constitutional authority to take such action. An article by now Supreme Court Justice Elena Kagan, writing as a legal scholar, argues that Congress, when it delegates rulemaking authority to an executive agency in lieu of an IRC, has implicitly permitted the President to direct executive agency officials to reach certain conclusions. Though Kagan contemplates a scenario in which the President orders an executive agency to reach a certain conclusion on an issue delegated to that agency, this authority to direct an agency official could likely justify the authority to subject those agency rules to centralized review. Kagan's argument recognizes that Congress has the authority to limit the President's control over agency officials and their discretion to implement certain regulations. For instance, when Congress delegates decision-making authority to an IRC, the President may not interfere with the discretion given to that officer. However, she argues that when Congress has delegated authority to an executive branch agency, and has not specifically limited the President's authority to control that agency decision, these statutes reflect congressional intent to permit the President to exercise control over that decision. This is because Congress is well aware that executive officers are subordinate to the President, appointed by the President, removable by the President, and are otherwise subject to presidential oversight. Furthermore, Congress knows how to isolate a specific decision from the President's influence by delegating that decision to an IRC. Therefore, she argues when Congress is silent, it is implicitly giving the President ultimate control over that legal authority. This control over agency decision making is likely sufficient to enable the President to require OIRA review of executive agency rules and to resolve any disputes between OIRA and the agency. Another approach to examine the President's authority over executive agencies is by evaluating these executive orders under the tripartite framework from Justice Jackson's concurring opinion in Youngstown Sheet & Tube Co. v. Sawyer . Justice Jackson's concurring opinion set forth three types of circumstances in which presidential authority may be asserted and established a scheme for analyzing the validity of presidential actions in relation to constitutional and congressional authority. First, if the President has acted according to an express or implied grant of congressional authority, presidential "authority is at its maximum." Second, in situations where Congress has neither granted nor denied authority to the President, the President acts in reliance only "upon his own independent powers, but there is a zone of twilight in which he and Congress may have concurrent authority, or in which its distribution is uncertain." Third, in instances where presidential action is "incompatible with the express or implied will of Congress," the power of the President is at its minimum. In such a circumstance, presidential action must rest upon an exclusive Article II power. An argument could be made that the issuance of executive orders requiring OIRA review of executive agency rules is an action that falls within Jackson's second prong the "zone of twilight." Congress has never given the President express authority to require centralized review of agency rules. Additionally, Congress has never expressly denied the President the authority to establish such requirements. Therefore, under this argument, the President's authority to act by executive order would be placed in category two's "zone of twilight." Justice Jackson's opinion declared there are no specific rules to determine whether an action in this category is constitutional, but notes that the validity of the action will likely "depend on the imperatives of events and contemporary imponderables rather than on abstract theories of law." Justice Jackson's opinion seems to suggest that practical considerations should be evaluated when determining the scope of presidential authority to act in the "zone of twilight." It could be argued that evaluating the orders based on these practical considerations would lend support for the President's authority to issue such orders, given the seemingly general support for centralized review, the complex nature of the administrative state that must be coordinated, and Congress's apparent acquiescence on the issue. In contrast, others have argued that the President's imposition of centralized review without congressional authorization runs afoul of the separation of powers under the tripartite framework. This argument notes that Congress has not delegated by statute, impliedly or expressly, the authority to require a centralized review of agency rules. In fact, the argument posits that Congress has impliedly denied the President the authority to assume this type of control over the rulemaking process. Congress's expansive use of the legislative veto, early congressional responses to President Nixon's attempts to make policy through the OMB budget process, and congressional rejection of legislative proposals to create a central office to evaluate agency performance all may be viewed as actions taken by Congress to limit the President's authority in the sphere of agency policymaking. Following this approach, the President is viewed as acting in the third category under Justice Jackson's opinion from Youngstown. Under this argument, in order for the President's centralized review requirements to be constitutional, the President must be able to rely solely on his own Article II powers. Although unitary executive proponents, discussed above, argue that the President has the requisite authority to impose centralized review based solely on his Article II powers, some scholars argue that the Vesting Clause and Take Care Clause, discussed above, do not grant the President a broad power, but rather show that the President is intended to be an "agent of Congress," carrying out the legislative will. Opponents of the unitary executive theory note that the authority to "take Care" that the laws be executed does not imply the authority to execute them himself. Rather, when Congress delegates to a subordinate official, the subordinate official has ultimate control over the decision and the President must "take Care" that only that official exercises the delegated authority. If it were true that the President is acting within Justice Jackson's third category with his powers at a minimum, these powers could arguably not be enough to sustain the constitutionality of the executive orders. These executive orders requiring agencies to submit their regulations for presidential review, it may be argued, impermissibly interfere with Congress's delegation of authority to the specific agency and could be potentially struck down for unconstitutionally breaching Congress's powers. Debates about the constitutionality of these executive orders have mostly receded since their initial issuance. Most scholars and organizations now seem to agree that the President has the authority to conduct centralized review of the executive agency rulemaking process. One author notes that "the once rather vibrant legal and policy debate over the pros and cons of presidential review has gradually evolved into a fairly broad agreement that it is not only legal, but that if properly administered, it is essential to effective executive branch management." Presidential review of agency rulemaking has existed in some form since 1971 and the authority has been exercised under E.O. 12866 for nearly 20 years without any action from Congress to restrain the process. The implicit acquiescence of both Congress and the courts regarding the constitutionality of these orders appears to provide practical support for the proposition that the President has the authority to exercise centralized control over the executive agencies. Furthermore, although no courts have directly decided the constitutional validity of these executive orders, cases dealing with the President's authority to consult and advise his executive officers could arguably be viewed as offering support for the constitutional validity of centralized review. The U.S. Court of Appeals for the D.C. Circuit (DC Circuit), when determining whether the President could consult nonpublicly with his EPA Administrator regarding a proposed rule, stated The authority of the President to control and supervise executive policymaking is derived from the Constitution; the desirability of such control is demonstrable from the practical realities of administrative rulemaking. Regulations such as those involved here demand a careful weighing of cost, environmental, and energy considerations. They also have broad implications for national economic policy. Our form of government simply could not function effectively or rationally if key executive policymakers were isolated from each other and from the Chief Executive. This statement from the DC Circuit could be viewed as lending support to the principles outlined in the 1981 OLC opinion. The court notes that the President may "control and supervise executive policymaking," and appears to indicate that, in the complex realm of administrative law, effective coordination between the executive agencies and the President is arguably necessary if not desirable. Further questions, however, could arise regarding whether the President could extend this review to cover the IRCs. The following sections discuss whether the President has the constitutional authority to require centralized review of the IRCs' rulemakings or whether these IRCs must remain free from this type of executive influence. <4. Independent Regulatory Commissions and OIRA Review> Although many groups and scholars have called for the extension of centralized review to the IRCs, this extension has not yet occurred. The following section addresses whether the President has sufficient legal authority to extend such requirements to the IRCs, assuming there are adequate legal grounds for general OIRA review of agency rulemaking (described above). <4.1. President's Authority for Extending OIRA Review to the IRCs> Although bypassing OMB review is a hallmark trait of agency independence, prior presidential administrations have considered subjecting the IRCs to OIRA review. Both Presidents Reagan and Clinton obtained legal opinions from OLC, which concluded there is sufficient legal basis to apply the centralized review requirements to the IRCs. Determinations not to extend the CBA requirements to the IRCs were apparently due to political rather than legal impediments. Yet, S. 3468 , a bill introduced by Senator Rob Portman in the 112 th Congress, would provide that: "The President may by Executive order require an independent regulatory agency to comply, to the extent permitted by law," with the centralized review requirements that are applicable to other executive agencies. While the stated purpose of this bill is to affirm the President's existing constitutional authority to take such action, as will be discussed below, the introduction of this proposal has also brought renewed attention to lingering questions regarding whether the President has the legal authority to extend requirements of the executive order to the IRCs without such congressional action. When President Reagan issued E.O. 12291 in 1981, both support and concern over the constitutionality of OMB's role in the administrative process had been expressed. The same arguments made in the 1981 OLC opinion in support of the constitutionality to conduct centralized review of regulations via executive order, discussed above, could also apply in extending the review requirements of E.O. 12866 to the IRCs. Relying on the Myers decision to reach its conclusion, OLC states it is "unclear to what extent Congress may insulate [non-independent] executive agencies from presidential supervision," given that the Court in Myers held that the President had an illimitable power of removal over "purely executive officers." While OLC applies Myers to explain the President's supervisory role over agencies whose heads are removable by the President at will, the Supreme Court's decision in Humphrey's Executor v. United States would likely provide guidance over whether the President may perform the same supervisory role with respect to agencies whose heads are restricted to removal "for cause." In Humphrey's Executor , the Court unanimously upheld the Federal Trade Commission (FTC) Act, which restricted the President's ability to remove an agency official. Specifically, the President could remove an FTC commissioner only on the basis of "inefficiency, neglect of duty, or malfeasance in office." Notably, the Court also pronounced in dicta that the congressional intent in creating the FTC was to create a body "independent of executive authority except in its selection [of commissioners]." A separate OLC opinion, which discussed the application of E.O. 12291 to the IRCs, wrestles with this characterization of the FTC, as it serves as a model for many of the IRCs. OLC lists several reasons why the dicta would not control whether the President has authority to supervise the IRCs in rulemaking. Among these reasons, OLC contends that insulation from the President for purposes of agency adjudication was not "pertinent to supervision of rulemaking," and the Court had not considered that "Executive Branch and independent agencies engage in rulemaking in a functionally indistinguishable fashion." It also underscores the President's other statutory powers over the IRCs, which "recognize the legitimacy of some presidential influence in the activities of independent agencies ... " Although Humphrey's Executor affirmed congressional intent to minimize presidential supervision of the IRCs, OLC ultimately concludes this does not prevent the President from "supervis[ing] [the IRCs] as necessary to ensure that they are faithfully executing the laws, although [the President] may not displace their substantive discretion to decide particular adjudicative or rulemaking matters." The OLC argument in favor of presidential supervision over the administrative process appears to draw from the principles which are at the root of the unitary executive doctrine. Under this view, despite the intent to have an agency insulated from presidential control, the "Constitution makes no provision for a category of agencies existing 'outside' the executive, legislative, and judicial branches. The President is the constitutionally specified agency of the Congress in implementation of federal law." Put another way, the "law that delegates authority to an independent regulatory commission, like the law that places final decision in the hands of cabinet officials, is constitutional and thus part of the body of law to the faithful execution of which the President is obliged to see." A statutory approach could also be taken in examining whether the President has authority to include the IRCs within E.O. 12866. The terms of removal of executive officers may assist in analyzing if Congress has granted authority to the President to supervise the IRCs, which informs whether these agencies may be subject to review requirements via executive order. Although there are no definitions for these removal terms, see discussion infra , a narrow interpretation of removal would mean the President is limited to firing the IRC heads for reasons unrelated to policy that is, "the President may discharge people for corruption ('malfeasance in office'), for refusing to do their jobs ('neglect of duty'), or for more general dereliction in the sense of gross incompetence ... ('inefficiency')." This interpretation would likely preclude the President from supervising an IRC's policy choices, such that he would have little authority to extend the Executive Order. A broad interpretation of the terms, on the other hand, would mean the President could remove an agency member "for any number of actual or perceived transgressions" of presidential will. Under this interpretation, the President could have a "high degree of authority over the policy choices of independent agencies," in which case "inclusion of [the IRCs] within the executive order is plainly lawful, simply as a statutory matter." Alternatively, at least one scholar suggests that the Court's latest removal decision in Morrison v. Olson potentially offers new guidance on the scope of the President's supervisory powers. After Morrison , the modified test on the constitutionality of a statutory removal restriction is whether the law "impedes the President's ability to perform his constitutional duty." This shift demonstrates the Court "moving away from loose conceptions that whole agencies have a special constitutional status outside the executive branch, and toward a more focused inquiry whether the President has been denied a supervisory role that is appropriate to the particular function involved." Accordingly, rather than examining whether the President could extend executive order requirements to the IRCs as whole, the new inquiry would be "whether the executive's accountability can be trusted" and "whether political accountability would interfere with successful performance of the function." This would involve identifying rulemaking programs on a case-by-case basis to determine whether the President may supervise agency rulemaking. The legal arguments against application of E.O. 12866 to executive agencies, discussed above, would also apply to the IRCs. However, while an analysis under Justice Jackson's concurrence from Youngstown could lead to the conclusion that coordinating regulatory review of executive agencies by executive order would not violate separation of powers principles, the outcome could be different when applying the tripartite framework to the IRCs. The third prong of the framework states that where presidential action is "incompatible with the express or implied will of Congress," the power of the President is at its minimum. There is no express congressional prohibition on the President conducting centralized review on executive agencies or the IRCs. However, the question with respect to the IRCs is whether an inference may be drawn that it is the "implied will of Congress" the President refrain from a supervisory role over the IRCs, based on congressional intent to insulate the IRCs, as well as statutory provisions that secure OMB bypass or presidential bypass for some IRCs. If such were the case, the presidential action must rest upon an exclusive power. This would likely call into question whether it would be sufficient for the President to take such action by relying solely on the general authority vested to him as head of the executive branch, and his authority to "take Care" the laws be executed faithfully. Notably, if S. 3468 were to become law, the first prong under Youngstown would likely be satisfied. As the President would be extending the Executive Order pursuant to an express grant of congressional authority, it is likely there would be little question that such action was valid. <5. Recourse for IRC Noncompliance> If the President were to amend E.O. 12866 to include the IRCs, this raises the question of what types of action may be taken to enforce agency compliance. If an agency disregarded the Executive Order, could the President fire a member of an IRC, who has "for cause" removal protection? Or, could action be taken through the courts to enforce compliance? Alternatively, Congress could codify the provisions of E.O. 12866, which has been previously considered. A statute mandating compliance with the OIRA review process could affect the recourse available to the President and the availability of judicial review. <5.1. President's Recourse> Through OMB, the President arguably plays a purely supervisory role over the administrative process, with no authority to determine the outcomes of the agency's final judgment. It is therefore plausible that an agency could disregard an OIRA request to defer rulemaking or to reassess a proposed rule for lack of adequate CBA. In this situation, the only recourse within the President's control for agency noncompliance would be to remove the head of the agency, as he or she serves at the pleasure of the President. However, if an IRC were to disregard the OMB process, the question arises as to whether the President has grounds to remove the members of the agency if they have "for cause" removal protection. This, in turn, depends on what it means to be removed "for cause." Before proceeding to discuss the potential meaning of "for cause" removal, we must first discuss whether "for cause" removal applies to members of an IRC where the establishing statute is silent on removal. <5.1.1. Does "for cause" Removal Protection Apply to Members of the IRCs If the Statute Is Silent?> In the context of removal under the Appointments Clause, the Supreme Court has declared as a general matter: "[i]n the absence of a specific provision to the contrary, the power of removal is incident to the power of appointment." Under this principle, the presumption is if a statute is silent on removal, the appointing authority has the power to remove, unless prevented by law. Although a majority of the IRCs have explicit provisions in their statutes providing that members may be removed only "for cause" or "for inefficiency, neglect of duty, or malfeasance in office," some are silent on removal. These include, among others, the Securities and Exchange Commission (SEC), the National Credit Union Administration (NCUA), and the Federal Election Commission (FEC). Statutory silence on removal may raise the issue of whether members of these agencies may be removed only "for cause." For at these three agencies the SEC, NCUA, and FEC lower courts have inferred the application of a "for cause" removal restriction. In Wiener v. United States , the Supreme Court addressed whether President Eisenhower could remove a member of the War Claims Commission (WCC) despite the statute's silence on removal. Reviewing the legislative history of the War Claims Act of 1948 as well as the distinctive adjudicatory functions of the WCC, the Court concluded the President could not remove the member at will. It found many similarities between the WCC and the FTC, whose restriction on removal had been upheld in Humphrey's Executor . After likening the structure, functions, and purpose of the WCC to the FTC that is, the quasi-judicial functions of the WCC, and the congressional intent the WCC to be "free from control or coercive influence" the Court was "compelled to conclude that no such power [of at will removal] ... is impliedly conferred upon by statute simply because Congress said nothing about it." Subsequent courts that have also read into an otherwise silent statute a "for cause" removal restriction have generally followed the Court's approach in Wiener . In Swan v. Clinton , the DC Circuit reviewed the NCUA's "function, statutory language and legislative history" to determine whether its Board members enjoy removal protection during their appointed terms. The DC Circuit held that it would assume that Board members have removal protection during their appointed terms, because the legislative background was not so "ambiguous as not to permit us to discount the possibility that Congress did intend at least [removal protection during the] term." Similarly, in SEC v. Blinder , the federal court of appeals reviewed the structural design, as well as the nature of the SEC's functions (quasi-legislative/judicial), and found that it could assume, without deciding, that SEC commissioners, like the FTC commissioners in Humphrey's Executor , may be removed only for "inefficiency, neglect of duty, or malfeasance in office." The DC Circuit likewise found the FEC to be "patterned on the classic independent regulatory agency sanctioned ... in Humphrey's Executor " in which case it held that it could "safely assume that the President would at minimum have authority to discharge a commissioner for good cause if for no other." Although the holding in Wiener could apply broadly to the IRCs whose statutes are silent on removal, it is likely a court would act like the DC Circuit in Swan and review each of these commissions on a case-by-case basis to determine whether a "for cause" limitation on removal can be read into the establishing statute. However, it may be likely that the IRCs without an explicit removal provision and that are exempt from E.O. 12866 may be more similar to the FTC and WCC, such that a reviewing court would apply the rationale in Wiener , and a "for cause" removal restriction could be read into their statutes. As "for cause" removal protection applies to many of the IRCs by statute, and assuming that a "for cause" provision can be read into the statute of other IRCs, the next issue raised is whether noncompliance with the requirements of E.O. 12866 would be grounds upon which agency members may be removed "for cause." <5.1.2. Does Noncompliance with an Executive Order Give Rise to "for cause" Removal?> There does not appear to have been an occasion where the President has successfully removed, on an involuntary basis, an individual with "for cause" removal protection. Moreover, it remains unclear as to the type of conduct that could give rise to removal under such circumstances, as these terms have not been defined by statute or the courts. For example, in Humphrey's Executor , President Franklin Roosevelt had asked a Commissioner of the FTC for his resignation, stating, "I do not feel that your mind and my mind go along together on either the policies or the administering of the Federal Trade Commission." The Commissioner declined to resign, and the President notified him that he was removed from office. The Court stated that "the intent of the [FTC] act is to limit the executive power of removal to the causes enumerated, the existence of none of which is claimed here." This case provides a sense of the type of conduct that would not provide grounds for removal within a "for cause" standard. Although the Court refrained from defining the removal terms, its conclusion appears to indicate that merely holding political views that differ from the President does not constitute grounds upon which the President may remove an individual "for cause." Notably, both Congress and DOJ also have opined on the meaning of "good cause" in the context of the Independent Counsel position, at issue in Morrison v. Olson . From DOJ's point of view, removal for "good cause" could exist if an independent counsel "refused to obey a presidential order to grant immunity to the target of an investigation." The Senate rejected this interpretation, stating the removal protection was for the purpose of preventing the firing of an official "unless he or she engages in some type of misconduct [such as] taking a bribe or committing an impropriety." This coupled with the Court's decisions in Humphrey's Executor and Wiener where the Court indicated that removal had to involve the "rectitude" of the government official could signify a more limited ability of the President to fire agency heads with "for cause" removal protection. On the other hand, the Court in Bowsher v. Synar noted that the applicable statute conferred "very broad" removal power upon Congress, whereby the Comptroller General could be removed for "any number of actual or perceived transgressions of legislative will." Legal scholars have suggested that "for cause" provisions could be interpreted broadly so the President may remove an IRC member "under a broad array of circumstances, including a commissioner's frequent or important failure to follow the President's wishes with respect to what is required by sound policy." In addition, this could include removal of an IRC head for refusing to follow certain presidential directives, such as an order to conduct CBA of a proposed regulation. The parameters for the conduct which give rise to removal "for cause" will remain less than clear, absent guidance by the courts or Congress. Were an IRC to disregard a presidential directive to follow OIRA review on proposed regulation, it appears uncertain whether this would constitute grounds by which the President could remove a member of an IRC "for cause." Thus, the President may have little or limited recourse to enforce an IRC's compliance with the Executive Order. Notably, S. 3468 , as discussed above, would not require the IRCs to comply with E.O. 12866 by statute; rather, the bill would authorize the President to require such conduct by executive order. The bill does not address whether noncompliance could constitute grounds for removal. It only requires the head of the agency, who does not comply with the executive order, to submit explanations of noncompliance with the proposed and final significant rule. Thus, even if S. 3468 became law and the President chose to extend to centralized review requirements to the IRCs, the President would face the same limits on enforcing IRC compliance, given the uncertainties of what constitutes "for cause" removal. Were Congress to codify the statutory provisions of E.O. 12866 such that the IRCs are mandated to comply with the centralized review procedures, it may still remain unclear whether noncompliance with a statute would give the President "cause" to fire an agency head. As discussed, it is uncertain what conduct permits the President to remove an official "for cause." Although it is less clear whether noncompliance with an executive order would be grounds for removal under a "for cause" standard, a persuasive argument could be made that noncompliance with a statute rises to the level of removal "for cause." A reviewing court may find that failing to comply with a statutory directive more clearly constitutes "neglect of duty" or "malfeasance of office." <5.2. Judicial Recourse> In addition to the recourse available to the President, discussed above, individuals could challenge the validity of an agency rule if the agency fails to comply with the requirements of centralized review. However, due to restrictions on judicial review contained in E.O. 12866, judicial review would only be available if Congress, through statute, permitted the courts to hear cases regarding compliance with centralized review requirements. The following sections discuss the limitations on judicial review contained in E.O. 12866 and the potential for judicial review if Congress authorizes the courts to hear challenges. <5.2.1. Executive Order 12866 Restricts Judicial Review> Although compliance with rulemaking procedure requirements that are established by statute are often subject to judicial review, the final section of E.O. 12866 provides that there shall be no judicial review for agency compliance with the order. Section 10 of Executive Order 12866 declares: Nothing in this Executive order shall affect any otherwise available judicial review of agency action. This Executive order is intended only to improve the internal management of the Federal Government and does not create any right or benefit, substantive or procedural, enforceable at law or equity by a party against the United States, its agencies or instrumentalities, its officers or employees, or any other person. Therefore, no individual may question the validity of an agency action for noncompliance with the centralized review procedures set forth by E.O. 12866. If the President were to extend the centralized review of rulemaking to the IRCs, it seems clear that the preclusion of judicial review would also extend to these IRCs. Courts have ruled that E.O. 12866 and its predecessor orders have effectively removed questions regarding compliance with the order from judicial scrutiny. In 2009, the United States Tax Court held that E.O. 12866 precluded a challenge to whether a regulation was actually a "significant regulatory action" requiring review by OIRA. In that case, the petitioner argued that the IRS violated E.O. 12866 when the agency failed to identify the challenged temporary income tax regulation as a "significant regulatory action" and submit it to OIRA for review. However, the court quoted Section 10 of E.O. 12866 and dismissed the argument swiftly by stating "petitioner has no right to challenge compliance with Executive Order 12866." Similarly, in an earlier case that involved Reagan's E.O. 12291, the U.S. Court of Appeals for the Sixth Circuit ruled that the order's provisions precluding judicial review established that no challenge could be made against an agency for noncompliance. From these decisions, it seems to be well established that Section 10 of E.O. 12866 effectively precludes judicial review of compliance with the order. <5.2.2. Judicial Recourse for Noncompliance with Statute> Although E.O. 12866 precludes judicial review, Congress could enact a statute that would require agencies, both executive agencies and the IRCs, to comport with centralized review and subject their compliance to judicial scrutiny. If compliance with the centralized review process were to be subject to judicial review, what effect would this have on the IRCs and executive agencies? Review of agency actions for compliance with the centralized review process, such as performing an adequate CBA, would provide courts with another avenue to set aside or vacate a rule for failure to comply with rulemaking procedures. If an agency failed to follow the statutorily imposed review requirements, claims could be brought under the APA challenging agency actions as arbitrary or capricious or otherwise not in compliance with the law. Existing decisions can provide an illustration for how agencies might be held to comply with CBA requirements. The remainder of this section discusses cases brought against the SEC for failure to consider the costs and benefits of their regulatory actions. Although the IRCs are not subject to the OIRA review process, many of them are required to consider the costs and benefits of their rules. However, such obligations are not imposed by executive order, but rather by statute. For example, the Investment Company Act (ICA) obligates the SEC to consider the economic effects of a new rule. If the SEC promulgates a rule without adequately assessing the economic impacts, a court can vacate the rule as an arbitrary or capricious action under the APA. Thus, when courts are permitted to review the economic analyses of an agency, the imposition of the agency's rules may be delayed by possible court action. The DC Circuit has vacated SEC rules and remanded rules back to the Commission for further consideration. The court has taken such action for the agency's failure to adequately consider the costs imposed by a rule, failure to consider possible alternatives to a rule, and for relying on insufficient data or unpersuasive studies. In 2005, the DC Circuit remanded to the SEC for further consideration a rule that required mutual funds to have independent directors represent at least 75% of the board of directors in order to qualify for certain exemptions. The court held that, in promulgating the rule, the SEC did not adequately consider the costs that would be imposed on mutual funds. The SEC argued that there was no "reliable basis for determining" how mutual funds would seek to comply with the requirement, and therefore it could not easily determine the potential costs. The court noted that this did not relieve the SEC from its obligation to estimate, as best it could, the economic impact of the new requirement. The court held that the lack of an economic impact analysis violated the SEC's obligations under the ICA and APA. Furthermore, the court determined that the SEC had also failed to adequately consider alternatives to their promulgated rule, in violation of the APA. Although the SEC is not required to consider every possible alternative, the court noted that two dissenting Commissioners from the SEC raised the possible alternative and that it warranted adequate consideration. In 2011, in Business Roundtable v. SEC , the DC Circuit vacated another SEC rule, which would have required public companies to disclose information to shareholders regarding shareholder-nominated candidates for board of director positions. The court again noted that, pursuant to the ICA, the SEC had an obligation to "determine as best it can the economic implications of the rule." The court found numerous problems with the SEC's justifications for the rule and determined, among other things, that the Commission: relied on "relatively unpersuasive studies" while dismissing other studies; "discounted the costs ... but not the benefits" of the new rule; and established the rule without obtaining important data relating to the frequency of election contests. It determined the SEC's action to be arbitrary and capricious under the APA and vacated the rule. These cases illustrate that allowing a court to review an IRC's or executive agency's rule for compliance with centralized review requirements, such as performing an adequate CBA, could provide another tool for vacating or delaying the rule. If Congress considers subjecting agencies to such judicial review, it likely would be important for Congress to evaluate the potential policy and institutional implications as there could be more legal challenges to agency rules. <6. Conclusion> Federal agencies regularly adopt rules pursuant to the APA, which have the force of law, to implement the statutes and programs authorized by Congress. Beginning with President Reagan and continued by President Clinton, the executive branch, through OIRA, has maintained a centralized review process for "significant regulatory actions." The provisions of E.O. 12866 establish additional steps that executive agencies must follow before a rule can be finalized. Although debate surrounded whether the President has the authority to impose these procedural obligations on executive agencies, there seems to be fairly broad agreement that he has adequate legal grounds for doing so. IRCs, however, are exempt from E.O. 12866, but there has been consideration of extending these executive requirements to encompass the IRCs. Drawing from principles of the unitary executive, arguments have been made in favor of the President's authority to include IRCs in the OIRA review process as it is part of his constitutional authority to "take Care" that the laws are faithfully executed. Others, however, argue that the President does not have legal authority to act because Congress has not authorized this process and such action would be in contravention to Congress's implied will, as arguably evident by other statutes, to insulate the IRCs from presidential control. However, were the President to extend E.O. 12866 to include the IRCs or were Congress to codify the provisions of the Executive Order, questions arise as to the President's, as well as the courts', ability to enforce compliance. The President's direct recourse to take action against an IRC that disregards the Executive Order may be limited because members of the IRCs typically enjoy "for cause" removal protection. As the meaning of "for cause" has not been defined by Congress or the courts, it is unclear what conduct may permit the President to remove an IRC member. This may still be the case even if the provisions of E.O. 12866 were codified, although failure to follow a statutory requirement could be more credible grounds for removing a member of an IRC with "cause." Courts are unlikely to grant judicial review for an IRC's failure to comply with E.O. 12866, as there is a provision that expressly precludes judicial review for noncompliance. However, were judicial review provided via statute, claims could be brought against the IRCs under the APA challenging agency actions as arbitrary or capricious or otherwise not in compliance with the law.

Federal agencies regularly adopt rules, which have the force of law, to implement the statutes and programs authorized by Congress. Unless a statute directs otherwise, agencies generally must follow the requirements of the Administrative Procedure Act to promulgate rules. However, beginning with President Reagan, Presidents have maintained a centralized review process for "significant regulatory actions." Currently, Executive Order (E.O.) 12866, issued by President Clinton, imposes additional procedures agencies must follow before a rule can be finalized. This includes requiring agencies to submit proposed regulatory action to the Office of Information and Regulatory Affairs (OIRA) at the Office of Management and Budget (OMB) for review. Although E.O. 12866 applies to executive agencies, independent regulatory commissions (IRCs) are not required to submit their rules to OIRA for review. Debates have arisen among scholars and legislators as to whether the President has the authority to require both executive agencies and IRCs to submit their regulations for review by OIRA. In the 112th Congress, Senator Rob Portman introduced S. 3468, the Independent Regulatory Agency Analysis Act of 2012. Under this bill, the President could issue an executive order establishing centralized review procedures for IRCs. This report discusses the constitutionality and the legal effects of extending centralized review of rulemaking to IRCs.

<1. Introduction> On January 13, 2012, President Barack Obama announced that he would ask Congress to reinstate so-called presidential reorganization authority, and a legislative proposal that would renew this authority was conveyed to Congress on February 16, 2012. Bills based on the proposed language were subsequently introduced during the 112 th Congress in the Senate ( S. 2129 ) and the House ( H.R. 4409 ). Similar authority was available to Presidents periodically between 1932 and 1984. It allowed the President to present plans to reorganize executive branch departments and agencies to Congress that would be considered under an expedited parliamentary process. Should this authority be reinstated, the President indicated that his first submitted plan would propose consolidation of six business and trade-related agencies into one: U.S. Department of Commerce's core business and trade functions, the Export Import Bank, the Overseas Private Investment Corporation, the Small Business Administration, the U.S. Trade and Development Agency, and the Office of the U.S. Trade Representative. This report summarizes the repeated renewal and evolution of presidential reorganization authority from 1932 to 1984, as well as subsequent unsuccessful efforts to renew it since then. The report then discusses President Obama's request in the context of this background. Finally, the report provides analysis of the possible options for congressional consideration relative to this legislation. <2. Evolution of the President's Reorganization Authority> Between 1932 and 1981, Congress periodically delegated authority to the President that allowed him to develop plans for reorganization of portions of the federal government and to present those plans to Congress for consideration under special expedited parliamentary procedures. Under these procedures, the President's plan would go into effect unless one or both houses of Congress passed a resolution rejecting the plan, a process referred to as a "legislative veto." This process favored the President's plan because, absent congressional action, the default was for the plan to go into effect. In contrast to the regular legislative process, the burden of action under these versions of presidential reorganization authority rested with opponents rather than supporters of the plan. In 1984, the mechanism was amended to require Congress to act affirmatively in order for a plan to go into force. This arguably shifted the balance of power to Congress. The authority expired at the end of 1984 and subsequently has not been available to the President. Presidents used this presidential reorganization authority regularly, submitting more than 100 plans between 1932 and 1984. Presidents used the authority for a variety of purposes, from relatively minor reorganizations within individual agencies to the creation of large new organizations, including the Department of Health, Education, and Welfare (HEW), the Environmental Protection Agency, and the Federal Emergency Management Agency (FEMA). The terms of the authority delegated to the President varied greatly over the century. During some periods, Congress delegated relatively broad authority to the President, while during others the authority was more circumscribed. As noted above, the reorganization authority was refined and reauthorized on a number of occasions between 1932 and 1984. On some occasions, such as 1939, 1945, and 1949, Congress enacted a completely new statute. On other occasions, modifications were made by amendment of the preceding reorganization authority. As a result of these modifications, the statute currently laid out in the U.S. Code is structured very differently from the early statutes of 1932 and 1933. Nonetheless, all of the elements of the current statute are represented, though perhaps in embryonic form, in the authority's earliest incarnation. Each of the elements of the reorganization authority is integral to its overall scope and effect, but several of these more strongly influence the relative authority of the President and Congress, and the resulting balance of power between the two branches. These elements are the reorganization plan contents , the limitations on power , and the expedited parliamentary procedures . The provisions that define the potential scope of reorganization plan content, when combined with the provisions that further limit or prohibit certain reorganization plan content, set the boundaries of a reorganization that the President can propose under this special authority. The provisions that specify the parliamentary procedures to be used define the role of Congress in facilitating or impeding the enactment of a submitted plan. These procedures also define the requirements of the President during this process. Such requirements may be seen by the Administration as easing or making more difficult a plan's enactment and implementation. <2.1. History of Reorganization Authority> The roots of presidential reorganization authority can be traced to the Herbert Hoover Administration (1929-1933), and the statutory framework for this authority evolved throughout the middle of the 20 th century. Congress reshaped the contours of the authority in response to experience and political context. During successive renewals of the authority, Congress sometimes narrowed, and other times expanded, the scope of potential reorganization activities. In addition, the expedited procedures were altered in such a way that it became easier or harder to defeat one of the President's plans, though always easier than under the regular procedures. In general, the trend from the 1940s onward was to narrow the scope of potential activities and to make it easier for Congress to defeat a plan. The presidential reorganization authority was not continuous from 1932 to 1984; it lapsed for periods of less than two years on a number of occasions, and for longer periods from 1935 to 1939, from 1941 through 1945, from 1973 to 1977, and from early 1981 to late 1984. As discussed below, the type of expedited parliamentary procedure employed under the reorganization authority a "legislative veto" was found to be unconstitutional in 1983. The authority was modified to address this issue, and it was extended for approximately two months at the end of 1984. However, this version of reorganization authority was never used; the last plan was submitted in 1980, by President Jimmy Carter. The 1984 authority expired and therefore is not available to the President, but its provisions are listed at 5 U.S.C. Sections 901 et seq. Table 1 provides summary information, by President, regarding the various versions of this authority. The following sections summarize the development of this statutory mechanism. The text includes brief historical context, a summary of Presidents' requests for the authority and Congress's response, highlights of the changes to the authority over time, and a summary of the plans that were submitted under the authority. Congressional consideration of grants of expedited reorganization authority to the President often included debates over the constitutionality of the legislative veto mechanism that was, until 1984, a key component. Inasmuch as this set of procedures was found to be unconstitutional and has no longer been under consideration in the legislative proposals of recent years, these previous constitutional concerns are not described here. CRS specialists conducted a thorough research of the evolution of these procedures in 1980, however, and the resulting studies were published in a committee print. <2.1.1. The Economy Act of 1932 (Hoover)> The earliest antecedent of the reorganization authority that is currently in the U.S. Code dates to 1932. While Secretary of Commerce, Herbert Hoover had been a proponent of the idea that Congress should delegate to the President authority to propose reorganizations of the executive branch for the purposes of improved economy and efficiency, subject to some form of congressional disapproval. He continued to advance this view during his presidency. In 1932, Hoover requested this power, and, a few months prior to the 1932 presidential election, Congress provided the first version of the President's reorganization authority. The statute was enacted on June 30, 1932, during the first session of the 72 nd Congress (1931-1932). Under the act, the President was authorized to direct, by executive order, specified government reorganization actions. Each such executive order was subject to congressional review, and could be nullified by a resolution of disapproval, within 60 days, by either chamber. In the event of an adjournment of Congress within the 60-day period, the order could not become effective until 60 days following reconvening. The first session of the 72 nd Congress adjourned on July 16, 1932, and it did not reconvene until December 5, 1932. The period between enactment and adjournment 16 days seemingly would have been of insufficient duration to allow an executive order to go into effect under the congressional review and disapproval provision of the statute, even if it had been submitted upon enactment. Perhaps for this reason, President Hoover did not submit executive orders under the act to Congress until December 9, 1932. By this time, the President had been defeated in his bid for reelection, and he was completing his term in office. The act established definitions for federal government agencies that reflected the distinctions made among various entities at that time. It specified that, for purposes of the statute an "executive agency" was a "commission, board, bureau, division, service, or office in the executive branch," with executive departments excluded. An "independent executive agency," by contrast, was an "executive agency not under the jurisdiction or control of any executive department," that is, any freestanding entity that was not a department. Congress continued to distinguish between departments, subunits of departments, and other freestanding federal organizations in later versions of the statute. Under the act, an executive order could transfer all or part of an independent agency and/or its functions to a department or agency; transfer all or part of an agency from one department to another; consolidate or redistribute functions within a department or in its component agencies; or specify the name and functions of a consolidated entity, as well as the title, powers, and duties of its head. The use of these powers was to be consistent with the purposes identified by the statute: that is, to group, coordinate, and consolidate agencies according to major purpose; to reduce the number of agencies by combining those with similar functions; to eliminate overlap and duplication of effort; and to "segregate regulatory agencies and functions from those of an administrative and executive character." Within these broad parameters, limitations were placed on the range of actions the President could include in an executive order. The statute provided that "Whenever the President concludes that any executive department or agency created by statute should be abolished and the functions thereof transferred to another executive department or agency or eliminated entirely the authority granted in this title shall not apply." In other words, an executive order under this authority could not abolish an entire federal organization or eliminate all of its functions. During the remainder of his term, President Hoover issued 11 executive orders under the authority of the act. The orders directed the consolidation, coordination, and grouping of specified agencies and activities according to the major functions and purposes. As previously noted, the act included a mechanism for disapproval by a resolution of a single house of Congress, also known as a "one-house legislative veto." Following four days of hearings in late December 1932, the House Committee on Expenditures in the Executive Departments recommended that the House disapprove all of the executive orders. Among other reasons, the committee expressed reservations about binding the incoming President with the initiatives of the outgoing President. The committee's report, published on January 9, 1933, noted that the testimony of the President's Director of the Budget appeared to endorse this view: At the conclusion of his testimony Colonel [J. Clawson] Roop, in reply to a question of the chairman of the committee, expressed his personal opinion that it would be unwise to make the proposed changes on the eve of the inauguration of a new President. This view, coming as it did from the Director of the Budget, the official who was designated by the President to prepare the information upon which the orders were based, naturally had great weight with members of the committee. The House disapproved all 11 of Hoover's orders on January 19, 1933, thus preventing their implementation. <2.1.2. The Amendments of 1933 (Roosevelt)> On January 3, 1933, President Hoover spoke out against opposition to his reorganization orders, and he urged Congress to either allow them to take effect, or to provide an enhanced authority to the next President: The same opposition has now arisen which has defeated every effort at reorganization for 25 years.... The proposal to transfer the job of reorganization to my successor is simply a device by which it is hoped that these proposals can be defeated.... Any real reorganization sensibly carried out will sooner or later embrace the very orders I have issued.... Either Congress must keep its hands off now, or they must give to my successor much larger powers of independent action than given to any President if there is ever to be reorganization. And that authority to be effective should be free of the limitations in the law passed last year which gives Congress the veto power, which prevents the abolition of functions, which prevents the rearrangement of major departments. Otherwise, it will, as is now being demonstrated in the present law, again be make-believe. Consistent with the spirit of this statement, one day before leaving office, President Hoover signed the Treasury-Post Office Appropriations Act of March 3, 1933, which included an amendment to the 1932 statute that extended and strengthened reorganization authority for the benefit of his successor, President Franklin D. Roosevelt. The 1932 provisions were further amended on March 20, 1933, after Roosevelt took office. As amended in 1933, the act expressed a greater sense of urgency, in the context of the national economic downturn, to reorganize the federal government. The introductory statement of the statute began: The Congress hereby declares that a serious emergency exists by reason of the general economic depression; that it is imperative to reduce drastically governmental expenditures; and that such reduction may be accomplished in great measure by proceeding immediately under the provisions of this title. The changes in the amended act addressed some of the features that Hoover had perceived to be shortcomings in the original law: While the executive orders were to be submitted to Congress as before, the amended act provided no expedited method of congressional disapproval. Consequently, any executive order under the 1933 act would go into effect, absent enactment of a new law to the contrary. Under the amended act, the list of possible reorganizational actions was expanded to include the abolishment of a statutorily established agency or function. An exception to this authority was that an order could not abolish or transfer a department or all of its functions. Overall, the 1933 amendments expanded the range of actions the President could order under the authority, and it all but eliminated the ability of Congress to prevent such orders from taking effect. Unlike the original 1932 act, however, the amended statute had a sunset date: Executive orders under this authority had to be transmitted to Congress within two years from enactment. Despite the availability of expansive reorganization powers, Roosevelt did not undertake a comprehensive rearrangement of the executive branch. He did, however, issue a number of executive orders making various individual regroupings, consolidations, transfers, and abolitions of executive agencies and functions. According to one observer, the most important of these changes were: The creation of an Office of National Parks, Buildings, and Reservations in the Department of the Interior in order to consolidate all functions of administering public buildings and reservations, national parks, national monuments, and national cemeteries; the creation of divisions of Disbursement and Procurement in the Treasury Department to handle all of the government's disbursement and procurement activities; the abolition of the United States Shipping Board and the transfer of its functions and those of its subsidiary Fleet Corporation to the Department of Commerce; the consolidation of the separate Bureaus of Immigration and Naturalization into the Immigration and Naturalization Service in the Department of Labor; the transfer of the functions of the Federal Board for Vocational Education to the Interior Department, where they were assigned to the Office of Education; the consolidation of all the government's agricultural credit agencies in a newly created Farm Credit Administration; the transfer of the Office of the Alien Property Custodian and its functions to the Department of Justice; the abolition of the Board of Indian Commissioners and the transfer of its functions to the Department of the Interior; and the creation of a Division of Territories and Insular Possessions in the Department of the Interior to consolidate all the governments functions pertaining to territorial matters. In his message transmitting Executive Order 6166 to Congress, President Roosevelt stated that it would "effect a saving of more than $25,000,000." Whether such savings ultimately were achieved under the order is unknown. It does not appear, however, that the number of government agencies declined during this period. One later assessment observed that, "[i]n the eighteen months from the middle of 1933 to the end of 1934, 60 new administrative units were created, some by Congress and others by executive order in pursuance of general legislation. None of these took the departmental form, and many remain[ed] as permanent units." Roosevelt's public statements suggest that he did not believe, in general, that government reorganization would be a source of much savings. He expressed this clearly in his articulation of the administrative benefits of reorganization when he sought a renewal of the authority in 1937: The experience of states and municipalities definitely proves that reorganization of government along the lines of modern business administrative practice can increase efficiency, minimize error, duplication and waste, and raise the morale of the public service. But that experience does not prove, and no person conversant with the management of large private corporations or of governments honestly suggests, that reorganization of government machinery in the interest of efficiency is a method of making major savings in the cost of government. Large savings in the cost of government can be made only by cutting down or eliminating government functions. And to those who advocate such a course it is fair to put the question which functions of government do you advocate cutting off? <2.1.3. Reorganization Authority Proposal During the 75th Congress (1937-1938) (Roosevelt)> By mid-1935, the reorganization authority that had been provided in 1933 had expired. Organizational changes under this authority, as well as statutes enacted by Congress during the first years of the Roosevelt Administration, had created a federal bureaucracy seemingly in need of administrative reorganization and improved management. In early 1936, both Congress and the President initiated studies of potential reorganization of the executive branch. The results of these studies were not publically released until after the 1936 election and the beginning of both the President's second term and the 75 th Congress (1937-1938). The research on behalf of Congress, which was carried out by the Brookings Institution, resulted in a series of 15 reports that were submitted to Congress periodically during this time. The reports were combined into a 1,200 page Senate report that was published in August 1937. This report contained the results of "a study of the organization and administration of [then] existing functions and recommendations regarding the improvement of their administrative performance." As such, it did not speak to the question of presidential reorganization authority. By early 1937, the study conducted on the President's behalf had been completed and reported to the President and Congress. This work, which was carried out by the President's Committee on Administrative Management, also known as the Brownlow Committee, resulted in a legislative proposal that was forwarded to Congress. Included in the proposal was a new version of reorganization authority. The proposal differed from the 1933 amendments in a number of ways that arguably would have shifted more power from Congress to the President than had been the case in the previous law. For example, the President would not have been required to inform, or get approval from, Congress as part of the process. In addition, the authority, previously authorized for two years, would have been without expiration. Furthermore, the range of reorganizational tools available to the President would have been greater. Among other possible actions, he would have been empowered to establish or abolish any government agency or federal corporation, including a department. The proposal to reactivate and expand the authority was embedded in draft legislation that also would have made statutory changes to the federal government, including establishment of a Department of Social Welfare and a Department of Public Works. Consideration of the Administration's request for executive branch reorganization authority appears to have been influenced by a proposal by the President, during the same session of Congress, to reorganize the federal judiciary. By this time, President Roosevelt had completed his first term and much of his New Deal economic and social legislative agenda had been enacted. The Supreme Court, in turn, had invalidated some of these laws. The President's proposal to reorganize the judiciary, which has frequently been referred to as his "court-packing plan," would have temporarily expanded the number of members of the Supreme Court and allowed the President to appoint additional Justices. These new Justices presumably would have ruled more favorably on challenges to New Deal legislation. The President's plan was seen by some to be an effort to aggrandize the power of the executive. It proved to be controversial, and, opposed even by some Members of Congress of his own party, it was never enacted. In this context, the President's request for expanded executive branch reorganization authority was viewed by some as another effort to expand the President's power, in this case at the expense of the legislative branch. For example, during Senate debate on reorganization authority in early 1938, one Senator drew an explicit connection between the two efforts: [A] year ago, when like a vagrant meteor the Court-packing scheme burst upon the horizon of our Legislature, the people, both legislators and onlookers, stood aghast, astonished, and bewildered. Little time had they to appreciate what that bill then was; and no time had they to appreciate that the complement of that bill, the so-called reorganization bill, followed and was a part of the scheme which was then presented to the American people. A year ago we had two bills. The first was the Court-packing bill, which was designed to give the President control of the courts. The second was the reorganization bill, which was designed to give the President all the power Congress possessed. If either bill were successful, that which was desired would be brought about. The Court bill was not successful. Its purpose has been and will be accomplished in a measure because time and nature have done their work. So the President has attained in part his object in that regard. The reorganization bill has not yet been successful. Yet men stand upon this floor just as good men as any of the rest of us, no doubt, with the same patriotic impulses the same desire to protect and preserve liberty in this land and plead for the passage of the reorganization bill, which gives to the President plenary powers in the entire domain of Congress. Some scholars have also attributed congressional opposition to other factors. Included in these factors are perceptions of insufficient consultation with congressional leadership and inadequate attention to spending reductions, as well as opposition to the establishment of one or more new departments. Early in 1938, the Senate passed a renewal of reorganization authority that was more limited than what the President had requested. Notably, it would have required that the President inform Congress of executive orders under the statute. In addition, the authority would have been of only two years duration. The range of reorganizational tools available to the President would have been similar to those that had been available in 1933. The Senate-passed measure was considered and amended in the House. The House amendments restored a version of the 1932 mechanism for congressional disapproval of the executive orders, among other changes. Ultimately the bill was recommitted in the House and never enacted. <2.1.4. The Reorganization Act of 1939 (Roosevelt)> Soon after the beginning of the 76 th Congress (1939-1940), President Roosevelt once again requested reorganization authority. The terms of the legislation were more limited in scope than those that had been requested during the preceding two years, and the Reorganization Act of 1939 was enacted on April 3, 1939. One observer noted: The Reorganization bill introduced in 1939 stood in sharp contrast to the measure defeated by the House the previous year. It was extremely mild, omitting nearly every controversial feature of its predecessor.... It sparked no storm of controversy; public fear was absent and pressure groups were quiescent. The authority, delineated under the first title of the statute, differed from that of 1933 in several ways. First, the legal vehicle by which a reorganization initiative would be proposed by the President was to be a reorganization plan, rather than an executive order. This provision addressed a long-standing concern that allowing Congress to void an executive order by resolution was a violation of the separation of powers. Second, a reorganization plan could be nullified by concurrent resolution of Congress within 60 calendar days of its transmittal a so-called two-house legislative veto. This mechanism for congressional involvement in the process represented somewhat of a middle ground between the 1932 statute, which allowed either house to nullify the President's proposal by simple resolution, and the 1933 statute, which had no provision for congressional nullification of an initiative. The 1939 act provided the President with less authority and included more limits than the 1933 act. Although a reorganization plan under the 1939 act could abolish agencies and transfer functions, as could be done under the 1933 statute, it could no longer abolish functions. In addition, the range of actions that could not be included in a plan was expanded to include the creation of a new department; a change in the name of a department or the title of its head, or the designation of any agency as "department" or its head as "Secretary"; the transfer, consolidation, or abolition of the whole or any part of 21 enumerated agencies; the continuation of an agency or function beyond the time provided for by law; and the exercise of a function not provided for in law. As had been the case under the 1933 law, the authority under the 1939 act was of limited duration. All plans had to be transmitted to Congress before January 21, 1941, the beginning of the next presidential term. President Roosevelt submitted five plans under the act, and each went into effect. Although not required by the act, Congress passed a joint resolution of approval in each case. These resolutions provided a way for Congress to "amend" the plans as to their application and effective dates. One of the plans faced opposition, but ultimately was approved. The House passed a concurrent resolution disapproving Reorganization Plan No. IV of 1940, but the Senate did not adopt the measure. The joint resolution of approval under which Congress endorsed the plan was initiated in the House as a joint resolution of approval for Reorganization Plan No. V of 1940. The Senate amended this resolution with approval of plan no. IV, and the House then agreed to the amended resolution. For some Members of Congress, this outcome, in which a plan went into effect despite the opposition of one chamber of Congress, was evidence of the shortcomings of the method of congressional consideration in the 1939 act. For example, in 1945, Representative Walter H. Judd referred to this sequence of events in the context of advocating for a one-house veto over a two-house veto. He stated: [I]t was under that 1939 act that a thing happened which many people here believe was unwise the transfer of the CAA [Civil Aeronautics Authority] into the Department of Commerce. That reorganization plan was disapproved, as I recall, by a vote of 4 to 1 in this House, but it was approved in the other body by a narrow margin and became the law, despite our objection. It was under that law which the House had disapproved that the CAA was placed under the Department of Commerce, so that it ceased to be a wholly independent quasijudicial agency and became subject to the control of the Secretary of Commerce, who is a political appointee. The President's five plans effected a number of changes, including some that had been recommended in the 1937 report of the Brownlow Committee. Included among these changes were reorganizations that shaped the newly created Executive Office of the President (EOP). The Federal Security Agency, predecessor to the Department of Health and Human Services, was also established under this authority, from functions transferred from the Departments of Labor (DOL), the Interior (DOI), and the Treasury (Treasury), as well as the Works Progress Administration, the Social Security Board, and the Civilian Conservation Corps. <2.1.5. The Reorganization Act of 1945 (Truman)> On May 24, 1945, President Harry S. Truman requested reorganization authority. By this time, the 1939 authority had been expired for four years. But the President had not been altogether without authority in this area. After the United States entered World War II, Congress provided the President with temporary and limited war-time reorganization authority. The First War Powers Act was enacted December 18, 1941, 11 days after the attack against the United States naval base at Pearl Harbor, HI. The statute provided the President with authority similar to that which had been conveyed through the Overman Act of 1918, during World War I. Under the authority, the President could transfer and consolidate agencies by executive order without congressional consultation or approval, as long as his actions related to the conduct of the war. After the war, however, the organizational structure of the departments and agencies was to revert to its pre-war status unless arrangements had been statutorily changed in the interim. The First War Powers Act seemingly diminished the need for a renewal of the 1939 authority at that time. Its reversion provision, however, planted the seeds for President Truman's 1945 request. As one observer later noted: The authority granted under Title I of the 1941 Act was to cease six months after termination of the war; and, as in the case of the Overman Act [of 1918], all agencies were to resume the exercise of duties, powers, and functions 'as heretofore or hereafter by law provided.' American participation in hostilities of World War II lasted almost forty-five months whereas in World War I it had lasted but nineteen. One hundred and thirty-five executive orders had been issued by President Roosevelt in regard to war organizations as contrasted with some twenty-four issued by President [Woodrow] Wilson [under the Overman Act]. The complexity of unraveling such a vast war organization and mobilization of manpower and resources was enormous. Truman discussed this problem in his message requesting reorganization authority: [E]very step taken under Title I [of the First War Powers Act] will automatically revert, upon the termination of the Title, to the pre-existing status. Such automatic reversion is not workable. I think that the Congress has recognized that fact . In some instances it will be necessary to delay reversion beyond the period now provided by law, or to stay it permanently. In other instances it will be necessary to modify action heretofore taken under Title I and to continue the resulting arrangement beyond the date of expiration of the Title. Automatic reversion will result in the re-establishment of some agencies that should not be re-established. Truman also envisioned reorganization activities not related to post-war reversion under the requested authority. His message stated: "Quite aside from the disposition of the war organization of the Government, other adjustments need to be made currently and continuously in the Government establishment." The legislation proposed by the Truman Administration would have been similar to that enacted in 1939. It provided that action by both chambers a two-house veto would be required for disapproval of submitted reorganization plans, for example. The Truman proposal differed from the 1939 act in several significant respects, however. Under the proposal, the authority would have been permanent, rather than limited in duration. In addition, no agencies would have been exempted from reorganization activities, and the range of permissible organizational adjustments would have been broader. As before, Congress was not receptive to what was perceived as a broad grant of authority, and the bills that made their way through the House and the Senate were more limited in scope. The first related bill introduced in the House, for example, would have exempted 21 agencies, provided for a one-house veto, and prohibited the establishment of new departments. The Administration actively advocated for its version of the authority, and it was successful in obtaining authority that was broader than that initially proposed in the House. Some have also credited Comptroller General Lindsay C. Warren, a former House Member who had been directly involved with the development of the 1939 act, with advancing the Administration's cause, particularly in the House. In a hearing of the House Committee on Expenditures in the Executive Departments, Warren gave a vivid description of the problem as he saw it: That is why I say the present set-up is a hodgepodge and crazy-quilt of duplications, overlappings, inefficiencies, and inconsistencies, with their attendant extravagance. It is probably an ideal system for the tax eaters and those who wish to keep themselves perpetually attached to the public teat, but it is bad for those who have to pay the bill. In his view, this was a problem that the President, with the proposed reorganization authority, might solve, but that Congress could not: Here is something that we all admit is bad. We admit this Government establishment just cannot survive at the pace it is going now. I mean the growth of it. Sooner or later it will tumble of its own weight unless something is done to coordinate and check some of this. Now, we have an Executive who says he will do this job fairly and efficiently and fearlessly. Now, when he sends down the plans, if you don't like them, if you put in the cloture provision, you have a right to vote against them. Gentlemen, Congress could sit in daily session here for the next hundred years and they wouldn't reorganize the Government of its own volition. And that is not any detraction of Congress, when I say that. Active congressional consideration of reorganization authority began in September of 1945, and a bill was enacted three months later on December 20. The new statute was similar to that of 1939 in a number of ways. In a victory for the Administration, disapproval of reorganization plans still required action by both chambers. But the Administration did not get the permanent authority it sought; the duration of the new authority was to be roughly two and a quarter years. In addition, certain kinds of reorganization activities, such as the power to abolish or create a department, were still prohibited. The new statute also differed from that of 1939 in several ways. The 1939 act opened by stating: "The Congress hereby declares that by reason of continued national deficits beginning in 1931 it is desirable to reduce substantially Government expenditures." This declaration was dropped in 1945, although the act did include among its six purposes "to reduce expenditures and promote economy." Listed first among these purposes, however, was "to facilitate orderly transition from war to peace." Another way in which the 1945 act differed from the 1939 act is that, whereas the earlier statute exempted 21 agencies from the authority, the later act partially or fully exempted only 11. In addition to these differences, the 1945 act included a new provision that constrained the use of the authority with regard to many independent regulatory agencies. The act provided that No reorganization plan shall provide for, and no reorganization under this Act shall have the effect of (6) imposing, in connection with the exercise of any quasi-judicial or quasi-legislative function possessed by an independent agency, any greater limitation upon the exercise of independent judgment and discretion, to the full extent authorized by law, in the carrying out of such function, than existed with respect to the exercise of such function by the agency in which it was vested prior to the taking effect of such reorganization; except that this prohibition shall not prevent the abolition of any such function. The Senate Committee on the Judiciary, which added this provision to the legislation it reported, included its rationale in its accompanying report: [The provision] represents an attempt by the committee to protect the independent exercise of quasi-judicial authority now vested, by an act of Congress, in agencies in the executive branch. The committee recognizes that the exemptions contained in the bill as reported may be changed or deleted before the bill is enacted in its final form; and the committee strongly urges that, whatever is done with respect to such exemptions, [this] provision be retained. This sentiment was reiterated by a committee member on the Senate floor shortly before passage of the Senate version: The thought of the Senate committee was that any quasi-judicial agency in exercising quasi-judicial functions or rule-making functions should be absolutely independent of, say, a Cabinet officer. The purpose of the committee was that in the event a quasi-judicial agency which is now independent should be placed under a Cabinet officer, notwithstanding that fact the Cabinet officer should in no way interfere with the absolute independence of the quasi-judicial junctions or the rule-making functions of such agency. President Truman submitted seven different reorganization plans to Congress under the 1945 act: three each in 1946 and 1947, and one in 1948. In response to six of the seven submissions, the House passed resolutions of disapproval. Of these six plans, only three were also disapproved by the Senate and thereby rejected. Such outcomes illustrate the extent to which reorganization authority requiring a two-house veto for disapproval of a plan was more favorable to Administration initiatives than authority with a one-house veto might have been. Had the 1945 act had a one-house veto procedure, it appears that six, rather than three, of Truman's seven plans might have been rejected. The disapproved plans included the following: Reorganization Plan No. 1 of 1946. Among other effects, this plan would have consolidated national housing functions and agencies, and centralized their administration. The plan was opposed by the housing industry. In addition, the plan proposed a national structure that differed from housing policy legislation that was then working its way through Congress. Truman's Reorganization Plan No. 3 of 1947, which the Senate allowed to go into effect the following year, reorganized housing agencies and functions in a way that was more acceptable to interested parties. Reorganization Plan No. 2 of 1947 and Reorganization Plan No. 1 of 1948. Both of these plans would have transferred the U.S. Employment Service to the Department of Labor. The service had been transferred from the Federal Security Agency to the Labor Department under the wartime authority; these plans would have kept it there. The proposed transfer would have strengthened the Department of Labor, which was perceived to favor the interests of organized labor. The plans were opposed by congressional Republicans, who were in the majority in both houses during the 80 th Congress (1947-1948), as well as many conservative Democrats. The Reorganization Act of 1945 expired at the end of March 1948. <2.1.6. The Reorganization Act of 1949 (Truman)> The Reorganization Act of 1949 was enacted soon after the start of President Truman's second term. The passage of this law followed the release of the recommendations of the Commission on Organization of the Executive Branch, which was also known as the Hoover Commission, after its chairman, former President Herbert Hoover. Among other things, the commission supported reactivation of presidential reorganization authority. This support reflected the sentiments of the chairman, who had sought the power during his own presidency (see above). President Truman generally endorsed the work of the commission, and he used reorganization authority to implement some of its recommendations. The Hoover Commission had been established by public law on July 7, 1947. The 80 th Congress (1947-1948), which enacted this statute, was led by Republicans, and many of its Members favored containing and shrinking the plethora of federal government agencies that had emerged during the New Deal and World War II. The Senate report on the legislation establishing the commission, for example, expressed this point of view: During the past 16 years, national and international events have necessitated a constantly expanding emergency government. In the wake of the prolonged economic distress of the 1930's and the 4 years of direct participation in World War II, the number of principal components of the Federal Government have multiplied from 521, in 1932, to 2,369, in 1947. The annual pay roll of the executive branch of the Government today approximates 6 billion dollars which is 1 billion dollars more than the Government spent for all purposes in 1933. The executive branch now employs more people than all the State, city, and county governments combined. In this sprawling organization called the United States Government, functions and services criss-cross and overlap to a degree which has astounded every student of governmental operation. For example, there are no less than 29 agencies lending Government funds, 34 engaged in the acquisition of land, 16 engaged in wildlife preservation, 10 in Government construction, 9 in credit and finance, 12 in home and community planning, 10 in materials and construction, 28 in welfare matters, 4 in bank examinations, 14 in forestry matters, and 65 in gathering statistics.... And all the evidence points towards still further expansion, aimlessly, pointlessly, pleasing no one and frustrating sincere efforts to serve the people. The first meeting of the Hoover Commission was held in late September 1947. The bipartisan commission, which included 12 members from both the government and the private sector, was charged with studying and investigating "the present organization and methods of operation" of all organizational units of the executive branch "to determine what changes therein are necessary to accomplish the purposes" of the act. These purposes included promoting "economy, efficiency, and improved service in the transaction of the public business" in these organizations by: (1) limiting expenditures to the lowest amount consistent with the efficient performance of essential services, activities, and functions; (2) eliminating duplication and overlapping of services, activities, and functions; (3) consolidating services, activities, and functions of a similar nature; (4) abolishing services, activities, and functions not necessary to the efficient conduct of government; and (5) defining and limiting executive functions, services, and activities. The commission carried out its research via 34 working groups, each charged with examining a particular organizational or policy area. Work began in the fall of 1947 and continued through 1948. Some saw the commission as a mechanism for strengthening the ability of the President to manage the large federal bureaucracy by centralizing authorities within the departments and agencies and building the President's management capacity the mission embodied in the first three purposes enumerated above. Others viewed it as a mechanism for assessing the role of the federal government and recommending abolition of those functions that would better be carried out by the private sector a mission derived from the latter two purposes above. Hoover appears to have favored both approaches to the commission's work, and the groundwork of the commission during 1947 and 1948 was geared toward accomplishing both of these missions. Studies of the commission's work have suggested that Hoover and other Republican members hoped that the commission's recommendations might provide the basis for significant government reform, in terms of both its management and its scope, under an anticipated Republican President. Such reform might have, for example, abolished some of the government functions that were established under the New Deal. After President Truman's reelection, the work of the commission apparently was retailored to focus less on reassessing the purposes of government and more on recommending organizational and managerial improvements that would be more acceptable to the Truman Administration. It has also been argued that the content and tone of the commission's recommendations were moderated by other factors, including the views of the Republican presidential nominee, Thomas E. Dewey; disagreements among commission members; the relationship between President Truman and former President Hoover; and Truman Administration influence. By January 1949, the reelection of President Truman, Democratic majorities in both houses, and the support of the Hoover Commission had laid the groundwork for renewing presidential reorganization authority, which had expired at the end of the previous March. Administration-drafted bills were introduced in both houses at the beginning of the Congress, and the legislation was actively considered over the following six months. The Administration sought to make the authority permanent, to eliminate exemptions of agencies, and to permit the creation of new departments. Although the recommendations of the Hoover Commission gained general public and congressional support, opposition to specific elements emerged. One recommended change that faced particularly strong opposition was a proposal to move the civil functions of the Army Corps of Engineers to the Department of the Interior. Whereas in the previous reorganization authority statute, Congress had arranged to protect certain agencies by exempting them and by prohibiting limitations on the judgment or discretion of independent agencies in carrying out quasi-judicial or quasi-legislative functions, legislative deliberations in 1949 yielded a different outcome. Congress elected to provide for disapproval by a vote of either house a so-called one-house legislative veto easing rejection of a plan that would reorganize a specific agency. With this procedural safeguard, the reorganization authority was enacted on June 20, 1949. The Reorganization Act of 1949 was similar in many respects to its 1945 predecessor; many of the provisions regarding plan contents and limitations remained the same, for example. It differed in several significant ways, however. Chief among these differences was the change in disapproval procedures and the lack of the exempted agencies provisions just discussed. In addition, the list of the six purposes of the authority no longer included a reference to a post-war transition. Instead, a new purpose that perhaps reflected the spirit embodied in the work of the Hoover Commission headed the list: "to promote the better execution of the laws, the more effective management of the executive branch of the Government and of its agencies and functions, and the expeditious administration of the public business." Yet another new provision incorporated a change that had been requested by the Administration: a reorganization plan could include the creation of a new department (although not through consolidation of two or more existing departments and their functions). Another goal of the Administration permanent authority was not achieved. Instead, the reorganization power was authorized for nearly four years, which was longer than previous periods. During this four-year period, President Truman submitted 41 reorganization plans to Congress. Unlike the bulk of the plans and executive orders submitted under previous reorganization statutes, most of these plans each dealt with a limited number of actions regarding one or two agencies. Many of these plans were designed either to implement recommendations of the Hoover Commission or to apply the principles set forth in the commission's reports. For example, a number of the reorganization plans pertained to the centralization of administrative authority over collegial boards and commissions in their chairs. Eleven of the 41 plans were disapproved by Congress. Two of these one submitted in 1949 and the other in 1950 would have elevated the Federal Security Agency to department status. Other rejected plans included those that would have: vested in the Secretaries of the Treasury and Agriculture functions and powers that had instead been vested by law in subordinate officials in their respective departments; centralized administrative authority in the chairs of the Interstate Commerce Commission, the Federal Communications Commission, and the National Labor Relations Board; transferred the Reconstruction Finance Corporation to the Department of Commerce; vested appointment authority for local postmasters in the Postmaster General, under the civil service, rather than in the President, with the advice and consent of the Senate; abolished certain Bureau of Customs offices that had been filled through appointment by the President with the advice and consent of the Senate, and transferred their functions to Treasury department officials appointed by the Secretary of the Treasury under the civil service; and vested the appointment authority for U.S. marshals in the Attorney General, under the civil service, rather than in the President, with the advice and consent of the Senate. The last three of these disapproved changes would have converted politically appointed positions, over which Senators were thought to have some influence, into career positions. <2.1.7. Subsequent Reauthorizations of the 1949 Act (Eisenhower, Kennedy, Johnson, and Nixon)> The Reorganization Act of 1949 was renewed eight times, in 1953, 1955, 1957, 1961, 1964, 1965, 1969, and 1971. In 1953, 1955, 1961, 1965, and 1969, Congress merely amended the bill to extend or reactivate the authority. In the three other cases, substantive changes were made in the act. <2.1.7.1. Eisenhower Reauthorization Requests> During the 1953, 1955, and 1957 reauthorization debates, some Members pushed to ease the process by which Congress could disapprove a plan. They proposed amending the congressional veto provisions of the statute so that passage of a disapproval resolution would require a simple majority of the Members of either house who were present and voting, rather than a majority of the authorized membership of the chamber. These efforts were not successful in the first two instances, but the amendment was added in 1957. In 1959, the Administration of President Dwight D. Eisenhower sought another extension of the act through mid-1961. After some debate, the House passed a bill providing for such an extension. The Senate Committee on Government Operations also supported the extension. Senator Russell B. Long opposed it, however, and it was not taken up for debate in the Senate. Senator Long appeared to oppose automatic extensions of the delegation of authority, rather than the authority itself. He stated: Does the distinguished Senator not believe it would be a good idea that, at least once in a while, the powers surrendered by Congress should come back to it and temporarily reside in Congress, at least long enough for us to know that we have not surrendered our power forever? It seems to me that if no strong case is made for a reorganization plan, Congress should perhaps retain the powers in its own hands rather than surrender them. In this instance, if the President has no plan, Congress will be surrendering its powers unnecessarily. I am willing to give the President the power to reorganize the Government when that is necessary. Without the extension, the authority expired on June 1, 1959. <2.1.7.2. Kennedy and Johnson Reauthorization Requests> Upon entering office in 1961, President John F. Kennedy requested a renewal of the 1949 authority. The bill was debated in each house without any strong opposition emerging. The statute was reauthorized through mid-1963. A further two-year extension was requested by the Kennedy Administration in early 1963. On June 4, 1963, the House passed the requested extension. The bill included an amendment, supported on the floor by Republicans and Southern Democrats, that prohibited the use of the authority to establish a new department. This amendment appears to have been a reaction to a controversial (and unsuccessful) 1962 effort by President Kennedy to establish a Department of Urban Affairs and Housing first through legislation, and then by reorganization plan. The Senate did not act on the reorganization extension request until after Kennedy's November 22, 1963, assassination. Upon taking office, President Lyndon B. Johnson requested Senate consideration of the matter. The bill, which extended the authority to June 1, 1965, and included the House-passed prohibitions, was adopted by the Senate on June 19, 1964. As the June 1965 expiration approached, the Johnson Administration requested that the reorganization authority be made permanent. The Senate considered several different durations short of the Administration's request, and settled on an expiration date of December 31, 1968, just prior to the conclusion of the President's term. The House agreed to this approach, and the extension was signed into law on June 18, 1965, just weeks after the previous authorization had expired. Altogether, President Johnson submitted 17 plans to Congress. Among these were plans to transfer certain locomotive inspection functions to the Interstate Commerce Commission, to transfer the Community Relations Service from the Department of Commerce to the Department of Justice, and to transfer the responsibility for the preparations of plans and specifications for the construction of buildings and bridges at the National Zoo from the Board of Commissioners of the District of Columbia to the Smithsonian Institution. One of the 17 plans, to centralize certain executive and administrative functions of the U.S. Tariff Commission in its chair, was disapproved by Congress. <2.1.7.3. Nixon and Ford Reauthorization Requests> Shortly after taking office, President Richard M. Nixon requested that Congress renew the authority for a two year period. Perhaps reflecting the relatively uncontroversial nature of the new President's request, a bill renewing the authority through April 1, 1971, was adopted by the Senate, without debate, and by the House, under suspension of the rules. The bill was enacted into law on March 27, 1969. As the 1971 expiration date approached, President Nixon requested an additional two year extension. Congress provided this extension, and also amended the statute to make several changes to the authority. First, the changes provided that not more than one plan could be transmitted to Congress within 30 consecutive days. In addition, no reorganization plan could deal with more than one logically consistent subject matter. The amended statute also made changes to the congressional veto procedures, extending the potential length of the period for committee consideration of a resolution of disapproval. In early 1973, the Nixon Administration transmitted to Congress draft legislation that would have extended the Reorganization Act of 1949 for an additional four years, until April 1, 1977. On June 14, 1973, Senator Charles H. Percy introduced legislation to the same end. In addition, this legislation would have established a process whereby Congress would have had an opportunity to review and comment on a proposed reorganization plan before its formal submission. Noting that a plan was not amendable once submitted, Senator Percy suggested that this process would allow potential problems with a plan to become known to the Administration and Congress while alterations might still be made. The bill also would have struck the restriction, added in 1971, that prevented more than one plan from being transmitted within a 30-day period. The provision requiring an itemization of expected savings from a reorganization would also have been deleted. Arguably, these latter two provisions would have made the process easier for the Administration. The bill was referred to the Senate Committee on Government Operations and saw no further action. Senator Robert C. Byrd also introduced legislation in 1973 that would have extended the authority. Unlike the Percy proposal, this bill would have extended the authority for only two years. Also, in contrast to the Percy proposal, Byrd's bill arguably would have made the process more difficult for the Administration. Perhaps most significantly, Byrd's legislation would have strengthened the role of Congress in the process by providing that a proposed reorganization plan would become effective through the adoption of a concurrent resolution of approval, rather than through the lack of a resolution of disapproval. The bill also would have required that the President, in his annual budget message, inform Congress of reorganization plans then under study or consideration. In addition, the President would have been required to give Congress at least 30 days advance notice of his intention to submit a plan. Like the Percy bill, this legislation was referred to the Senate Committee on Government Operations and saw no further action. In 1975, President Gerald R. Ford requested that Congress renew and extend the 1949 statute for another four-year period. No legislation to this effect appears to have been introduced. The reason or reasons that Members of Congress did not grant President Nixon and President Ford extensions in 1973 and 1975 do not appear to have been documented in the Congressional Record . However, Senator Byrd's remarks upon the introduction of his extension bill in 1973 may reflect the priorities of at least some Members during the Watergate and early Post-Watergate period. After delineating a series of bills he had introduced that were "aimed at regaining congressional power over the administrative arm of the Federal Government" and describing his extension legislation, Senator Byrd stated: I believe that my bill is a major step toward recovering some of the initiative the legislative branch has lost to the executive. It will aid in restoring to Congress its responsibility for discharging the duty of overseeing the conduct of the executive departments. It will strengthen the authority of the Congress over the administrative bureaucracy in the face of the increasing executive encroachment on Congress's constitutional authority. And it will safeguard against ill-considered and hasty action by the executive and default approval by a busy or an apathetic Congress. Congressional control and oversight of the executive departments and agencies constitute one of our most important functions. It is the means by which the Congress is assured that its policies are being faithfully carried out, by which it may hold executive officers to an accounting for their stewardship, and by which it learns the effects of legislative policies and is thus able to make necessary statutory revisions. <2.1.8. Reorganization Plans Submitted Under the Reauthorized 1949 Act: 1953-1973> Between the first reauthorization of the 1949 act, at the beginning of the Dwight D. Eisenhower Administration in 1953, and its final expiration in 1973, during the second term of President Richard M. Nixon, 52 reorganization plans were submitted to Congress. Among the notable reorganizations implemented under the authority were the establishment of the following organizations: the Department of Health, Education and Welfare; the Office of Science and Technology Policy in the EOP; the Environmental Protection Agency; the National Oceanic and Atmospheric Administration in the Department of Commerce; and the Drug Enforcement Administration in the Department of Justice. Eight of the 52 submitted plans were disapproved by Congress. The disapproved plans included those that would have reorganized the research and development programs of the Department of Defense; provided the Federal Savings and Loan Insurance Corporation with its own management, independent of the Federal Home Loan Bank Board; transferred certain functions related to exchanges, sales, and other transactions concerning natural resources under the jurisdiction of the Secretary of Agriculture from the Secretary of the Interior to the Secretary of Agriculture; authorized the Securities and Exchange Commission to delegate its functions to a division of the commission, an individual commissioner, a hearing examiner, or an employee or employee board; authorized the Federal Communications Commission to delegate its functions to a division of the commission, an individual commissioner, a hearing examiner, or an employee or employee board; authorized the National Labor Relations Board to delegate its functions to a division of the board, an individual board member, a hearing examiner, or an employee or employee board; established a Department of Urban Affairs and Housing that would have included the functions of the Housing and Home Finance Agency, the Urban Renewal Administration, the Community Facilities Administration, and the Public Housing Administration, and would have included, as intact entities, the Federal Housing Administration and the Federal National Mortgage Association; and transferred certain executive and administrative functions from the U.S. Tariff Commission to its chair. Just as President Truman had drawn on the recommendations of the first Hoover Commission when developing his reorganization plans, subsequent Presidents also drew on the work of various later government reform committees and councils when developing their plans. Unlike the Hoover Commission, which was established by public law, these groups were established under executive authority, and they reported to the President. These advisory entities included the President's Advisory Committee on Government Organization (Eisenhower), the President's Task Force on Government Reorganization (Kennedy and Johnson), and the President's Advisory Council on Executive Organization (Nixon). <2.2. The Reorganization Act of 1977 (Carter)> During his 1976 run for President, Jimmy Carter's campaign described the federal government as "a horrible bureaucratic mess." It suggested that a Carter Administration would "give top priority to a drastic and thorough revision of the federal bureaucracy." The candidate himself indicated that, if elected, he would ask for "complete authorization to reorganize the Executive Branch of government, giving [him] as much authority as possible." This authority would be used toward "the elimination of unnecessary agencies and departments, regulations and paperwork." If elected, he pledged to "have a complete reorganization of the Executive Branch of government [and] make it efficient, economical, purposeful, simple, and manageable for a change." Soon after taking office, President Carter requested a four-year renewal of the Reorganization Act of 1949, with specified modifications. On February 4, 1977, he sent a message to Congress transmitting proposed legislation to this end, and briefly delivered remarks on the topic at the White House. Congress was largely amenable to the President's request, enacting a modified version within two months. The Senate Committee on Governmental Affairs held hearings in early February, and the House Committee on Government Operations held hearings in early March. After considerable debate in both chambers, a significantly modified version of the President's proposal was passed by late March. The President signed it into law on April 6, 1977. Perhaps the greatest conflict over the legislation concerned the procedures by which Congress would pass judgment on a plan. The chairman of the House Committee on Government Operations, Representative Jack Brooks, questioned the constitutionality of the legislative veto procedure, as had some Members of Congress over the course of its use. He favored legislation under which a President's plan would go into effect only upon affirmation by both houses of Congress. Ultimately, the authority enacted in 1977 continued to use a legislative veto. But the procedures were modified to require the mandatory introduction, in each chamber, of a resolution of disapproval upon the submission of a plan, as well as to facilitate the consideration of such resolutions. During the course of the legislative process, the bill was reconfigured from an amendment to the 1949 act to an entirely new statute, the "Reorganization Act of 1977." The new law used the same structure as the 1949 statute. In addition to the procedural changes just discussed, the 1977 statute differed from the final version of the 1949 act (as last amended in 1971) in a number of other ways, including the following: The President could amend a plan within 30 days, or withdraw a plan within 60 days, of its submission to Congress. The limitation to one plan submission during a 30-day period was changed to a limit of no more than three plans pending before Congress at one time. Congress conveyed its intent that the President provide an avenue for "broad citizen advice and participation in restructuring and reorganizing the executive branch." A prohibition on the abolition of any enforcement or statutory program was added. The prohibition against establishing, abolishing, transferring, or consolidating departments was expanded to prohibit also the abolition or consolidation of independent agencies. The President's transmittal message for a plan was to also include information concerning any estimated increase in expenditures as well as any expected management improvements. President Carter submitted 10 plans under the new statute, all of which went into effect. Among these were a plan to reorganize the federal personnel management system, including the creation of an Office of Personnel Management, a Merit Systems Protection Board, and a Federal Labor Relations Authority; the establishment of a Federal Emergency Management Agency, to which were transferred functions and entities from various parts of the government; and to reorganize international trade functions, centering policy coordination and negotiation in this area in a United States Trade Representative in the Executive Office of the President. As discussed above, under the new authority, the President was permitted, for the first time, to amend a plan within 30 days of its submission. President Carter did so for 6 of his 10 plans. In early 1979, the Carter Administration conveyed the President's intention to create a new Department of Natural Resources. The proposal reportedly faced congressional opposition, and no related reorganization plan was submitted. A 1981 Senate report on a bill to further extend reorganization authority recounted the episode this way: In February of 1979, then President Carter had announced his intention to submit a reorganization plan to establish a Department of Natural Resources that would absorb the Department of the Interior and would transfer the Forest Service from the Agriculture Department and the National Aeronautics and Space Administration from the Department of Commerce. The use of the reorganization plan process to establish the new Department was clearly a violation of the intent behind Section 905(a) of the Reorganization Act of 1977 which states that no reorganization plan may provide for or 'have the effect of creating a new executive department'. The Administration was candid in its belief that the proposal for a new Department of Natural Resources could not be passed if the normal legislative process was followed. By asserting that the President was merely changing the name and focus of the Department and not creating a new one, the Administration hoped to escape the prohibition in the Reorganization Act against such action. The authority provided under the Reorganization Act of 1977 expired on April 6, 1980. Congress passed a one-year extension of the authority with little discussion in committee or on the floor. President Carter's final reorganization plan was submitted on March 31, 1980, prior to the original deadline. <2.3. Reorganization Authority in the 1980s (Reagan)> The extension of the Reorganization Act of 1977 under President Jimmy Carter expired on April 7, 1981. During the early years of the presidency of Ronald W. Reagan, efforts were made to extend and modify the authority once again. In 1981, reorganization authority legislation supported by the Reagan Administration was passed in the Senate, but not acted upon in the House. Although this legislation was not enacted, some modifications of the 1977 language included in the bill later became part of the statute as it stands today. The 1981 bill also included provisions to prohibit the President from renaming an existing department, in response to President Carter's proposal to create a Department of Natural Resources from the Department of the Interior, discussed above; prohibit the creation of new agencies that were not part of an existing department or independent agency; require inclusion, in a plan, of specified, detailed implementation information; and extend the period during which the President could amend or withdraw a plan and the period of congressional consideration. The 1981 bill also would have created a different method for congressional consideration of proposed plans that did not become part of the current statute. As described in the committee report: [R]eorganization plans would become effective if any one of three conditions were satisfied during the 90 day period for Congressional review: (1) each House of Congress adopts a resolution approving the plan; (2) one House of Congress adopts an approving resolution while the other House fails to vote; or (3) neither House votes on an approving resolution. Although shifting the congressional mechanism used from a resolution of disapproval to a resolution of approval, it appears the process would have functioned much as the earlier one would have: with no congressional action, a plan would have taken effect; with negative action in either chamber, the plan would not have taken effect. In 1984, Congress enacted legislation amending the Chapter 9 of Title 5 of the U.S. Code , which embodied the 1977 Reorganization Act. In addition to adopting the 1981 modifications discussed above, the amendments altered the method by which a plan could take effect. This change responded to a 1983 ruling by the Supreme Court, in INS v. Chadha , that the legislative veto process (i.e., that a plan could be rejected by a resolution of one or both houses) was unconstitutional. Under the new authority, once the President submitted a reorganization plan, Congress was to consider, under an expedited procedure, a joint resolution approving the plan. The expedited procedure included limitations on the duration of committee consideration, the duration of floor debate, and amendments (although the President could amend or modify his plan during the first 60 days after submission). As a joint resolution, this vehicle would need to be approved by the President to have the force of law. Unlike the legislative veto, the burden of action was placed on the proponents of the plan, rather than its opponents. As is the case under the regular legislative process, the default would be the status quo. The process of reorganizing the government was thus made somewhat more difficult than it would have been under earlier versions of presidential reorganization authority. The amendments enacted by Congress extended the reorganization plan authority from November 1984 to December 31, 1984. However, the Senate adjourned sine die for the year the day following passage of the bill, and it did not reassemble until January 3, 1985, after the December 31, 1984, deadline for submission of plans had passed. Given the requirement that plans be submitted while Congress was in session, the Reagan Administration had virtually no opportunity to use the authority he had been given. Although the statutory deadline for submission of plans has passed, the dormant statute remains in the U.S. Code . The Court's ruling in INS v. Chadha raised concerns that the validity of existing reorganization plans, all of which had gone into effect under reorganization authority with legislative veto provisions, might be called into question. Consequently Congress passed legislation ratifying all of the reorganization plans that had gone into effect under the now-unconstitutional procedure. As part of the FY1986 budget request, submitted in early 1985, the Reagan Administration proposed a renewal of the 1984 authority. The document noted the long history of the statute, and that the President had not had the opportunity to use the authority that had been granted in the previous year. The request stated: "The President will propose renewal of that reorganization authority to December 31, 1988, to permit continued structural flexibility." The President's proposal was reiterated in the budget the following year. Legislation to extend reorganization authority was introduced early in that Congress (the 99 th , 1985-1986). The Senate Committee on Governmental Affairs held a hearing on the bill together with other legislative initiatives of the President related to governmental management. No further legislative action was taken. The budget documents for FY1988, released at the beginning of the 100 th Congress (1987-1988), restated the President's interest in a renewal of the authority. It appears that no legislation was introduced during this Congress, and the initiative did not appear in the budget submission for the following year. <2.4. Requests for Reorganization Authority from 1989 through 2010> In the decades since this authority last expired, some presidential administrations have advocated its restoration, and some have not. It does not appear that President George H. W. Bush sought its extension, nor that such legislation was introduced during his Administration. Initial reports issued by the Clinton Administration's National Performance Review included the recommendation that the reorganization authority be reauthorized, but President Clinton did not directly request action by Congress. As discussed below, the George W. Bush Administration called for a renewal of presidential reorganization authority, and legislation introduced during the 108 th Congress (2003-2004) included provisions that would have renewed the authority in modified form. This legislation was not enacted. <2.4.1. 2002 Effort to Renew Presidential Reorganization Authority> In his FY2003 budget proposal, President George W. Bush stated, "The Administration will seek to re-institute permanent reorganization authority for the President to permit expedited legislative approval of plans to reorganize the Executive Branch." In January 2003, the second National Commission on the Public Service released a report with a number of recommendations regarding federal government organization and management, including the re-establishment of reorganization authority. Early in the 108 th Congress, Representative Tom Davis, chairman of the House Committee on Government Reform, indicated that he planned to introduce legislation to re-establish reorganization authority. On April 3, 2003, the committee held a hearing on that topic, with testimony in support of that action by, among others, House Majority Leader Tom DeLay. On September 17, 2003, the House Committee on Government Reform, Subcommittee on Civil Service and Agency Organization held a hearing concerning the connection between federal personnel issues and government reorganization. As part of legislative activity that led to the enactment of the Intelligence Reform and Terrorism Prevention Act of 2004 during the 108 th Congress, the House passed provisions that would have renewed the President's reorganization authority in a modified form. It would have amended Chapter 9 of Title 5 that is, the most recent form of presidential reorganization authority to make the following changes: the grant of reorganization authority would have been permanent, rather than subject to periodic congressional reauthorization; the President would have been permitted to submit reorganization plans under this authority only for intelligence-related units identified in the provision or "other elements of any other department or agency as may be designated by the President, or designated jointly by the National Intelligence Director and the head of the department or agency concerned, as an element of the intelligence community"; seven limitations on the President's authority under this chapter would have been eliminated, including the prohibition on the use of reorganization plans to create or rename executive departments, or to abolish or transfer an existing department or independent regulatory agency; the inclusion in submitted plans of provisions for the creation of new agencies would have been explicitly permitted; and a submitted plan could have included "the abolition of all or a part of the functions of an agency" without the formerly included limitation that "no enforcement function or statutory program shall be abolished by the plan." These provisions were removed in conference with the Senate, and they were not included in the bill as enacted. <2.5. Experience Under Presidential Reorganization Authority> Between 1939 and 1984, more than 100 plans were submitted to Congress under various forms of presidential reorganization authority, and a majority of these went into effect. Many of the plans that went into effect reorganized the government in relatively minor ways. In some cases, however, the authority was used to make larger changes. For example, presidential reorganization authority was used in 1939, to transfer offices to the newly created Executive Office of the President and to consolidate human service offices and create the Federal Security Agency; in the mid-1940s, to help facilitate the organizational transition from wartime to peacetime; in the late 1940s and early 1950s to implement some of the administrative changes recommended by the Hoover Commissions, such as the consolidation of authority in the heads of departments and agencies; in 1953, to elevate the Federal Security Agency to department status with the establishment of the Department of Health, Education, and Welfare in 1953; in 1970, to establish the Environmental Protection Agency; and in 1978, to consolidate federal emergency management functions and create the Federal Emergency Management Agency. As the President's reorganization authority evolved from the 1930s onward, Congress continued to delegate authority to the President while establishing provisions that sought to protect congressional prerogatives. Although the specific terms varied under different versions of the authority, the statutory framework evolved to include four elements that defined the potential scope of the President's plans and the congressional role in passing judgment on such proposals. These were specification of the range of actions that could be undertaken under the authority, a series of limitations constraining the breadth of those actions, an authorization of limited duration, and some opportunity for Congress to consider, and potentially block, a plan before its effective date. <3. Obama Administration Proposal> As previously noted, a legislative proposal that would renew the President's reorganization authority was conveyed to Congress on February 16, 2012. The proposal would amend the expired provisions of the Reorganization Act of 1977, as amended in 1984, which are listed at 5 U.S.C. 901 et seq. (hereinafter "1984 statute"). It would reactivate the authority for two years from the date of enactment by amending Section 905(b) and Section 908(1), the two places in the law that specify deadlines that limit the period during which the authority can be used; define "efficiency-enhancing plan" as one that the Director of the Office of Management and Budget (OMB) determines is likely to result in a decrease in the number of agencies or cost savings in performing the functions that are the subject of the plan; require that all plans are efficiency-enhancing plans; allow the abolition or renaming of an existing department, or the creation of a new department (not permitted under the 1984 statute); allow the consolidation of two or more departments (not permitted under the 1984 statute); and allow the creation of a new agency that is not part of an existing agency (not permitted under the 1984 statute). Should this authority be granted, the President indicated that his first submitted plan would propose consolidation of six business and trade-related agencies into one: U.S. Department of Commerce's core business and trade functions, the Export Import Bank, the Overseas Private Investment Corporation, the Small Business Administration, the U.S. Trade and Development Agency, and the Office of the U.S. Trade Representative. It appears that this plan would also involve the relocation of some subunits and functions that are not directly linked with business and trade. The Administration has stated, for example, that the National Oceanic and Atmospheric Administration would be moved to the Department of the Interior. <4. Potential Approaches for Congressional Consideration> President Obama has requested a renewal of presidential reorganization authority, and a bill has been introduced in the Senate that would grant him this power in a modified form. Congress might approach the question of whether, and how, to delegate this authority to the President in various ways. First, Congress could simply elect not to renew the authority, either by not acting on the President's proposal, or by actively rejecting it. In the event that Congress elects to renew presidential reorganization authority, it might do so in a number of different ways. For example, it could renew the authority (1) without modifications, (2) with the requested amendments to the scope of the authority, (3) with a different set of amendments to the scope of the authority, (4) with changes to the nature of the expedited congressional procedures, or (5) with some combination of these. Each of these approaches is discussed in greater detail below. Presidential reorganization authority raises administrative, political, and institutional questions, including the following: Is government reorganization desirable? If reorganization is desirable, is the President better suited than Congress to undertake government reorganization? If the President is better suited to undertake reorganization, is the granted authority under a given proposal flexible and extensive enough to allow the President to make meaningful changes to government organizational arrangements? Are the limitations on plan contents sufficient to preclude organizational changes that might be deemed by Congress to be problematic from a policy or institutional point of view? Should organizations that exercise predominantly quasi-legislative or quasi-judicial (regulatory) functions be treated differently from those that exercise predominantly executive functions? What kind of input into the crafting of reorganization plans should be afforded to Congress? Do congressional procedures allow for a sufficient congressional check on the President's use of this authority? Should the President have the ability to reorganize any quarter of the executive branch as he sees fit, or should he be required to lay out his intentions for reorganization prior to obtaining the authority? To what degree should Congress prescribe the parameters of potential reorganizations? What limitations should be included in statute? What significance should be given to recommendations from congressional commissions, congressional committees, GAO, and other stakeholders? Answers to these questions, drawn from the history of reorganization authority, could provide a basis for evaluating the potential approaches discussed below. <4.1. Option I. No Renewal of Reorganization Authority> Congress might elect not to act on the President's request. In this case, present legal authorities would continue to define the range of potential changes to organizational arrangements. Reorganization activities could be accomplished through the enactment of legislation. For example, the President could transmit his proposal to consolidate six business- and trade-related agencies, and this proposal could be considered by Congress. Alternatively, agency heads could direct reorganization activities within their agencies, where the power to establish organizational arrangements is understood to be inherent or is specified in law. In addition, under Section 301 of Title 3 of the United States Code , the President could alter organizational arrangements by redelegating functions that Congress has vested in him. Advocates of this approach might argue that existing delegations of reorganization authority provide the Administration with sufficient flexibility to make minor adaptations to changing circumstances. They could argue that a renewal of presidential reorganization authority, which could facilitate larger scale government-wide changes, would be an unnecessary delegation of Congress's role in establishing and shaping the federal bureaucracy. Such an argument might point to the ability of Congress to carry out this role, as evident over the past decade in, for example, the establishment of the Department of Homeland Security, the reorganization of the intelligence community, the increase of autonomy for the Federal Emergency Management Agency within the Department of Homeland Security, the abolishment of the Office of Thrift Supervision, and the establishment of the Consumer Financial Protection Bureau. It could further be argued that Congress, through its committee system, is better suited to represent the broad array of interests that might be affected by alterations to the federal bureaucracy, and that reorganizations that take these interests into account are more likely to endure and not be impeded during the implementation phase. On the other hand, proponents of renewing the authority have argued that Congress has been ineffective in enacting legislation that improves federal organizational arrangements. For example, when introducing his initiative, President Obama stated: In 1984 Congress stopped granting [presidential reorganization] authority. And when this process was left to follow the usual congressional pace and procedures, not surprisingly, it bogged down. So congressional committees fought to protect their turf and lobbyists fought to keep things the way they were because they were the only ones who could navigate the confusion. And because it's always easier to add than subtract in Washington, inertia prevented any real reform from happening. Layers kept getting added on and added on and added on. At a March 2012 hearing on renewal of the authority, Daniel I. Werfel, the Controller at OMB, acknowledged, however, that Congress was able to legislate a large scale reorganization in the aftermath of 9/11, while differentiating this accomplishment from potential reorganizations based on non-emergency needs: I think the important distinguishing factor about Department of Homeland Security reorganization is that that was in response to a crisis and a clear emerging need that was on the national consciousness to realign or clearly protect the homeland.... The fact that the DHS reorganization came together in response to a crisis, from our standpoint, is not sufficient evidence that the executive branch and Congress are ready to be transformative in government reorganization. Congressional committees might elect to conduct oversight of the federal bureaucracy's organizational arrangements, either government wide, or in select policy spheres, regardless of whether or not Congress renews presidential reorganization authority. In the past, when additional investigation and analysis of federal organization were indicated, Congress has sometimes established blue ribbon commissions. In the case of the first Hoover Commission, for example, the panel conducted its work in the run-up to the presidential election, and its recommendations were then available to the new Congress and the re-elected President (Truman). <4.2. Option II. Renew the Authority without Modification> If Congress were to renew the authority without further amendment, it would renew the authority as it existed in 1984. Notably, the 1984 statute was never used. Although, as discussed above, the authority is similar to the version used by President Jimmy Carter from 1977 through 1980, it also differs from it in significant ways. Perhaps chief among these, the expedited congressional procedures are tailored to facilitate consideration of a joint resolution to approve submitted plans, rather than to disapprove submitted plans. In addition, the scope of the 1984 statute is more limited than that of the Carter-era authority: renaming of existing departments is not permitted and a plan could not create a new, freestanding agency. In addition, the current statute differs from the earlier version by requiring that the President's message include additional detailed information regarding implementation of a plan. It appears that under this potential approach to the reorganization authority question, President Obama would not be able to submit the plan he has described. This is because the plan, as described, would involve reconstituting and renaming a department and, arguably, establishing a new, freestanding organizational unit, both of which would be prohibited. Nonetheless, the Administration might be able to adapt the plan to fit the scope of authority provided in the current statute, were it renewed without the Administration's requested amendments. Because this course of action would be a continuation of the statute as it was last authorized by Congress, it might be seen as representing continuity. Many of the Members of the Congress who last considered and renewed this authority were also Members at the time the reorganization authority was last in use, during the Carter Administration (1977-1981). Presumably this experience would have informed the 1984 reauthorization. The reauthorization process appears to have been uncontroversial. It passed in the House, on April 10, 1984, by voice vote under suspension of the rules. It passed the Senate by voice vote on October 11, 1984, as the 98 th Congress was drawing to a close. The bill was signed into law on November 8, 1984. It could be argued, however, that because the 1984 law was never tried, its effectiveness in carrying out congressional purposes is unknown. Furthermore, the lack of controversy associated with its passage, particularly in the Senate, could be associated with the short duration of the authority. In fact, the Senate adjourned sine die for the year the day following passage of the bill, and it did not reassemble until January 3, 1985, which was after the deadline for submission of plans had passed. By the time the law was signed, the Senate was adjourned. Given the requirement that plans be submitted while Congress was in session, the Reagan Administration had virtually no opportunity to use the statute once it was enacted. Finally, although the passage of the 1984 reauthorization legislation might be seen as a ratification by the 98 th Congress of the terms of the reorganization authority it conferred, it does not necessarily follow that the current Congress would have the same views or priorities concerning the statute. <4.3. Option III. Enact the Authority as Requested> A third possible approach to the question of presidential reorganization authority would be for Congress to enact the President's proposal. As previously described, this proposal, embodied in S. 2129 , as introduced during the 112 th Congress, would renew and amend the expired 1984 reorganization authority set forth in 5 U.S.C. Sections 901 et seq. The bill would alter the 1984 statute by: changing the deadline for submission of reorganization plans from December 31, 1984, to two years from enactment; requiring that each submitted plan be "efficiency-enhancing" likely to result in a decreased number of agencies or cost saving related to targeted functions as verified by the OMB director; allowing for the creation of a new executive department; the renaming of a department; the abolishment or transfer of a department, or all its functions; or the consolidation of two or more departments, or all their functions; and allowing for the creation of a new freestanding agency. These elements are discussed in more detail below. <4.3.1. Two-year Extension> The proposed two-year extension is consistent with many of the past extensions of this authority. On other occasions, Congress delegated this authority to the President for longer periods of time. The 1949 act, for example, provided the authority for three years and nine months, until about two months after the end of the Truman Administration. The 1965 reauthorization extended the authority for approximately three and a half years, to nearly the end of the Johnson Administration. The 1977 act provided the authority for a period of three years from enactment. On the other hand, Congress has also sometimes authorized periods of significantly less than two years in duration, such as in 1964 (approximately 11 months), 1971 (approximately 15 months), and 1980 (one additional year). The last authorization appears to have been the shortest. The legislation, which was signed into law on November 8, 1984, specified that "a provision contained in a reorganization plan may take effect only if the plan is transmitted to Congress on or before December 31, 1984," only 53 days later. <4.3.2. "Efficiency-Enhancing" Requirement> S. 2129 would also amend the expired 1984 authority to require that each submitted plan be "efficiency-enhancing." The bill defines an efficiency-enhancing plan as one "that the Director of the Office of Management and Budget determines will result in, or is likely to result in (A) a decrease in the number of agencies; or (B) cost savings in performing the functions that are the subject of that plan." These purposes would not be completely new, but would prioritize two current purposes and require verification that a submitted plan has addressed them in specified ways. The expired 1984 statute provides, among other purposes, that "it is the policy of the United States to reduce expenditures and promote economy to the fullest extent consistent with the efficient operation of the Government [and] to reduce the number of agencies by consolidating those having similar functions under a single head, and to abolish such agencies or functions thereof as may not be necessary for the efficient conduct of the Government." In furtherance of these purposes, under the 1984 statute, each reorganization plan is to be accompanied by a "declaration that, with respect to each reorganization included in the plan, [the President] has found that the reorganization is necessary to carry out" these purposes or any of the other four purposes identified in the statute. In addition, the plan is to be accompanied by a message that, among other things, "estimates any reduction or increase in expenditures (itemized so far as practicable) which it is expected will be realized as a result of the reorganizations included in the plan." The proposed efficiency-enhancing standard in S. 2129 would prioritize these two purposes a decrease in the number of agencies and cost savings in performing functions in the plan over the other purposes in the 1984 statute, because one or the other would have to be addressed in any plan put forward. The amendment also would go beyond requiring the President to declare that a reorganization is necessary to carry out the purposes. Notably, such a declaration would indicate that such an action is necessary , but not that it is sufficient , to actually achieve the specified result. Seemingly, by requiring that the OMB Director make an official determination that one of the purposes associated with the efficiency-enhancing standard will be, or is likely to be achieved, it could be expected that the reorganization would be sufficient to deliver the promised results. It could be argued, on this basis, that this amendment to the 1984 statute would make the Administration more accountable for achieving reorganization outcomes that address at least one or two of the long-specified purposes in the current statute. It is also possible, however, that, because the statute has a general definition of "agency" that includes "an Executive agency or part thereof; and an office or officer in the executive branch," a plan could reduce their number while not achieving a consolidation or reduction in the size of the federal government. For example, a plan could provide for the abolition of a department and its 17 subagencies (18 agencies total), while establishing 16 new independent agencies that would carry out the same functions. This would result in a decrease of two agencies while arguably increasing the spread of the government. Furthermore, assuming that the heads of these new organizations have administrative flexibility to structure their agencies, they would be able to create additional subunits be they termed offices, bureaus, agencies, services, or some other entity at a later time. Arguably, this would provide an incentive for reorganization plans to provide for only the broad structure of an agency, so as to reduce the "number of agencies," and to create additional structural features administratively at a later date. Similarly, because the term "cost savings" is not defined, disagreements might arise about the OMB Director's determination with regard to those associated with a particular plan. In addition, projections are not always met by actual achievements. During previous delegations of presidential reorganization authority, there were few instances in which reorganization plans resulted in documented cost savings. <4.3.3. Decreased Limitations on Alterations to Departments> The amendments to the current reorganization authority that are part of S. 2129 would also allow for the creation of a new executive department; the renaming of a department; the abolition or transfer of a department, or all its functions; or the consolidation of two or more departments, or all their functions. Some of these powers have been available in at least one previous version of the reorganization authority, but none were available in the most recent version. The history of each of these is discussed below. <4.3.3.1. Creating a new department:> The 1932 and 1933 presidential reorganization statutes did not explicitly allow for or prohibit the creation of a department, but it appears that it was understood to be beyond the scope of authorized actions, and no such reorganization was attempted. In fact, none of President Hoover's executive orders under the 1932 act would have established any new organization. This was also true of most of President Roosevelt's reorganizations under the 1933 authority; in most cases they transferred, consolidated, or abolished functions and subunits within and among existing departments and agencies. The 1939 and 1945 statutes, however, explicitly prohibited the establishment of new departments. As discussed above (" Reorganization Authority Proposal During the 75th Congress (1937-1938) (Roosevelt) "), the enactment of the 1939 authority followed an unsuccessful presidential request for broader reorganization authority during 1937 and 1938. Among the points of disagreement during those years was whether there should be created a new Department of Social Welfare and a new Department of Public Works. The language included in the 1939 and 1945 statutes suggests that those who favored the reorganization as a means of maintaining or decreasing the size of government prevailed in shaping the provisions. The Reorganization Act of 1949 did not continue the prohibition on the establishment of new departments. The prohibition was removed because Members observed that plans under previous acts had created large agencies that were, for all intents and purposes, like departments. Thus, the President was not prevented from creating large organizations, just from calling them departments. The frequently cited example of this was the Federal Security Agency. As the Senate report regarding reauthorization of the authority put it: The bill deletes the prohibitions against creation of new executive departments by reorganization plan. At least one agency the Federal Security Agency has been established by plan which obviously is of departmental magnitude and importance and should have been designated as an executive department. No good purpose has been served by the old prohibition. The only successful use of this authority to establish a department resulted from President Eisenhower's first reorganization plan. Shortly after taking office in 1953, he submitted a plan that established the Department of Health, Education, and Welfare. Essentially, this action elevated the existing Federal Security Agency to department status. Notably, Congress endorsed this action by enacting a statute that moved up the effective date of the department's establishment. The 1964 extension of the Reorganization Act of 1949 reinstated the prohibition on the establishment of new departments. As noted above, this amendment appears to have been a reaction to a controversial (and unsuccessful) effort by President Kennedy, in 1962, to establish a Department of Urban Affairs and Housing first through legislation, and then by reorganization plan. The legislative effort to create the department was defeated when the House Rules Committee did not adopt a rule for floor consideration of the measure, reportedly because of civil rights-related issues. The President subsequently submitted Reorganization Plan No. 2 of 1962, which also would have established a Department of Urban Affairs and Housing to carry out the functions of several existing agencies. Though the House adopted a resolution disapproving the plan, the President's efforts were seen by some as an abuse of the authority. This led to the reinstatement of the restriction, which continued to be part of subsequent reorganization authority statutes. <4.3.3.2. Renaming a Department:> As discussed above, enactment of the 1939 authority followed a period of disagreement about whether to establish two additional departments in the federal government. Just as the new authority did not permit a plan to establish a new department, it prevented the renaming of a department. This limitation was continued in the 1945 act, but was dropped in 1949. Subsequent versions of the statute remained free of this provision until the final amendments, in 1984. At this time the restriction was reinstated in response to an unsuccessful Carter initiative that would have constituted a controversial use of the statute. As discussed earlier in this report ("The Reorganization Act of 1977"), the Administration announced plans to submit a reorganization plan that would have had the effect of establishing a new Department of Natural Resources by renaming the Department of the Interior and transferring to it the Forest Service and the National Oceanic and Atmospheric Administration, among other entities. According to a Senate report: The Administration was candid in its belief that the proposal for a new Department of Natural Resources could not be passed if the normal legislative process was followed. By asserting that the President was merely changing the name and focus of the Department and not creating a new one, the Administration hoped to escape the prohibition in the Reorganization Act against such an action. The Obama Administration has been clear about its intention to establish a new department with a new name if granted reorganization authority. Nonetheless, questions might arise about other, similar actions that could be taken under this authority subsequent to the initial reorganization effort. <4.3.3.3. Abolishing or transferring a department or all its functions:> This limitation has been part of all reorganization statutes thus far. The Obama Administration request to remove this limitation could allow the Administration to abolish the Department of Commerce, as such, as part of a possible reorganization of trade-related agencies. Because the reorganization authority has never been enacted without this limitation, however, it is unclear what administrative, political, or institutional impacts this change might have. Similar reorganization activities in the past, such as the division of the Department of Commerce and Labor into the Department of Commerce and the Department of Labor, and the division of the Department of Health, Education, and Welfare into the Department of Health and Human Services and the Department of Education, were accomplished by congressional action. <4.3.3.4. Consolidating two or more departments, or all their functions:> The consolidation of two or more departments was not explicitly prohibited until the 1949 act. It could be argued, however, that such a reorganization would have been impermissible even under the pre-1949 authorities, because it could have been seen as an abolition of at least one, if not two departments an action explicitly prohibited. As discussed above, the 1949 act removed the prohibition on the establishment of new departments. It appears that the new language in 1949 concerning consolidation of departments was intended to continue, and make clear, the prohibition on the creation of a new department in one particular way: by consolidating two existing departments. There does not appear to have been much discussion of this part of the change in the provision. One committee report stated simply that, "The new language prohibiting consolidation of two or more executive departments by reorganization plan conforms to the belief of the President that the elimination of an executive department should only be effected by statute." It should be noted that, when the prohibition on creating a new department was added back into the statute in the 1964 amendments, as discussed above, the prohibition on consolidation remained. Both provisions were then part of all succeeding versions of the law. <4.3.4. Permitting New Freestanding Agencies> The latest expired version of reorganization authority stipulated that a "reorganization plan may not provide for, and a reorganization may not have the effect of creating a new agency which is not a component or part of an existing executive department or independent agency." It appears that this provision was first considered during deliberations of the Senate Committee on Governmental Affairs concerning legislation to extend reorganization authority in 1981. The legislation, including this provision, was adopted by the Senate, but not the House, later in 1981. The following Congress, the provision was enacted as part of the 1984 amendments. Because reorganization authority was not used after 1980, this provision's impact on the authority and its use cannot yet be assessed. If the limitation were to be deleted, as the Obama Administration has requested, the authority would be, in this respect, similar to that in use under the Carter Administration. The Senate and House committees of jurisdiction expressed different intentions with regard to this provision. The perspective of the Senate Committee on Governmental Affairs was captured in the 1981 report of extension legislation: Many experts believe there is a need to slow the growth of new independent agencies in the executive branch of government that are not part of an existing executive branch agency. New independent agencies tend to diffuse accountability for programs and policies. The larger the number of such agencies, the more difficult it is for the President to establish, coordinate and implement policies. Since new independent agencies will often report directly to the President and not through a cabinet secretary, their access and participation in the Administration's policy making process is more limited. From the perspective of the House Committee on Government Operations, as expressed in its 1983 report on extension legislation, the inclusion of this provision was intended to clarify pre-existing limitations with regard to the creation of new departments and agencies. Taken together with other limitations, the "requirements reflect the [House] Committee's desire that the creation of new entities in the Executive Branch be subject to the legislation process." <4.3.5. Proposal as a Whole> If Congress were to renew the presidential reorganization authority as requested by the Obama Administration, without congressional amendment, it would make a delegation of authority that has precedent in the mid-20 th century in a form that has never been tried before. It appears that the statute would provide the President with a greater level of flexibility to establish and abolish departments than has ever been provided before. It could be argued that this power might be circumscribed, in part, by the prohibition on the establishment, by reorganization plan, of any free-standing agencies. To a lesser extent, the use of the power might be shaped by a requirement that the Administration self-certify that a plan is likely to result in a decreased number of agencies or cost saving related to targeted functions. As discussed above, however, such a determination of net changes in the number of agencies and the level of cost-savings could be complicated by definitional issues. The congressional procedures for consideration of a submitted plan would perhaps pose a greater constraint on the President's power under the Obama proposal. Although these specialized parliamentary procedures would be similar to those enacted in 1984, they were never before used in the context of this authority. Arguably, the President could face a greater legislative burden in gaining approval for his plans than did previous Presidents who had similar reorganization authority. <4.4. Option IV. Enact the Authority with Other Amendments> As discussed above, should Congress elect to renew presidential reorganization authority, it might reauthorize it in its current form or it might reauthorize it with the amendments requested by the Obama Administration. Naturally, the options for renewing the statute that are available to Congress are not restricted to these two choices. Congress could opt to include any of a variety of other changes. Such changes might amend any of the statute's 12 sections, or add new sections altogether. As noted earlier in this report, each of the elements of reorganization authority is integral to its overall scope and effect; several of these bear particular mention because they establish the roles and authority of the President and Congress, respectively, in this context. These elements are the reorganization plan contents , the limitations on power , and the expedited parliamentary procedures . When combined, the provisions that define the potential scope of reorganization plan content and the provisions that further limit or prohibit certain reorganization plan content set the parameters of a reorganization that the President can propose. For example, the 1977 act allowed that a reorganization plan may provide for consolidating all or part of an agency with all or part of another agency. In the same act, the limitations section provides that a reorganization under this authority may not have the effect of consolidating two or more departments or two or more independent regulatory agencies. In this way, the general authority is modified under specific circumstances. The expedited parliamentary procedures merit close attention in the context of this authority because they define the role of Congress in facilitating or impeding the enactment of the plan developed by the President. The procedures also define steps the President must take during this process, and so prescribe the ease or difficulty, from his perspective, with which a plan might be enacted and implemented. <4.4.1. Potential Changes to Permissible Reorganization Plan Contents> Congress could elect to alter the scope of potential reorganizations by amending 5 U.S.C. 903, which establishes the range of actions that could be included in a reorganization plan. It states that a plan may provide for (1) the transfer of the whole or a part of an agency, or of the whole or a part of the functions thereof, to the jurisdiction and control of another agency; (2) the abolition of all or part of the functions of an agency, except that no enforcement function or statutory program shall be abolished by the plan; (3) the consolidation or coordination of the whole or a part of an agency, or of the whole or apart of the functions thereof, with the whole or a part of another agency or the functions thereof; (4) the consolidation or coordination of part of an agency or the functions thereof with another part of the same agency or the functions thereof; (5) the authorization of an officer to delegate any of his functions; or (6) the abolition of the whole or a part of an agency with agency or part does not have, or on the taking effect of the reorganization plan will not have, any functions. Congress could reduce the range of permissible actions that could be included in a plan by, for example, striking portions of these provisions. By eliminating paragraph 2, for example, a proposed plan could no longer provide for the abolition of functions. Alternatively, Congress could expand the range of permissible plan provisions. For example, paragraph 2 could be amended by striking the second clause so that "the abolition of all or a part of the functions of an agency" would be without qualification. This change was included in legislation proposed by the George W. Bush Administration. The Bush proposal also would have explicitly permitted the submitted plans to include provisions for the creation of new agencies by adding a seventh paragraph to that effect. Given that the Obama Administration has described, in general terms, the first reorganization that would be undertaken under renewed authority, Congress might elect to amend the statute to specify that only one plan could be submitted at a time. Such amendments might modify this section and/or the section on limitations to specify the range of agencies or functions that could be included in the plan. This approach might be seen by lawmakers as a middle ground between delegating broad authority to the President and not delegating to him any reorganization authority at all. <4.4.2. Potential Changes to Limitations> Congress has employed a range of limitations in the various versions of reorganization authority. The present statute includes seven limitations on what may be included in a reorganization plan. A plan could not provide for (1) creating a new executive department or renaming an existing executive department, abolishing or transferring and executive department or independent regulatory agency, or all the functions thereof, or consolidating two or more executive departments or two or more independent regulatory agencies, or all the functions thereof; (2) continuing an agency beyond the period authorized by law for its existence or beyond the time when it would have terminated if the reorganization had not been made; (3) continuing a function beyond the period authorized by law for its exercise or beyond the time when it would have terminated if the reorganization had not been made; (4) authorizing an agency to exercise a function which is not expressly authorized by law at the time the plan is transmitted to Congress; (5) creating a new agency which is not a component or part of an existing executive department or independent agency; (6) increasing the term of an office beyond that provided by law for that office; or (7) dealing with more than one logically consistent subject matter. The Obama proposal, discussed above, would amend paragraph 1 to eliminate references to executive departments, and would strike paragraph 5, both of which would give the President additional flexibility to submit the plan he has outlined. Limitations could be reduced further than requested by the President to provide even more flexibility. For example, by striking paragraph 7, and eliminating prohibition on "dealing with more than one logically consistent subject matter" in plans, the President could submit more comprehensive plans to Congress. This might allow him to construct plans that would combine changes appealing to different constituencies in a way that would increase the likelihood that the plan would be ratified by Congress. Alternatively, Congress might elect to add limitations, thus putting further constraints on the President's exercise of reorganization authority. Some potential limitations were included in past versions of reorganization authority, but are no longer included. For example, the limitations section of the 1939 act enumerated 21 agencies that could not be the subject of most of the reorganization activities a plan might specify. It provided that no plan would provide "for the transfer, consolidation, or abolition of the whole or any part of such agency or of its head, or of all or any of the functions of such agency or of its head." Another provision, used in the 1945 act, limited reorganizations with regard to certain agency functions, rather than entire specified agencies. Under the act, no plan was to provide for "imposing any greater limitation upon the exercise of independent judgment or discretion in connection with carrying out [quasi-judicial or quasi-legislative] functions," than existed prior to the reorganization. A third provision, also adopted in 1945, exempted from alteration any organizational arrangements that had been enacted by Congress since the beginning of that year. President George W. Bush's proposal took a different approach to limitations. It would have repealed all seven existing limitations, and instead circumscribed the agencies that might be part of a plan. The agencies selected perhaps reflected the Administration's highest priority reorganization at the time. The new amended Section 905 would have provided that plans would be limited to the following organizations: the Office of the National Intelligence Director; the Central Intelligence Agency; the National Security Agency; the Defense Intelligence Agency; the National Geospatial-Intelligence Agency; the National Reconnaissance Office; other offices within the Department of Defense for the collection of specialized national intelligence through reconnaissance programs; the intelligence elements of the Army, the Navy, the Air Force, the Marine Corps, the Federal Bureau of Investigation, and the Department of Energy; the Bureau of Intelligence and Research of the Department of State; the Office of Intelligence Analysis of the Department of the Treasury; the elements of the Department of Homeland Security concerned with the analysis of intelligence information, including the Office of Intelligence of the Coast Guard; and such "other elements of any other department or agency as may be designated by the President, or designated jointly by the National Intelligence Director and the head of the department or agency concerned, as an element of the intelligence community." <4.4.3. Potential Changes to Expedited Congressional Procedures193> Should Congress grant the President renewed reorganization authority, lawmakers might choose to include expedited parliamentary procedures that are the same as those last authorized in 1984, or they may choose instead to modify these procedures in whole or in part. Conversely, Congress might reject the idea of including fast track procedures entirely, and instead decide to have Congress consider a joint resolution of approval or disapproval or a reorganization implementing bill under its regular parliamentary procedures, rather than special rules enacted in law. Broadly speaking, when considering what type of expedited legislative procedures might be enacted as part of reorganization authority, several structural questions might be considered by lawmakers. The first is whether to make the parliamentary vehicle for congressional consideration a joint resolution of approval or one of disapproval. Joint resolutions of approval arguably have the effect of tilting the balance of power to Congress and away from the President by requiring affirmative congressional action for any reorganization plan to go into force. Joint resolutions of disapproval, on the other hand, strengthen the hand of the President vis-a-vis Congress because they establish a situation in which a President's reorganization plan will go into force unless Congress is able to stop it, something which would likely require supermajority votes of the House and Senate to override presidential veto of a disapproval resolution. Another consideration to take into account relating to expedited procedures is whether to include mandatory pre-consultation requirements that the President must adhere to before submitting a reorganization plan to Congress. Some expedited procedure statutes, such as the Trade Act of 1974, do require the President to consult with Congress in various ways and on various questions before submitting a proposed implementing bill to the House and Senate. Should policymakers include such pre-consultation provisions, they could choose to make them broad or extremely prescriptive. Still another question is whether Congress should be permitted to amend a reorganization plan once it is submitted. Generally speaking, prior versions of expedited authority did not allow Congress to directly do this, although the most recent version of reorganization authority provided the President with a limited window to amend or withdraw his own reorganization plan once submitted. From a parliamentary standpoint, it should be noted that if a congressional amendment process is permitted in an expedited procedure either at the committee or floor stage of consideration, it is not possible to guarantee that Congress will be able to complete consideration of a legislative measure for presentment to the President. <5. Concluding Observations> Government reorganization is often cast in terms of potential administrative benefits, such as improved program effectiveness, greater efficiency, reduced cost, and improved policy integration across related programs. Whenever Congress has delegated reorganization authority to the President in the past, it has clearly stated in the statutory provisions that the objective of reorganization is such administrative improvement. Congress has often required that reorganization plans submitted by the President certify that such improvements are at least part of the objective of the proposed reorganization. In more recent versions of the law, the President is required to articulate the plan's means of achieving such improvements. In addition to these administrative goals, reorganization efforts often have spoken or unspoken political goals and outcomes. The political nature of reorganization arises from the fact that it redistributes power and resources, and interests inside and outside the federal bureaucracy stand to gain or lose in this process. Depending on the scope and limitations of the authority available to the President, organizational units and functions might not only be moved, but could be abolished. Employees in the reorganized agencies will often be the most directly impacted, but outside interests, such as those who are regulated by, or receive benefits from, such agencies are affected as well. Congressional committees may also be impacted by a reorganization, directly through potential jurisdictional changes or indirectly through constituent groups. Although a government reorganization may have beneficial outcomes over time, it is axiomatic that it is disruptive, at least in the short term, to the functioning of the organizational systems involved. It is likely to upset existing power dynamics, rearrange relationships, create uncertainty and anxiety, and generally interrupt the flow of work. Proponents of a delegation to the President of broad reorganization authority might argue that the President can be more effective than Congress in conceptualizing, as well as implementing, government-wide reorganization. Some critics argue that Congress is often unable to develop consensus and pass meaningful reorganization legislation. Where such consensus is arrived at, critics might assert that political, rather than administrative reform concerns are primary in its crafting. Opponents of reauthorizing the President's reorganization authority might argue that Congress is better suited as a place for sorting out the competing demands and interests involved in broad reorganizations. They might argue that Congress, by representing a greater cross section of interests, provides a better forum in which to shape the federal government. Critics of presidential reorganization authority might also note that Congress has successfully reorganized the federal government, in large and small ways, through the legislative process. When Congress delegates reorganization authority to the President and establishes expedited procedures for the consideration of resulting plans, it cedes some of its institutional power to the President. The history of such delegations suggests that Congress has been selective about when and under what terms it does so. Among the factors that appear to influence this decision-making process are the perceived administrative need and expected benefits, the record of collaborative efforts between a particular Congress and a particular President, and other political contextual factors.

On January 13, 2012, President Barack Obama announced that he would ask Congress to reinstate so-called presidential reorganization authority, and his Administration conveyed a legislative proposal that would renew this authority to Congress on February 16, 2012. Bills based on the proposed language were subsequently introduced in the Senate (S. 2129) and the House (H.R. 4409) during the 112th Congress. Should this authority be granted, the President indicated that his first submitted plan would propose consolidation of six business and trade-related agencies into one: U.S. Department of Commerce's core business and trade functions, the Export Import Bank, the Overseas Private Investment Corporation, the Small Business Administration, the U.S. Trade and Development Agency, and the Office of the U.S. Trade Representative. It appears that this plan would also involve the relocation of some subunits and functions that are not directly linked with business and trade. The Administration has stated, for example, that the National Oceanic and Atmospheric Administration would be moved to the Department of the Interior. Between 1932 and 1981, Congress periodically delegated authority to the President that allowed him to develop plans for reorganization of portions of the federal government and to present those plans to Congress for consideration under special parliamentary procedures. Under these procedures, the President's plan would go into effect unless one or both houses of Congress passed a resolution rejecting the plan, a process referred to as a "legislative veto." This process favored the President's plan because, absent congressional action, the default was for the plan to go into effect. In contrast to the regular legislative process, the burden of action under these versions of presidential reorganization authority rested with opponents rather than supporters of the plan. In 1984, the mechanism was amended to require Congress to act affirmatively in order for a plan to go into force. This arguably shifted the balance of power to Congress. The authority expired at the end of 1984 and therefore has not been available to the President since then. Presidents used this presidential reorganization authority regularly, submitting more than 100 plans between 1932 and 1984. Presidents used the authority for a variety of purposes, from relatively minor reorganizations within individual agencies to the creation of large new organizations, including the Department of Health, Education, and Welfare; the Environmental Protection Agency; and the Federal Emergency Management Agency. The terms of the authority delegated to the President varied greatly over the century. During some periods, Congress delegated relatively broad authority to the President, while during others the authority was more circumscribed. Congress might approach the question of whether, and how, to delegate this authority to the President in various ways. First, Congress could simply elect not to renew the authority, either by not acting on the President's proposal or by actively rejecting it. In the event that Congress elects to renew presidential reorganization authority, it might do so in a number of different ways. For example, it could renew the authority without modifications, with the requested changes to the scope of the authority, with a different set of changes to the scope of the authority, with changes to the nature of the expedited congressional procedures, or with some combination of these.

<1. Recent Developments> On November 19, 2012, the Revolutionary Armed Forces of Colombia (FARC), the country's largest and oldest guerrilla organization, announced a two-month unilateral ceasefire as peace talks continued in Havana, Cuba. A month earlier, the Colombian government began formal peace talks with the FARC in Oslo, Norway. (For more details, see " Peace Talks " below.) On September 18, 2012, Colombian drug kingpin Daniel Barrera (also known as "El Loco") was captured in Venezuela in a joint Colombian-Venezuelan operation assisted by the U.S. and British intelligence agencies, with support from the U.S. Drug Enforcement Administration. The Barrera arrest hailed as the demise of the "last of the great kingpins" by President Santos signifies intensified counternarcotics cooperation between Venezuela and Colombia. (See " Relations with Venezuela and Ecuador " below.) On September 4, 2012, President Santos and FARC leader Rodrigo Londo o Echeverri, (also known as "Timochenko") announced that official peace talks would begin in Oslo, Norway, and continue in Cuba. In late August, President Santos surprised many when he announced that the government had begun "exploratory peace talks" with the FARC. President Santos said that the Colombian military would retain its presence in every part of the country and that a smaller insurgent group was interested in joining in the negotiation process. (See " Peace Talks " below.) On July 30, 2012, the U.S. Office of National Drug Control Policy (ONDCP) announced that in its estimates Colombia's potential cocaine production capabilities had fallen below Peru's. According to the estimate, Colombia's 2011 potential cocaine production fell to 195 metric tons, 25% below the prior year estimate and 72% below the U.S. government estimate for 2001. (See " Colombia and Global Drug Trends " below.) On June 27-28, 2012, the Colombian Congress, in a special session, voted to annul judicial reform legislation just approved in the prior regular session. President Santos refused to sign the final bill, which he claimed had been altered with "surprise" amendments. The legislation, which was widely criticized, would have restricted the Supreme Court from investigating crimes committed by legislators, among other provisions. The government had originally sponsored the judicial system reform. (See " Reforms under the Santos Administration " below.) On May 15, 2012, the U.S.-Colombia Free Trade Agreement (CFTA) went into force. Implementing legislation for the bilateral trade agreement had been approved by the U.S. Congress in October and signed by President Obama on October 21, 2011 ( P.L. 112-42 ). (See " U.S.-Colombia Free Trade Agreement " below.) On April 14-15, 2012, Colombia hosted democratic leaders from 30 Latin American countries, the United States, and Canada at the sixth Summit of the Americas held in Cartagena. On April 2, 2012, the FARC released its last 10 military and police hostages, some of whom had been held in the jungle for more than a dozen years. The release of these kidnap victims, announced in February, was intended to show FARC's willingness to engage in a peace process to end the armed conflict. (See " Current Status of the FARC " below.) <2. Overview of Colombian Developments> Colombia is a South American nation of roughly 47 million people, the third-most populous country in Latin America. It is an ethnically diverse nation 58% of the population is mestizo, 20% white, and 14% mulatto. According to the U.S. Department of State, official statistics suggest that Afro-Colombians and indigenous people are about 10% of the population, with 3% of the people self-identifying as indigenous. At the same time, some nongovernmental organizations (NGOs) and human rights groups estimate that indigenous people and Afro-Colombians may make up 25% or higher. Colombia has one of the oldest democracies in Latin America, yet it has been plagued by violence and a conflict that has lasted nearly five decades. The country's rugged terrain historically made it difficult to establish state control over large swaths of the nation's territory. High rates of poverty have also contributed to social upheaval in the country. But Colombia's economic picture has in recent years improved fairly steadily. In 2011, approximately 34% of Colombians lived in poverty, down from 50% in 2002. Colombia's economic growth rates have been strong, reaching 5.9% in 2011 and projected at 4.4% in 2012. Security improvements and a more stable economy have attracted foreign direct investment (FDI), which more than doubled in five years from roughly $6.5 billion in 2006 to more than $14 billion in 2011, largely in the oil, manufacturing, and mining sectors. Nevertheless, income inequality and land ownership concentration are still significant problems. The unemployment rate has hovered near or above 11% over the last five years, but is forecast to fall below 10% in 2012 according to some analysts. The large, unregulated informal sector accounts for 50% to 60% of Colombian workers. Drug trafficking has helped to perpetuate Colombia's conflict by providing earnings to both left- and right-wing armed groups. The two main leftist guerrilla groups are the FARC and the National Liberation Army (ELN), both of which kidnap individuals for ransom, commit serious human rights violations, and carry out terrorist activities. Most of the rightist paramilitary groups were coordinated by the United Self-Defense Forces of Colombia (AUC), which disbanded in 2006 after more than 31,000 of its members demobilized. All three groups (the FARC, ELN, and AUC) were designated Foreign Terrorist Organizations (FTOs) by the U.S. government in the late 1990s and early 2000s. Members of the AUC were accused of gross human rights abuses and collusion with the Colombian Armed Forces in their fight against the FARC and ELN. New illegally armed groups, including criminal bands some of which include re-armed paramilitaries, are now a significant challenge in Colombian cities and towns. Drug production and trafficking continue to generate many millions of dollars annually for illicit groups. As a result of the conflict and drug-related violence, Colombia has one of the largest populations of internally displaced persons in the world, with more than 3.9 million displaced since 1997. From the 19 th century through much of the 20 th century, the Liberal and Conservative parties have dominated Colombian politics. But in recent years, these parties were weakened by their perceived inability to resolve the root causes of the violence in the country. In 2002, Colombians elected an independent, lvaro Uribe, as president, largely because of his aggressive plan to reduce violence in Colombia. Uribe served two terms. In 2010, Juan Manuel Santos was elected president from the National Unity party (described below). The major political parties represented in the bicameral Colombian Congress include the Liberal, Conservative, Alternative Democratic Pole, National Unity, Green and Radical Change parties, and several smaller political movements. The leftist Alternative Democratic Pole is the only major party in opposition to a "national unity" coalition that backs the Santos government. <2.1. The Uribe Years (2002-2010)> During his first term (2002-2006), President Uribe began to fulfill his campaign promises to address the paramilitary problem, defeat leftist guerrilla insurgents, and combat narcotics trafficking. He took a hard-line approach to negotiations with illegally armed groups, declaring that the government would only negotiate with those groups who were willing to give up terrorism and agree to a ceasefire. These included paramilitary groups with whom former President Andr s Pastrana had refused to negotiate. Negotiations with the AUC paramilitaries resulted in a July 15, 2003, agreement in which the AUC agreed to demobilize its members by the end of 2005. President Uribe endorsed a controversial Justice and Peace Law that provided a framework for those demobilizations. Uribe also built up the Colombian military and police, which stepped up their counternarcotics operations and activities against the FARC. High public approval ratings, largely due to reductions in violence as a result of his security policies, prompted Colombia to amend its constitution in 2005 to permit Uribe to run for reelection. On August 7, 2006, lvaro Uribe was sworn in for his second term as president. Pro-Uribe parties had won a majority in both houses of congress in the elections of March 2006, giving President Uribe a strong mandate. His government improved the security situation in Colombia under a policy called "Democratic Security," demobilized the AUC, and made headway in defeating the FARC and ELN. According to U.S. State Department figures, kidnappings in Colombia declined by 83%, homicides by 40%, and terrorist attacks by 76% between 2002 through 2008. Police regained a presence in all of Colombia's municipalities, including areas from which they had been ousted by guerrilla groups. President Uribe oversaw the demobilization and disarmament of more than 31,000 AUC paramilitaries, although the demobilization process has been criticized for failing to provide adequate punishments for perpetrators and provide reparations to victims of paramilitary violence. On March 1, 2008, the Colombian military raided a FARC camp in Ecuador killing a top FARC leader and capturing his computer files. This was followed by the July 2, 2008, rescue of 15 hostages long held by the FARC, including 3 U.S. defense contractors and a former Colombian presidential candidate. Despite this progress under the Uribe government, Colombia faces serious challenges. While the FARC's numbers are dramatically reduced, it still has thousands of fighters capable of carrying out terrorist attacks, kidnappings, and other illicit activities. Not all paramilitaries demobilized, and others have returned to paramilitary and criminal activities since demobilizing. One weakness of the demobilization program has been the difficulty reintegrating demobilized forces into law-abiding civilian life. Moreover, a new generation of paramilitaries has formed that is more criminal than political in nature. These groups, which contain many former combatants as well as new recruits, are involved in drug trafficking, kidnapping, extortion, and other violent crime and reportedly have a presence in about one-third of Colombian municipalities. Although former President Uribe has not been personally implicated, the Colombian Supreme Court is investigating suspected links between Colombian politicians, many from pro-Uribe parties, and paramilitary groups. Since the 2006 elections, there have been several scandals involving extrajudicial killings by Colombian security forces. The most significant of these scandals broke in October 2008 when 27 soldiers and military officers (including three generals) were fired over the discovery that 13 murdered civilians had been dressed by their killers in order to appear to be guerilla fighters to increase military body counts (the "false positives" scandal). As a result, General Mario Montoya, the commander of the Colombian army, stepped down on November 4, 2008. President Uribe's high approval ratings led many of his supporters to urge him to seek a third presidential term. For Uribe to be reelected, the Colombian constitution would have had to be amended again. For months, the 2010 presidential election campaign was virtually suspended as Colombians anticipated the possibility of President Uribe running for a third term. But on February 26, 2010, Colombia's Constitutional Court ruled 7 to 2 to deny a referendum to allow President Uribe to run for reelection. President Uribe immediately stated that he "accepted and respected" the court's decision, removing himself as a candidate in the 2010 race. <2.2. 2010 Congressional and Presidential Elections> Legislative elections for the entire 268-member bicameral Congress took place on March 14, 2010. The elections were the least violent of recent times with a high turnout of more than 13 million voters. Voters gave a strong victory to pro-Uribe parties, indicating their support for continuing President Uribe's democratic security policies. Two parties in the pro-Uribe coalition, the National Unity Party (also known as the Partido de la U or the U Party) and the Conservative Party, won the most seats. The pro-Uribe coalition secured a majority in both the Senate and the Chamber of Representatives. Observers thought this election outcome was a good sign for presidential candidate Juan Manuel Santos (see box), who headed the National Unity party and had been leading in the polls. However, the field of candidates for president was complex. A successful candidate had to win at least 50% of the votes cast, or compete and win in a runoff held on June 20. Antanas Mockus, Green Party candidate and twice former mayor of Bogot , rose dramatically in popularity between March and May 2010. Other presidential hopefuls included Naomi San n of the Conservative Party; Gustavo Petro of the leftwing Democratic Pole; Germ n Vargas Lleras, a right wing senator who split with Uribe over his bid for a third term; and Rafael Pardo of the Liberal Party. In the May 30, 2010, election, Santos received more than twice as many votes as did Mockus in an election in which slightly over 49% of eligible Colombians voted. Although Santos came close to winning the majority of votes, he had to compete in the June 20 runoff against second-highest vote-getter Antanas Mockus. In the ensuing weeks, Santos won the backing of nearly every candidate who responded to his call to create a government of national unity, giving him a strongly favorable position. Mockus fared poorly in the debates and refused to accept a formal alliance with the leftwing Democratic Pole party. <2.3. The Santos Administration> On June 20, 2010, Santos won the Colombian presidency by the largest margin in recent history, taking 69% of the vote. Santos's landslide victory earned him the backing of a unity coalition in Congress, providing him a stronger mandate than even Uribe had following his two elections. The ruling coalition included the center-right National Unity and Conservative parties, the centrist Radical Change Party, and the center-left Liberal Party. (In July 2011, the centrist Green Party left the opposition and joined the governing coalition.) When President Santos was inaugurated on August 7, 2010, he pledged to continue the successful security strategies of his predecessor while pursuing democratic, economic, and social reforms. He stated that the door to negotiations to end the armed conflict was not shut. <2.3.1. Reforms under the Santos Administration> In general terms, President Santos and Vice President Angelino Garz n have promoted a more rigorous protection of human rights than the Uribe Administration, and denounced threats against human rights defenders. President Santos has reached out to the judiciary in Colombia, ameliorating tensions that had grown between former President Uribe and the Supreme Court. He secured an anti-corruption law and some labor formalization laws. He has led a reform of the executive branch that included fiscal reforms, and the redistribution of royalties from land and mineral development so that funds were distributed nationwide, not just to producing regions. The Santos Administration proposed legislation in 2010 to compensate victims of the internal conflict (including victims of state forces) and to restore land to those who were forcibly displaced. The Colombian Congress approved the Victims' and Land Restitution Law (hereinafter Victims' Law) in May 2011, which was signed by President Santos in June. The legislation calls for the return of property to those forced off their land by armed groups during the conflict. Many observers are eager to see how these reforms will result in actual changes on the ground. While the Victims' Law has been lauded as historic by international organizations, including U.N. agencies and U.N. General Secretary Ban Ki-moon, many caution that ensuring the safety of the displaced victims will be a major challenge. Since President Santos came to office, the pace of assassinations of land return advocates has not diminished. The government said it will increase protection for these leaders and has been providing protection to some 393 land rights leaders and activists as of October 2012. Because the law's restitution program is taking place during an ongoing conflict, it also pledges assistance to those who may yet be victimized, through 2021. It provides economic reparations to victims of the conflict going back to 1985, and proposes to return land to those who had it stolen after 1991. The government has estimated over its 10-year time frame that the initiative will cost $30.5 billion to implement. In January 2012, implementation of the Victims' Law was launched with the handover of lands to displaced families in the northern department of C rdoba. The policy is expected to meet resistance from local officials and others who may have played a role in the illegal land seizures that the law is attempting to reverse. Some U.S. and Colombian nongovernmental organizations (NGOs), however, have criticized the scope of the law, maintaining that its definition of victims was not sufficiently broad and identifying other gaps. The U.S. government announced $50 million of support to strengthen the law's implementation in July 2012. Establishing the institutions to deliver both the reparations and land restitution programs will be an ongoing administrative challenge with 37 national agencies playing a part. The Colombian government has developed a Victims Unit within the Department of Social Prosperity to coordinate compensation and services and a Land Restitution Unit within the Ministry of Agriculture to coordinate the restitution of land to the dispossessed. A new court system to adjudicate land claims is to be established, and municipal and departmental (state) coordination for handling victims' compensation requires participation from multiple layers of government. By late October 2012, approximately 113,000 Colombians who were registered as victims of violence received compensation, totaling approximately $360 million. The Colombian government reported that 755 Regional Transitional Justice Committees had formed in 31 of Colombia's 32 departments. These committees, which are to have victims represented on them, are critical for the implementation of the law at the local level. However, early reports are that victims are sometimes not involved, or only selectively, and some victims have been threatened because of their participation. As of late October 2012, more than 26,000 claims had been filed for land restitution, although the first judgments to resolve the claims are just beginning to be issued according to the government. In April 2011 the Colombian Congress authorized President Santos to reorganize the executive branch and split three ministries into six. The new ministries are Interior, Justice, Health, Labor, Environment, and Housing. The formation of an independent Labor Ministry to better institutionalize labor protections was a requirement of the Action Plan Related to Labor Rights jointly announced by President Obama and President Santos on April 7, 2011. The plan included a number of "major, swift and concrete steps" that the Colombian government agreed to take to address remaining issues of U.S. concern with regard to labor. Measures included steps to reduce violence against trade unionists and to ensure prosecution of such violence. (For more, see " U.S.-Colombia Free Trade Agreement .") As part of the government reorganization, the discredited Department of Administrative Security (DAS) was dissolved. The scandal-plagued national intelligence agency, charged with ties to paramilitary groups and conducting a campaign of illegal wiretapping, was replaced in early 2012 by a new, considerably streamlined intelligence agency, with fewer personnel and more oversight. Other reforms spearheaded by the Santos Administration include a peace framework law passed by the Colombian Congress in June 2012. The law is a constitutional amendment that provides a transitional justice structure for an eventual peace process if the Colombian Congress passes enacting legislation. Under the framework, leftist rebels are recognized as combatants in an internal conflict, and may become eligible for a reduced sentence if they demobilize. Cases against perpetrators of the most heinous crimes would be prioritized and fully prosecuted. Although controversial with critics on both the left and the right, the measure passed with a large majority on its final vote in the congress that signaled there was political support for a future peace process. One major reform effort of the Santos government ended in political controversy. A proposal to reform the clogged justice system was amended to a point, such that when it passed Congress in June 2012, the president found it unacceptable. One amendment limited the Supreme Court's power to investigate legislators suspected of crimes, and another weakened rules for unseating convicted legislators. Santos called Congress into an extraordinary session in late June requesting that the law be annulled, and Congress complied. As a result, the national unity coalition backing President Santos was strained, his relations with Congress were weakened, and his popularity suffered. During the affair, Santos's justice minister was pressured to resign. The Santos government has backed another constitutional reform bill, likely to be voted on by Colombian Congress before the end of 2012, which would expand the jurisdiction of military courts. Several of the bill's provisions have been criticized by human rights advocates for shifting jurisdiction of serious human rights crimes allegedly committed by public security forces from the civilian courts back to military courts increasing the likelihood of impunity for such crimes. According to current conditions on U.S. military aid, human rights cases involving Colombian Armed Forces must be transferred to civilian courts. Former President Uribe has become his successor's strongest critic. The former president has questioned some of the key Santos government reforms, his appointments, and his administration's security approach. As President Santos passed the two year mark in office, feuding between the two former allies sharpened. Uribe's criticism of the Santos government centers on what he sees as a conciliatory approach to the FARC and the government of Venezuela, but Uribe has also expressed negative views on the judicial reform that was initially backed by the Santos government, the law to compensate victims of the internal conflict, and the peace framework law passed by the Colombian Congress in June 2012. The former president has even reportedly launched an effort to block President Santos from a second term if he chooses to run. President Santos retained high popularity ratings during his first year and a half in office, sometimes exceeding 70%. In mid-2012, however, his support fell to 47% in July due to the perception of growing insecurity and the judicial reform effort that floundered and was later voided. President Santos announced a major cabinet re-shuffle in late August, reportedly to bolster sagging popularity. Some observers speculate that fissures in the national unity coalition may restrain President Santos from completing his reform agenda. Nevertheless, polling done in September and October 2012 indicated his approval ratings had recovered somewhat following his announcement of new peace talks. <2.3.2. Peace Talks> On August 27, 2012, President Santos disclosed that exploratory discussions to end the nearly half century internal conflict were underway with the FARC, which confirmed widely circulated rumors. In a brief statement, he said that three principles guided his conduct in searching for peace: (1) the errors of past negotiation efforts would not be repeated; (2) all measures would be taken to end the conflict and not to prolong it; and (3) the Colombian military would not cede any territory (which was widely interpreted to mean there would not be a demilitarized zone inside the country as in past peace talks). He also acknowledged that the smaller rebel group, the National Liberation Army (ELN), may also join the peace process. An ELN leader later said he welcomed joining unconditional peace talks but that the ELN would not end its military campaign prior to such negotiations. While there was broad albeit cautious public support for the peace initiative according to early polls, former President Uribe decried the effort as a concession to terrorists that would demoralize the military. The initiative received praise from the U.S. State Department, from the Secretary General of the Organization of American States (OAS), and from U.N. Secretary General Ban Ki-moon. In early September 2012, the government and the FARC's supreme leader, Rodrigo Londo o (also known as "Timochenko"), announced that formal talks would begin in October in Oslo, Norway, and then move to Cuba. Subsequently, both sides announced their negotiating teams (5-member lead negotiators to represent a 30-member team). The FARC urged a ceasefire, but the government did not agree to one. A framework agreement for the talks signed by both parties identified the principal themes for the talks: (1) rural development policy; (2) guarantees on political participation once FARC guerrillas laid down their arms; (3) illegal drug trafficking; (4) ending the armed conflict, including a plan to integrate the guerrillas into civil society; and (5) support for the rights of victims of the armed conflict. The framework agreement also identified a role for the countries of Norway and Cuba as "guarantors" of the talks, and Venezuela and Chile to "accompany" the talks. The official talks are the first in a decade since the FARC held talks with the government of President Andr s Pastrana between 1998 and 2002. President Santos also announced that he envisioned the peace process taking months rather than years, and that if progress toward ending the conflict was not made he would shut down the negotiations. In mid-October 2012, the peace negotiations formally began in Oslo. In a press conference held at the opening of the talks, the FARC spokesperson made some strident remarks about the organization's many grievances with the Colombian government beyond the scope of the negotiated framework, dimming the hopes of some optimists. The brief opening ceremonies held in Norway were followed by a month interlude as the talks moved to Cuba. Since the announcement of the peace initiative, civil society groups stepped up their mobilization to have their perspectives on the peace process represented in the negotiations. A minor delay of the peace talks' start-up in Cuba was attributed to arranging civil society participation in the talks, according to a joint statement issued by both sides. On November 19, 2012, as peace talks resumed in Cuba, the FARC announced a two-month, unilateral ceasefire they described as a goodwill gesture. The government responded it would continue normal operations against rebel forces. The Santos peace initiative is seen by many as a political gamble for the president, although polling suggests that a majority of Colombians are cautiously optimistic. In a poll conducted for some leading media outlets in Colombia in early September (released September 11, 2012), 77% of Colombians approved of the president's decision to engage in peace negotiations with the FARC. However, not as many respondents thought the talks were likely to succeed. While popular support has moderated some since that time a Gallup poll found in late October 2012 that 72% supported the talks public opinion is certain to fluctuate as the closed-door meetings proceed in Cuba. The agreed-upon first topic for discussion, providing rural populations with access to land, illustrates the ambition of the negotiators to address some of the profoundly contentious issues that are at the root of the decades-long internal conflict. <2.3.3. Foreign Affairs and Trade> A hallmark of the Santos Administration has been improving relations with neighboring Ecuador and Venezuela. Improved relationships with both countries have led to greater cooperation on trade, counternarcotics, and security. The Santos Administration has also broadened Colombia's relations with other countries in the region. Sharing its considerable experience, Colombia has provided counternarcotics and security training to more than a dozen countries in Latin America, including Mexico, Haiti, Honduras, Guatemala, and others. Colombia's rising leadership in regional affairs was demonstrated when it hosted the sixth Summit of the Americas in Cartagena on April 14-15, 2012, with the participation of 30 of the 34 democratically elected leaders in the region. At the summit, President Obama and President Santos announced that the U.S.-Colombia Free Trade Agreement (FTA), approved by the U.S. Congress in October 2011, would enter into force on May 15, 2012. The agreement will drop nearly all tariffs and barriers to bilateral trade over the next decade. Beyond the FTA with the United States, the Santos government has sought to diversify regional relations and continued the market-opening strategies of former President Uribe. In late May 2011, Colombia, Peru, and Chile opened an integrated stock market. The same three countries, along with Mexico, have launched a trading block called the Pacific Alliance to facilitate the free flow of investment, trade, and people. As tension with Venezuela has eased, trade between the two countries has significantly recovered from an embargo imposed by President Hugo Ch vez in 2009. The Santos government has actively pursued and concluded free trade agreements. A free trade agreement with the European Union is expected to be implemented by the end of 2012, and an agreement with Canada went into effect in August 2011. A free trade agreement was concluded with South Korea in 2012 and a conclusion with Japan is pending. A number of agreements signed with China have strengthened bilateral ties. <3. Colombia's Internal Conflict> <3.1. Roots of the Conflict> Colombia has a long tradition of civilian democratic rule, yet has been plagued by violence throughout its history. This violence has its roots in a lack of state control over much of Colombian territory, and a long history of poverty and inequality. Conflict between the Conservative and Liberal parties led to two bloody civil wars The War of a Thousand Days (1899-1903) and The Violence (1946 to 1957) that killed hundreds of thousands of Colombians. A power sharing agreement (the so-called National Front pact) between the Liberal and Conservative parties ended the civil war in 1957, but it did not address the root causes of the violence. Numerous leftist guerrilla groups inspired by the Cuban Revolution formed in the 1960s as a response to state neglect and poverty. Right-wing paramilitaries formed in the 1980s when wealthy landowners organized to protect themselves from the leftist guerrillas. The shift of cocaine production from Peru and Bolivia to Colombia in the 1980s increased drug violence, and provided a source of revenue for both guerrillas and paramilitaries. The main paramilitary organization, the AUC, began demobilization in 2003 and disbanded in 2006 in a controversial process devised under the Uribe Administration. Uribe also took aggressive measures against the guerrilla insurgency. Major armed groups today are the FARC, the ELN, and the new generation of paramilitary groups. In May 2011, the Santos Administration announced a new security policy that aimed to dismantle all illegal groups by 2014. Nevertheless, as discussed above, President Santos revealed in August 2012 that exploratory peace talks had begun with the FARC, surprising many although rumors about government contacts with the FARC had been widely circulated. He later said that preliminary talks with FARC's leadership had been underway for about six months to establish a framework for the formal peace talks that would open in Norway in October and then move to Cuba. The announcement of official negotiations marked the fourth attempt in 30 years to negotiate with the insurgents. Some observers were optimistic about conditions for the new effort. For example, the International Crisis Group, an NGO that focuses on conflict resolution, maintains that the military superiority of the government and the relative weakness of the FARC provide "a more promising constellation" of conditions than existed during the last negotiations effort that ended in failure a decade ago. <3.1.1. Revolutionary Armed Forces of Colombia (FARC)> The FARC can trace its roots to armed peasant self-defense groups that had emerged during "the Violence" of the 1940-50s. By the 1960s, those groups located in the remote, mountainous regions between Bogot and Cali had developed into a regional guerrilla movement. In 1964, the guerrillas announced the formation of the FARC, a group dedicated to rural insurgency. The FARC is the oldest, largest, and best-equipped and financed guerrilla organization in Latin America. It mainly operates in rural areas, but has shown its ability to execute attacks in urban areas, including Bogot . It conducts bombings, murders, mortar attacks, kidnappings, extortion, and hijackings, mainly against Colombian targets. The FARC is fully engaged in the drug trade, including cultivation, taxation of drug crops, and distribution, from which it reaps significant profits. In recent years, the FARC has increased its activities along Colombia's borders with Ecuador and Venezuela. The Pastrana Administration (1998-2002) attempted to negotiate a peace agreement with the FARC during which FARC was granted control of a Switzerland-size territorial refuge during the peace process. The FARC was widely perceived to use the demilitarized zone as a way to re-arm, regroup, and build up its forces. With continued FARC military activity, including the hijacking of a commercial airliner and the kidnapping of a Colombian senator, President Pastrana halted the negotiations in early 2002 and ordered the military to retake control of the designated territory. During the inauguration of President Uribe on August 7, 2002, the FARC launched a mortar attack on the presidential palace that killed 21 residents of a nearby neighborhood. In mid-2003, the Colombian military's Plan Patriota campaign to recapture FARC-held territory began with a largely successful effort to secure the capital and environs of Bogot . In 2004, military operations by up to 17,000 troops tried to regain territory from FARC in the southern and eastern regions of the country. The FARC launched a counter-offensive in February 2005. The conflict with the FARC has since largely remained in the countryside. The FARC was unable to disrupt President Uribe's August 2006 inauguration. In 2006 the FARC controlled an estimated 30% of Colombian territory. Plan Patriota reduced FARC ranks, recaptured land held by the FARC, and confiscated large amounts of material used to process cocaine. Despite those advances, critics pointed out that large numbers of civilians were displaced during the campaign. <3.1.1.1. Colombia's March 2008 Raid of a FARC Camp in Ecuador> On March 1, 2008, the Colombian military bombed a FARC camp in Ecuador, killing at least 25 people including Ra l Reyes, the terrorist group's second-highest commander. This was the first time in the 44-year struggle against the FARC insurgency that the Colombian military killed a member of the FARC's seven-member ruling secretariat. A few days later, Ivan Rios, another member of the FARC's secretariat, was murdered by his own security agent. FARC's top commander, Manuel Marulanda, also died in March, of a heart attack. These three deaths dealt a significant blow to the FARC. During the raid in Ecuador, information extracted from captured laptops suggested Venezuela was providing support for the FARC. The files also included information that President Rafael Correa of Ecuador received campaign donations from the FARC in 2006. Both Presidents Ch vez and Correa vigorously rejected these claims. Venezuelan officials dismissed the data as having been fabricated even though Interpol verified in May 2008 that the files had not been tampered with since they were seized. <3.1.1.2. Hostage Releases, Escapes, and the July 2008 Hostage Rescue> In 2007-2008, prisoner escapes, hostage deaths, and later hostage releases focused international attention on the plight of hundreds of hostages held by the FARC. In June 2007, 11 departmental deputies who had been held since 2002 were executed by the FARC. In December 2007, Fernando Araujo, a former minister of development, escaped from the FARC after being held hostage for more than six years. From February through July 2008, Araujo then served as Colombia's foreign minister. Six hostage releases occurred during early 2008. On February 27, 2008, the FARC released four former members of the Colombian Congress to Venezuelan officials in Colombian territory. On July 2, 2008, after months of planning and tracking the FARC, the Colombian military tricked the FARC into releasing 15 of its prized hostages. Those hostages included three U.S. defense contractors Marc Gonsalves, Thomas Howes, and Keith Stansell held since February 2003 and former Colombian presidential candidate Ingrid Betancourt, held since February 2002. This bloodless rescue was widely cited as an example of the Colombian military's increasing professionalism and intelligence capabilities, which was largely a result of years of U.S. training and security assistance programs provided through Plan Colombia. <3.1.1.3. Current Status of the FARC> Most government estimates are that FARC forces have declined to between 8,000-9,000 fighters today. The FARC is roughly half of what it was at its peak in the early 2000s, when the FARC had as many as 16,000 to 20,000 members. The decline has come along with government victories in taking out some of the guerrilla organization's top leadership. Despite many reverses over its 48-year history, the FARC has shown a capacity to revive itself and continue to pose a serious security threat. The State Department's Country Reports on Terrorism 2011 (issued in July 2012) maintains that Colombia faced increased attacks by the FARC in 2011 and a decrease in the number of FARC troops that demobilized, or who were killed or captured. The successful reversion to the hit and run tactics of guerrilla warfare, despite the government's taking down two of the FARC's top leaders in 2011, resulted in increased casualties. The Santos Administration has kept up strong pressure on the FARC yet some public concern persists that the administration has faltered on security. In September 2010, the Colombian military and police bombed the camp of FARC military strategist Jorge Brice o (also known as "Mono Jojoy"), killing him and other guerrillas. Brice o was the operational second-in-command of the FARC and the military leader of its powerful Eastern bloc. In early November 2011, the Colombian government killed the FARC's top leader, Alfonso Cano. A week later, the FARC announced their new leader would be Rodrigo Londo o Echeverri (known as "Timole n Jim nez" or "Timochenko"). The new leader quickly made overtures to open a political dialogue with the Santos government, including an announcement in late February 2012 that it would release all high-value hostages and halt future kidnapping. In recent years, the FARC has unilaterally released some hostages in an attempt to win popular support. For example, in March 2010, the FARC unilaterally released two of their high-value "exchangeable" hostages, including Sergeant Pablo Emilio Moncayo, who had spent 12 years in captivity. Unilateral releases continued as the Santos government settled in. In February 2011, the FARC released six more hostages in operations coordinated by former Senator Piedad C rdoba with international assistance. However, on November 27, 2011, the FARC killed four hostages who were members of Colombia's security forces who had been held hostage for more than a decade. The FARC executed the men as the Colombian military approached a FARC camp in a remote part of southern Colombia. A fifth hostage, Luis Alberto Erazo, survived the melee and escaped. Erazo, a police sergeant, had been held since 1999. In response there was wide public outcry. On December 6, 2011, demonstrations involving thousands of demonstrators in cities across Colombia expressed widespread public disgust with the FARC. In early April 2012, the FARC released its 10 remaining police and military hostages, following through on its announcement weeks before. The FARC had held individuals from the Colombian military and police as "exchangeable" hostages who they hoped to trade for some 500 imprisoned FARC combatants they considered political prisoners. However, the FARC continues to hold a disputed number of other kidnap victims beyond its "exchangeable" hostages. Reportedly, the FARC has diversified from kidnapping into illegal mining and logging, cattle rustling, and extortion to supplement its income after drug trafficking. FARC's leader Timochenko expressed interest in opening a dialogue with the government, although he did not appear to be ready to meet possible government demands such as the release of all hostages, implement a ceasefire, or ban the use of landmines. In 2011 and the first half of 2012, the FARC and ELN reportedly increased their attacks. According to the State Department's 2011 Country Reports on Terrorism , the FARC alone was responsible for 377 attacks in 2011 (79% of all terrorist attacks in the Western Hemisphere). There has been a sharp increase in infrastructure attacks. Pipeline attacks reportedly grew by more than 250% between the first half of 2011 and 2012, for example. Targets of the recent spate of attacks include electricity infrastructure, trains carrying coal, and gas pipelines. These attacks threaten the energy sector, a key source of the country's booming economy. (The energy and mining sectors generate about 70% of the country's exports with oil alone accounting for about 12% of the country's gross domestic product.) In 2012, the FARC and the Santos government began secret exploratory talks that led to the September 2012 announcement that formal peace talks would commence. (For more on the status of the negotiations, see " Peace Talks .") <3.1.2. National Liberation Army (ELN)> The smaller ELN was formed in 1965, inspired by the ideas of Fidel Castro and Che Guevara. The ELN today is estimated to have less than 2,000 fighters (some observers suggest the membership may be under 1,300), but the group has still been able to carry out high profile kidnappings and bombings. In addition to terrorizing the rural civilian population, the ELN has targeted the country's infrastructure, especially its oil and electricity sectors. Its operations are mainly located in the rural areas of the north, northeast, the Middle Magdalena Valley, and along the Venezuelan border. The ELN earns funds from the taxation of illegal crops, extortion, attacks on the Ca o-Lim n pipeline, and kidnapping for ransom. Its size and military strength have been dramatically reduced since the late 1990s. One measure is the reduction in sabotage attacks on the Ca o-Lim n pipeline from 171 attacks in 2001 to only five attacks in 2009. However, infrastructure attacks began to rise again in 2011 and early 2012. Over the years, the ELN has periodically engaged in peace discussions with the Colombian government. The last round of talks ended in June 2008, after which former President Uribe stepped up operations against the insurgent group. In the first two years of the Santos Administration, the ELN commander Nicolas Rodriguez Bautista, alias "Gabino," has repeatedly expressed interest in a "political solution" to the conflict. Following the president's announcement of the FARC-government peace talks, Gabino expressed interest in the ELN joining the peace negotiations; this was acknowledged by President Santos in his late August broadcast announcing the exploratory talks. The ELN leader offered to participate but stated that there would be no ceasefire or cessation of kidnapping and extortion before talks got underway. Later, in November 2012, the ELN announced it was interested in joining the peace talks "without preconditions." How and when the ELN might participate in the FARC-government formal talks remains to be further defined. As mentioned above, there has been recent evidence that the ELN has raised its level of violence. Some analysts believe that the ELN has been able to build up its forces because a truce between the ELN and the FARC agreed to in December 2009 may have finally gone into effect in 2011 following years of clashes between the two leftist guerrilla organizations. The ELN has also reportedly made pacts with some of the criminal bands (or Bacrim, see below) that pursue drug trafficking and other criminal activities. The modest "comeback" of the ELN and increased attacks by the FARC in 2011 and 2012 come at a time when there is a growing threat from former paramilitaries. <3.1.3. Paramilitaries and Their Successors> Paramilitary groups originated in the 1980s when wealthy ranchers and farmers, including drug traffickers, organized armed groups to protect themselves from kidnappings and extortion plots by the FARC and ELN. In 1997, local and regional paramilitary groups felt the need for an umbrella organization and formed the AUC, which became the largest paramilitary group. As discussed in more detail below, the AUC disbanded in 2006. Not all paramilitary groups had joined the AUC umbrella. The AUC massacred and assassinated suspected insurgent supporters and directly engaged the FARC and ELN in military battles. The Armed Forces of Colombia have long been accused of ignoring and at times actively collaborating with these activities. The AUC, like the FARC, earned most of its funding from drug trafficking. Jane's World Insurgency and Terrorism estimated that in 2006 paramilitaries handled 40% of Colombian cocaine exports. On July 15, 2003, the AUC agreed with the Colombian government to demobilize its troops. At that time, the State Department estimated that there were between 8,000 and 11,000 members of the AUC, although some press reports estimated up to 20,000. The demobilization, begun in 2004, officially ended in April 2006. By that time, more than 31,000 AUC members had demobilized and turned in over 17,000 weapons. AUC leaders remained at large until August 2006 when President Uribe ordered them to surrender to the government to benefit from the provisions of the Peace and Justice Law. Not all paramilitaries demobilized. Some former paramilitary fighters have re-joined or re-organized into paramilitary groups since demobilizing. Some former AUC members continue to be active in the drug trade in spite of the demobilization process. The U.S. State Department and U.N. both note that the new illegal groups do not share the political objectives of the AUC, which sought to defeat leftist guerrillas, but have shifted to purely criminal purposes, predominantly drug trafficking, extortion, kidnapping and other crime. Despite their ad-hoc nature, the new illegal groups labeled "emerging criminal gangs" or "Bacrim," (the Spanish acronym), by the Colombian government pose a threat to Colombian civilians. The level of violence generated by these paramilitary successor groups and their expansion and consolidation have led many observers to consider them the primary security threat to Colombia today. According to the Annual Report of the U.N. High Commissioner for Human Rights (UNHCHR) covering 2010, these groups commit murders, massacres, threats, extortion, and acts of sexual violence, and cause individual and mass displacement. Several human rights groups have raised concern that the Bacrim are tolerated by Colombian security forces and some local authorities due to corruption, intimidation, and threats. Police reports indicate that more than 50% of the members of these groups who have been captured or killed to date had been demobilized paramilitaries, according to the UNHCHR in its 2011 annual report issued in January 2012. Another issue raised in the report is the control by Bacrim or successor groups of illegally seized land (either because it was re-stolen by the successor groups or it was acquired through their links to paramilitary networks). According to the report, these groups have violently defended their control of land and pose a threat to the government's land restitution program under the Victims' Law. Leaders of land return efforts and others involved in land restitution processes have been targeted and killed by the Bacrim. One group calls itself the "Anti-Land Restitution Army" and has made threats against land restitution activists in northern Colombia. In early 2012, one of the most powerful Bacrim groups, Los Urabe os, staged an armed strike that paralyzed businesses and shut down transportation in six northern departments of Colombia for two days in response to the killing of their leader Juan de Dios Usaga by the Colombian police. The armed strike cost local businesses and governments millions of dollars. A series of terror attacks in early February 2012 may have resulted from collaboration between the FARC and criminal bands such as the Rastrojos according to the government. There are about a half dozen dominant Bacrim groups including Los Urabe os, Los Ratrojos, the Popular Revolutionary Anti-Terrorist Army of Colombia (ERPAC), Los Machos, Los Paisas, and the Aguilas Negras. It is unclear how many smaller groups there are. As noted, the organized criminal groups both compete and cooperate with the FARC and the ELN. The Santos government has adopted an integrated strategy to target these groups and has captured or killed some of its main leaders. Nevertheless, the violence they generate, and the growing number of massacres and victims attributed to this violence, suggests that government success in dismantling the Bacrim structures has been limited. Reportedly the Bacrim groups are present in more than a third of Colombia's 1,100 municipalities. <3.2. Remaining Political Challenges> <3.2.1. Para-political Scandal> A scandal alleging paramilitary ties to politicians, especially members of the Colombian Congress that erupted in November 2006 has continued to affect Colombian politics after more than five years. On November 9, 2006, the Colombian Supreme Court ordered the arrest of three congressmen for their alleged role in establishing paramilitary groups. Since then, numerous Colombian politicians have been charged with ties to paramilitary groups in what is called the "para-political" scandal. In April 2008, Mario Uribe, a former senator, second cousin, and close ally of former President Uribe, was arrested for colluding with the paramilitaries. On February 21, 2011, Mario Uribe was convicted of aggravated conspiracy to commit a crime and sentenced to seven and a half years in prison. Illustrating the widespread fallout from the para-political scandal, the State Department has reported that of Colombia's 2006-2010 Congress, 128 former representatives (out of the 268 total) were accused of having paramilitary ties. Of the representatives elected to the 2010-2014 Congress, 13 who were re-elected were under investigation by the Supreme Court. The para-political scandal increased tensions between former President Uribe and the Supreme Court, which is charged with investigating the politicians accused of having paramilitary ties, many of whom were from what were then pro-Uribe parties. In July 2008, representatives from the two branches met to discuss President Uribe's concern that the paramilitary investigations were advancing too quickly. Despite those meetings, the Supreme Court ordered the arrest of Senator Carlos Garcia, head of Uribe's main coalition party, in late July. Government critics questioned President Uribe's decision in May 2008 to extradite key paramilitary figures to the United States, suggesting it was intended, in part, to thwart investigations into government-paramilitary ties. They also questioned the motives behind a judicial reform package submitted by Uribe to the Congress that would remove the Supreme Court's power to investigate legislators. The judicial reform bill was withdrawn by the government after it received strong criticism from the courts and from members of Colombia's Congress. In October 2008, Human Rights Watch released a report that said that the Uribe Administration had harassed the Supreme Court as it investigated politicians, security forces, and others with alleged paramilitary ties. The Santos Administration moved quickly to repair relations between the executive and the judiciary. The improved relations may have been demonstrated by the prompt election by the Supreme Court of a new Prosecutor General in December 2010. There had been an impasse of 16 months during which the Supreme Court would not approve anyone proposed by President Uribe. (However, in late February 2012, the Council of State decided to unseat the prosecutor general because of irregularities in the voting procedure which put her in office.) In late March 2012, Santos's nominee to be prosecutor general Luis Eduardo Montealegre Lynett was again elected promptly by the Colombian Supreme Court. In February 2008, Jorge Noguera, the head of Colombia's Department of Administrative Security (DAS) during President Uribe's first term, was formally charged with collaborating with paramilitaries, including giving paramilitaries the names of union activists, some of whom were subsequently murdered. Noguera was convicted in September 2011 by the Colombian Supreme Court for the murder of a university professor and conspiracy with illegal paramilitary death squads and other charges; he received a 25-year prison sentence. Noguera has been at the center of a scandal involving the DAS's illegal wiretapping and other criminal activities. The "DAS scandal" generated other investigations and convictions and led to the dismantling of the DAS by the Santos Administration. In August 2012, General Mauricio Santoyo, chief of security for President Uribe between 2002 to 2006, pled "guilty" to collaborating with illegal paramilitaries. While he admitted to cooperation with the AUC, he rejected drug trafficking charges in U.S. court. Santoyo is the highest ranking Colombian official to be extradited to the United States to face criminal charges. He is now collaborating with U.S. authorities in an ongoing investigation. The para-political scandal and other abuses of power related to paramilitary influence continue to reverberate in Colombian politics. <3.2.2. The Justice and Peace Law and Demobilization> As part of the paramilitary demobilization process, President Uribe proposed a Justice and Peace Law (JPL) granting conditional amnesties to illegal combatants. The law would also apply to FARC and ELN fighters if they entered into negotiations with the government. Colombia's Congress approved the legislation in 2005. The Justice and Peace Law requires demobilized fighters to provide an account of their crimes and to forfeit illegally acquired assets in exchange for a penalty of up to eight years' imprisonment, as an alternative penalty to longer terms usually imposed for murder, kidnapping, terrorism and other crimes. If the accused was found to have intentionally failed to admit to a crime, the alternative penalty could be revoked and the full sentence for the concealed crime would be imposed. Critics contended that the penalties were too lenient and amounted to impunity. The Uribe Administration argued that without the inducement of the new law, paramilitary leaders and fighters would be unwilling to demobilize and the violence would continue. In July 2006, Colombia's Constitutional Court upheld the constitutionality of the law. In the ruling, however, the Constitutional Court limited the scope under which demobilizing paramilitaries can benefit from the reduced sentences. Paramilitaries who commit crimes or fail to fully comply with the law will have to serve full sentences. The law affirmed that paramilitaries must confess all crimes and make reparations to victims using both their legally and illegally obtained assets. Paramilitary leaders reacted by stating that they would not comply with the law. In response, President Uribe ordered paramilitary leaders to turn themselves in. By October 2006 all but 11 paramilitary leaders had complied with this order. The merits of the Justice and Peace Law have been fiercely debated in Colombia and the United States. Supporters believe it has been an effective means to end paramilitary activities. The George W. Bush Administration supported the law, noting that it facilitated the collective demobilization of more than 31,000 paramilitary members. In addition, some 20,000 FARC, ELN, and former paramilitaries have individually laid down their arms. Other supporters of the law observe that paramilitaries must act in good faith and stop further participation in illegal activities in order to benefit from alternative sentencing. Nevertheless, the OAS Mission to Support the Peace Process in Colombia and other observers have expressed concern about the institutional frailty of the Justice and Peace process. Today more than 377,000 victims have registered under the JPL. Many observers have expressed reservations about the Colombian government's efforts to provide reparations to victims effectively. Human rights organizations are concerned that the paramilitaries have not been held accountable for their crimes and, that by under-reporting illegally obtained assets, have failed to provide adequate reparation to their victims. Other observers are concerned that many paramilitaries have not participated in the Justice and Peace process. Of the more than 31,000 paramilitary members that had demobilized, only 4,153 had been found potentially eligible to receive benefits under the Justice and Peace Law's framework. In response to concerns raised by NGOs that extradited former paramilitaries would stop cooperating in the JPL process and victims would be unable to participate, the U.S. and Colombian governments have collaborated to facilitate the continued participation of extradited individuals through telecommunications links. According to the State Department, several extradited former paramilitaries have continued to participate by providing their confessions through teleconferencing. Of the more than 4,000 individuals who were eligible for alternative prosecutions under the 2005 law, more than 1,800 demobilized paramilitaries are incarcerated while awaiting trial while only 14 individuals have been convicted under the JPL in seven years. In his March 2010 report, then-U.N. Special Rapporteur on Extrajudicial, Summary, or Arbitrary Executions, Philip Alston, observed "the Justice and Peace Law ... has not achieved the transitional justice intended for paramilitary crimes." Alston's observations seem to have continuing validity. In response to concerns about the JPL's many implementation challenges, the Colombian Congress passed a reform of the law in October 2012 to speed up its judicial processes. According to proponents, the reform reduced the number of hearings required to achieve sentencing under the law, clarified reasons for exclusion from the benefits of the JPL sentencing, and took other steps to increase the effectiveness of the Justice and Peace process. <3.2.3. Human Rights Violations by Colombian Security Forces> For several years, human rights organizations have raised serious concerns about the extrajudicial execution of civilians by the Colombian military. This issue received prominent attention when more than a dozen young men from the impoverished community of Soacha were lured to another part of the country with a promise of jobs and then murdered. In October 2008, the armed forces were linked to the murders of civilians whose bodies had been disguised as guerillas in order to inflate military body counts. As a result of an investigation, the government fired 27 soldiers and officers (including three generals), and the commander of the Colombian army, General Mario Montoya, resigned in November 2008. Named the "false positives" scandal by the Colombian press, there have been continuing revelations about this problem as the Colombian military has worked to revise a policy that rewarded high guerrilla body counts. Many observers believe that justice in the Soacha murder cases, and others, has lagged. In January 2010, more than 20 soldiers accused of carrying out the Soacha murders (of the more than 60 soldiers now implicated in the case) were released from pretrial detention by a judge who ruled that the pre-trial procedures had taken too long. Reacting to this ruling, the representative of the U.N. High Commissioner on Human Rights in Colombia expressed concern about the ruling's negative repercussions on the large backlog of cases of extrajudicial killings being investigated by the Prosecutor General's human rights team. The State Department's Country Reports on Human Rights Practices for Colombia covering 2009 stated that "political and unlawful killings remained an extremely serious problem," and that "there were periodic reports that members of the security forces committed extrajudicial killings during the internal armed conflict," although the number had decreased since the prior year. In its 2009 State of the World Human Rights report, Amnesty International asserted that between June 2007 and June 2008, at least 296 civilians were extrajudicially killed by Colombian security forces and many were disguised as guerillas who had been killed in combat ("false positives"). In June 2009, on a 10-day mission to Colombia, then-U.N. Special Rapporteur on Extrajudicial Executions Philip Alston found that the killings were not a result of official government policy. Nevertheless, according to the Special Rapporteur, "the sheer number of cases, their geographic spread, and the diversity of military units implicated, indicate that these killings were carried out in a more or less systematic fashion by significant elements within the military." The slow pace of bringing the Soacha murder cases to trial (it has been more than four years) suggests to some that the Prosecutor General's office may be overwhelmed. The first convictions in the Soacha trials came in June 2011 when eight soldiers were convicted of two murders of young Soacha residents, receiving sentences ranging from 28 to 54 years in prison. In 2012, there was another false positive case in which six soldiers were sentenced for the murder of a young man from Soacha to between 35 to 52 years in prison. According to the State Department's latest human rights certification, several cases involving victims from Soacha are pending as of August 2012. The extrajudicial killings Sub-Unit of the Prosecutor General's office has been assigned over 1,700 cases (involving more than 3,500 victims) of extrajudicial killings allegedly committed by members of the Colombian Armed Forces between 1985 through June 2012. According to some human rights advocates, the high level of incomplete cases is evidence that impunity remains the norm. There has been progress, however, in reducing the number of new cases. As noted, the number of new cases fell in 2009 and 2010, and no new cases "fitting the false positives profile" were reported in the most recent human rights certification issued by the State Department in August 2012. <3.2.4. Internally Displaced Persons (IDPs)> Colombia has one of the largest populations of internally displaced persons in the world most estimates placing the total between 4 million to 5 million IDPs with indigenous and Afro-Colombians disproportionately represented among those displaced. There is some disagreement over the rate of displacement. Some IDPs do not register with the Colombian government out of fear and because of procedural barriers. Therefore, estimates of new displacements put forth by NGOs tend to be higher than government figures. For 2011, the government maintained there were 143,116 new displacements (a 7% increase over 2010). The Consultancy for Human Rights and Displacement (CODHES), a Colombian NGO, reported 259,146 displacements. Many humanitarian organizations and the Colombian government reported a significant increase in mass displacements during 2011. CODHES and the government also differ on the total number displaced. The government has registered 3.9 million people as IDPs since 1997, while CODHES estimates more than 5 million have been displaced since 1985. The U.N. High Commissioner for Refugees (UNHCR) has observed that however IDPs are counted, the number of the displaced in Colombia continues to grow and is one of the largest internally displaced populations in the world. Displacement is driven by a number of factors, most linked to the internal armed conflict. It occurs frequently in more remote regions of the country where armed groups compete and seek to control territory or where armed groups confront Colombian security forces. Violence that uproots people includes threatened or actual child recruitment or other forced recruitment, and physical, psychological, and sexual violence. Other contributing factors reported by NGOs include counternarcotics measures such as aerial spraying, illegal mining of minerals and ore, and large scale economic projects in rural areas. There are increasing reports of "interurban" displacement in cities such as Medellin, resulting from violence and threats by organized crime groups. <3.2.5. Landmines> The use of landmines by Colombian guerrilla groups is a very serious ongoing problem. Although Afghanistan and Cambodia continue to have higher rates of landmine casualties (per capita) than Colombia, the International Campaign to Ban Landmines reported that Colombia had the highest number of landmine casualties in the world in 2006, with 1,106 casualties. Both Human Rights Watch and the International Campaign to Ban Landmines report that the vast majority of landmines are laid by the FARC and ELN. In 2007, Landmine Monitor cited a decline in landmine casualties to 895, the first decline since 2002. The change was attributed to setbacks suffered by the FARC. Landmine casualties in Colombia declined further in 2008 to 798, and to 741 in 2009 and 512 in 2010. In November 2012, the Colombian Minister of Agriculture maintained that much of the land being claimed for return under the Victims' Law (see " Reforms under the Santos Administration ") that was in FARC control had been mined. He noted that demining the land will be slow and costly. <4. U.S. Policy Focus and Concerns> <4.1. Colombia and Global Drug Trends> Colombia's prominence in the global production of cocaine and heroin has long been a U.S. focus of counternarcotics efforts in the Andean region. On July 30, 2012, the U.S. Office of National Drug Control Policy (ONDCP) announced that in its estimates Colombia's potential cocaine production capabilities had fallen below Peru's and Bolivia's. According to the estimate, Colombia's 2011 potential cocaine production fell to 195 metric tons, 25% below the prior year estimate and 72% below the U.S. government estimate for 2001. Nearly the entire world's supply of cocaine is produced by just three countries: Peru, Bolivia, and Colombia. The major components of U.S. strategy have been drug crop eradication, interdiction, and alternative development programs, all with an eye to reducing the drug supply at its source. Until the mid-1990s, Peru and Bolivia were the two major producers. Successful eradication and interdiction efforts in the 1980s and 1990s of coca and cocaine in Peru and Bolivia inadvertently pushed cultivation to Colombia. Colombia eclipsed Bolivia in 1995 and Peru in 1997. Cocaine production in Colombia increased fivefold between 1993 and 1999. But by 2010, cultivation of coca had decreased in Colombia according to estimates published by the United Nations, and pushed back into Peru and Bolivia. This suggests the so-called "balloon effect" may be responsible. This occurs when producers working to supply the illicit drug market move their operation to locations they perceive to have less enforcement that is pressure in one part of the "balloon" moves the trade to another yet total global production is mainly unaffected. The estimates of the area under coca leaf cultivation and the volume of potential production of pure cocaine depend upon making assumptions from limited data. The United Nations Office on Drugs and Crime (UNODC) and the U.S. government have developed varying estimates that report midpoints in a range of likely cultivation and production, but U.S. and U.N. estimates often differ considerably. The organizations also sometimes modify their estimates after more data is collected. For example, UNODC modified its 2008 calculation upward for Colombia's production of pure cocaine from 430 metric tons to 450 metric tons. On the other hand, the U.S. government changed its estimate of production of pure cocaine for 2008 downward from 295 metric tons to 280 metric tons. In its annual coca cultivation survey for Colombia published in June 2012, UNODC reported that 64,000 hectares of coca were grown in the country in 2011. This was a slight increase over the 62,000 hectares of coca detected in 2010. However, the UNODC also estimated for 2011 that Colombia's potential production of cocaine fell by 1% to 345 metric tons in 2011. In contrast, the U.S. government estimates for coca cultivation registered a 17% decline from 100,000 hectares in 2010 to 83,000 hectares in 2011. The White House Office of National Drug Control Policy announced that the U.S. government estimate for potential production of cocaine had in 2011 declined to 195 metric tons, a 72% reduction over the high point in 2001 of an estimated 700 metric tons. The new U.S. production estimate placed Colombia behind both Peru and Bolivia in pure cocaine production. Some observers maintain the divergent estimates are contradictory and do not present a coherent picture. Nevertheless, according to the State Department's 2012 International Narcotics Control Strategy Report (INCSR) published in March 2012, Colombia produces about 95% of the cocaine seized in the United States. In recent years, the Colombian government, with significant U.S. assistance, has stepped up its eradication efforts. ONDCP has credited ongoing aerial spraying and manual eradication programs with recent declines in the cocaine productivity of the coca cultivated in Colombia. In the 2011 INCSR , the State Department notes that the eradication efforts goals were set lower based on what was accomplished in 2009. Manual eradication in 2010 declined considerably to below its goal of 70,000 hectares, when the government managed to manually eradicate about 45,000 hectares of coca "due to budgetary disbursement delays, security concerns, and the dispersion of coca crops to smaller fields." In 2010, the government eradicated nearly 102,000 hectares by spraying, slightly above its stated aerial eradication target. In 2011, according to the latest INCSR , Colombia manually eradicated 34,592 hectares and sprayed slightly over 102,000 hectares. After a long period of stable prices, purity, and availability of illegal drugs in the United States, evidence indicated that the price of cocaine rose significantly between January 2007 and September 2010. According to the Department of Justice's National Drug Intelligence Center (NDIC) report, National Drug Threat Assessment 2011 , the average street price for a pure gram of cocaine rose from $97.71 to just under $165 in that time period, while average street sale purity declined from 67% to 47%, a decline of 30%. The supply of drugs is often judged by changes in price, with higher prices signifying decreased supply (or increased demand which does not appear to be the case in the United States). Declining purity also measures decreased availability. The NDIC report , published in August 2011, found a sharp decline in cocaine availability in the United States since 2006 that may have been responsible for price increases and purity declines. The report identifies no single factor for the decline in cocaine availability. Rather, a combination of factors, including decreased ability to move cocaine from South America due to intercartel fighting in Mexico and counterdrug activity, decreased production of cocaine in Colombia, and cocaine flowing to non-U.S. markets (such as Europe), all likely contributed to decreased amounts being smuggled into the United States. Some observers express caution in interpreting recent trends in price, purity, and availability. They maintain that short-term fluctuations are not uncommon and may not be sustainable. Analysts note that over the longer term retail cocaine prices have dropped dramatically since the mid-1980s. Even with the significant increase in price for a pure gram of cocaine between 2007 and 2010, the price has still not surpassed the level of 2001 (a year after the inception of Plan Colombia), when it was $194 per gram. Most heroin consumed in the United States comes from Mexico and a lesser quantity from Colombia. In an October 2008 report on Plan Colombia, the U.S. Government Accountability Office (GAO) reported that opium poppy cultivation and heroin production had declined in Colombia by about 50% between 2000 and 2006. In 2008, the U.N. reported that opium production dropped to 394 hectares in Colombia, the lowest figure in the last 14 years of reporting. In 2009 and 2010, the number of hectares under cultivation continued to decline dropping to a low of 346 hectares in 2010. <4.2. Colombia and Regional Security> Another U.S. policy focus in the Andean region is helping Colombia deal with armed insurgencies that are involved in drug trafficking and have a destabilizing effect on regional security. Colombia shares a 1,367-mile border with Venezuela, approximately 1,000 miles each with Peru and Brazil, and much smaller borders with Ecuador and Panama. With porous borders amid rugged territory and an inconsistent state presence, all of Colombia's border regions have been particularly problematic. The conflict in Colombia and its associated drug trafficking have led to spillover effects in Colombia's neighboring countries, especially Venezuela and Ecuador. <4.2.1. Relations with Venezuela and Ecuador> Colombia's relations with its neighbors have been strained by the spillover from Colombia's counter-insurgency operations, including cross-border military activity. Colombia has asked both Venezuela and Ecuador for assistance in patrolling border areas where the FARC and, in some cases, the ELN are strong. Cooperation between Colombia and its neighbors, Venezuela and Ecuador, who had tense relations with the Uribe Administration, has markedly increased under President Santos. Both governments re-established diplomatic relations with Colombia following the Santos inauguration. Ties with Ecuador were severed for 33 months because of the 2008 bombing raid by the Colombian military on a FARC camp located inside Ecuador near the border. In response to that raid, Venezuela also broke off relations and sent troops to its border with Colombia. Following a diplomatic intervention, Venezuela restored relations. Personal relations between Venezuelan President Hugo Ch vez and President Uribe were quite tense as both leaders accused one another of undermining their governments. In July 2009, Venezuela withdrew its ambassador and imposed a trade embargo following Colombian accusations that Venezuelan government military equipment had been discovered in a FARC camp. By the year's end, bilateral trade fell by one-third as a result of the trade cut off, weakening one of Colombia's most important trade relationships. In October 2009, a U.S.-Colombia base agreement that was signed that permitted U.S. troops to use seven military facilities in Colombia further inflamed President Ch vez. He claimed that the placement of U.S. troops in Colombia was a threat and described the now stalled base agreement as "fanning the winds of war" across the region. In its last month in office, in July 2010, the Uribe government presented evidence at the Organization of American States (OAS) that the Venezuelan government was harboring FARC and ELN fighters in numerous camps inside its territory. These charges brought relations to a nadir. After President Santos took office, Venezuela and Colombia restored diplomatic ties in late August 2010, and Ecuador renewed full diplomatic relations with Colombia in December 2010. Since then, bilateral cooperation on issues such as trade, cross-border crime, and counternarcotics has been strengthened. In 2011, several FARC operatives have been captured in both countries and extradited to Colombia. A number of alleged drug kingpins wanted in Colombia have been arrested in Venezuela, including Maximiliano Bonilla (known as "Valenciano") in November 2011 and Daniel Barrera (alias "El Loco") in September 2012. Barrera's arrest in the Venezuelan border state of T chira involved a joint Venezuelan-Colombian operation with support from U.S. and British intelligence agencies. Barrera was allegedly deeply involved in drug trafficking for more than two decades and served as a bridge between leftist insurgents, rightwing paramilitaries, and some of Colombia's largest drug trafficking organizations. The State Department's Country Reports on Terrorism 2011 , issued in July 2012, cites the increasing bilateral cooperation of Venezuela and Colombia on security. According to the report, President Ch vez made statements that illegal armed groups will not be tolerated on Venezuelan territory. However, the report also notes that four Venezuelan government officials are targets of U.S. sanctions for their direct links to the FARC's drug and arms trafficking activities. Despite government denials, many observers believe that Venezuela is used for rest, resupply, and drug transit by the FARC and to a lesser degree the ELN. To Colombia's south, the report states "Ecuador's greatest counterterrorism and security challenge remained the presence of Colombian terrorist groups in the extremely difficult terrain along the porous 450-mile border with Colombia." Ecuador's ability to combat these groups has been limited by resources and capabilities. Ecuador has other issues with Colombia. It receives high numbers of refugees from Colombia's conflict and opposes aerial spraying of coca in southern Colombia that it fears drifts into Ecuador and damages licit Ecuadorian crops. However, relations between Colombia and Ecuador have steadily improved under the Santos Administration, a process that began in the later months of the Uribe Administration. Many analysts see this regional diplomacy by President Santos as an effort to build a more balanced approach to neighboring countries and to end Colombia's relative isolation in the region that had grown during the Uribe Administration. Others maintain that future relations with Venezuela are uncertain, given the unpredictability of recently re-elected President Ch vez and concerns about his health. The supportive role of Venezuela to the peace negotiations with the FARC also elevates the relationship, which is decried by former President Uribe and other critics of the peace talks. The rapprochement with Venezuela has had its trade offs for the United States. When drug kingpin Walid Makled Garcia was arrested in Colombia on a U.S. warrant in August 2010 and requested for extradition by both Venezuela and the United States, the Colombian government honored the Venezuelan request and returned Makled to Venezuela in May 2011. <4.3. Plan Colombia and the Andean Counterdrug Program (ACP)> Plan Colombia was developed by President Pastrana (1998-2002) as a strategy to end the country's 40-year-old armed conflict, eliminate drug trafficking, and promote development. The initial plan was a $7.5 billion six-year plan, with Colombia providing $4 billion of the funding and requesting $3.5 billion from the international community. The U.S. Congress approved legislation in support of Plan Colombia in 2000, as part of the Military Construction Appropriations Act of 2001 ( P.L. 106-246 ) providing $1.3 billion for counternarcotics and related efforts in Colombia and neighboring countries. Plan Colombia was never authorized by Congress. Subsequent funding has been appropriated for Plan Colombia and follow-on plans annually. President Bush continued support for the plan under the Andean Counterdrug Program (ACP) aid account. The ACP account funded counternarcotics programs in Bolivia, Brazil, Ecuador, Panama, Peru, and, until FY2008, Venezuela. The U.S.-Colombian partnership, initially focused on counternarcotics, shifted in 2002. Because narcotics trafficking and the guerrilla insurgency had become intertwined problems, Congress granted the Administration flexibility to use U.S. counterdrug funds for a unified campaign to fight drug trafficking and terrorist organizations. Formerly, the ACP and Foreign Military Financing (FMF) accounts supported the eradication of coca and opium poppy crops, the interdiction of narcotics shipments, and the protection of infrastructure through training and material support for Colombia's security forces. U.S. assistance supports alternative crop development and infrastructure development to give coca and opium poppy farmers alternative sources of income, and institution building programs to strengthen democracy. In FY2008, alternative development programs were shifted from the ACP account to the Economic Support Fund (ESF) account. U.S. assistance includes human rights training programs for security personnel in response to Congressional concern about human rights abuses committed by Colombian security forces. Congress has prohibited U.S. personnel from directly participating in combat missions. It has also capped the number of U.S. military and civilian contractor personnel who can be stationed in Colombia in support of Plan Colombia at 800 and 600 respectively, although numbers deployed have been well below the 1,400-person cap in recent years. The United States also supports the interdiction of drug shipments through the Air Bridge Denial (ABD) Program. The Air Bridge Denial program began as a joint interdiction effort between the United States, Peru, and Colombia to identify drug flights from Peru to Colombia and to interdict them by forcing them to land, or, if necessary, by shooting down suspect aircraft. The program was suspended in 2001 after a small airplane carrying American missionaries was mistakenly shot down over Peru. Following the establishment of new safeguards against accidental shootdowns, the program was renewed in Colombia in 2003. In 2008, the United States began turning over operational and financial responsibility for Plan Colombia programs to the Colombians in a process of nationalization. Over the last four years, as U.S. funding for Plan Colombia has gradually declined, several programs were successfully nationalized, including the ABD program and several police and military aviation operations. The nationalization efforts are not intended to end U.S. assistance, but rather reduce it to pre-Plan Colombia levels adjusted for inflation. <4.3.1. Aerial Eradication, Coca Cultivation, and Alternative Development151> Upon taking office, President Uribe announced that aerial eradication, along with alternative crop development, would form a significant basis of the government's efforts to reduce cocaine production. The Plan Colombia eradication spraying program began in December 2000 with the U.S.-funded counternarcotics brigade in Putumayo. It should be noted, however, that spraying does not prevent, although it may discourage, the replanting of illicit crops. According to the 2012 International Narcotics Control Strategy Report , manual eradication in Colombia fell to 45,000 hectares in 2010 and was just over 34,000 hectares in 2011 not reaching the targets set due to "security concerns, budget issues, and the dispersion of coca to smaller fields." The report notes that 9 manual eradicators were killed in 2011 (and 32 injured) due to attacks from traffickers and other illegally armed groups. As discussed above, the United Nations and United States use different methodologies to estimate annual coca cultivation levels in Colombia. The different methodologies yield results that not only show different levels of cultivation, but sometimes different trends as well. The area of cultivation is measured in hectares, and a hectare is equivalent to 2.47 acres. The UNODC maintains that if an adjustment is made for the prevalence of small fields that Colombia's coca cultivation declines from a base estimate of 73,000 hectares in 2009 to 62,000 hectares in 2010. According to the State Department's 2012 INCSR , the U.S. government estimated that Colombia's coca cultivation declined from 116,000 hectares to 100,000 hectares in 2010, a 14% decline. The U.S. government estimates for 2011 show another decline to 83,000 hectares whereas the UNODC showed a slight increase to 64,000 hectares. Aerial eradication has been controversial both in Colombia and the United States. Critics have long charged that it has unknown environmental and health effects, and that it deprives farmers of their livelihood, when carried out without coordination with alternative development programs. With regard to environmental and health consequences, the Secretary of State, as required by Congress until FY2012, has reported that the herbicide, glyphosate, does not pose unreasonable health or safety risks to humans or the environment. In consultation for the certification, the U.S. Environmental Protection Agency has confirmed that application procedures and concentration of the aerial spray program in Colombia are within the parameters listed on U.S. glyphosate labels. Nevertheless, press reports indicate that many Colombians believe the health consequences of aerial fumigation are grave, and many international NGOs criticized the prior certification process for being analytically inadequate. The U.S. Agency for International Development (USAID) funds alternative development programs to assist farmers of illicit crops in the switch from illicit to licit crops, and provides assistance with infrastructure and marketing. The approach includes job creation for rural families in coca-growing and conflict-prone areas with economic development potential. From 2002 through September 2009, the United States completed 1,290 social and productive infrastructure projects with communities that agreed to remain free of illicit crops according to the State Department. The USAID Mission in Colombia reports significant progress since funding started flowing for alternative development through Plan Colombia. By the end of FY2010, alternative development programs had benefitted 479,221 families and supported 476,215 hectares of licit crops (cumulative totals) in both coca and poppy areas. The success of alternative development in Colombia has been limited both by security concerns and the limited scope of the program. The 2008 GAO report, among others, that examined the progress of Plan Colombia identified weaknesses in the program. For example, a majority of the USAID alternative development projects in Colombia were not located in areas where the majority of coca is grown and they have not been evaluated for meeting drug reduction goals or for their sustainability. Security concerns were blamed for the proposed withdrawal of USAID assistance from five departments where coca production was increasing, according to a USAID memo leaked to the press in October 2006. UNODC reported in June 2006 that alternative development programs have been successful, but only reach 9% of Colombian coca growers. The organization called for a tenfold increase in international donor support for alternative development programs. In 2006, USAID redesigned its strategy to lure coca growers to relocate to geographic zones that offered economic opportunities from zones where coca had been grown. The two core projects of the USAID strategy that ran between 2006 and 2011 were the More Investment for Sustainable Alternative Development (MIDAS) and Areas for Municipal Level Alternative Development (ADAM). Both projects have generated thousands of hectares of licit crops and jobs. In FY2010, USAID reported that it helped rural families produce more than 95,000 hectares of licit agricultural products and to create more than 150,000 jobs. However, the USAID projects have been criticized for neither reaching those most vulnerable to coca cultivation nor providing adequate income substitution during the comparatively long time needed for alternative crops to mature and generate sufficient and sustainable income. Several assessments of USAID's alternative development program under Plan Colombia cite the "zero coca" policy of the Colombian government as actually a barrier to reaching those impoverished farmers most vulnerable to coca growing. For example, in one assessment, researchers were told "alternative livelihoods assistance reaches only a small segment of the population in need, i.e. either cultivating coca or vulnerable to coca cultivation." Proponents of U.S. policy argue that both eradication and alternative development programs need time to work and that alternative development programs do not achieve drug crop reduction on their own. Alternative development in Colombia was designed to support the aerial and manual eradication programs. An integrated approach to alternative development was one element of the National Consolidation Plan officially launched by the Colombian government in 2008. <4.4. National Consolidation Plan> In early 2007, the Colombian Ministry of Defense announced a "Policy of Consolidation of Democratic Security" to guide security policy for the Uribe Administration's second term (2006-2010). The new strategy was intended to consolidate the gains of the Democratic Security policies that were successful in reducing violence in the first term and to consolidate state presence in marginal areas where insurgent activity by illegal armed groups, drug trafficking, and violence converged. Called "integrated action" and later the National Consolidation Plan (PNC), the strategy combines security, counternarcotics, and development in a sequenced approach targeting remote, but strategically important, areas where illegal armed groups continue to operate. First, security forces enter a contested zone to stabilize and hold the area so that civilian state institutions can come in to provide social services such as justice, education, health, and housing to establish a positive state presence. The doctrine is based on the premise that all military and social actions are interdependent and no effort can be successful if the complementary efforts are not. Led by civilian and defense officials in the Ministry of Defense, this major shift in approach was declared to be a "strategic leap" forward by then- Colombian Defense Minister Juan Manuel Santos in March 2009. At the local level, this strategy is carried out at regional consolidation centers staffed by civilian, police, and military personnel. The two best-known pilot projects, which have each received considerable U.S. and international support, are the regional coordination centers established in the Macarena in the Meta department and Montes de Mar a near the central Caribbean coast. Both are intended to function as models for consolidation efforts in other municipalities located in priority zones in Colombia. Six municipalities in the Macarena region (formerly a high coca growing area) reduced their coca cultivation by 85% between 2007 and August 2012 with minimal replanting, suggesting the consolidation efforts have been effective. Early critics argued that the blurring of lines between military and civilian activities poses some dangers and that there is a need for increased civilian leadership and greater representation of community interests. USAID programs and the U.S. Department of Defense have strongly supported this approach and provided funding to consolidation programs since 2007. The Colombia Strategic Development Initiative aligns U.S. assistance with the new strategy. According to the State Department, the U.S. government collaborated with Colombia since 2008 to pilot integrated counternarcotics initiatives in three regions that combined security, eradication and development. In September 2010, President Santos "relaunched" the National Consolidation Plan so it dovetails with Colombia's development plans and targets zones that can become the source of new economic growth in Colombia. The PNC has been refocused to concentrate on 51 priority municipalities (out of a national total of 1,100), and the current USAID "consolidation and livelihoods" programming goes to 40 of the priority municipalities. According to the 2012 INCSR , the U.S. government provides alternative development assistance for communities as they transition in the consolidation process. In zones that have recently been recovered, the U.S. government provides support for immediate and short-term activities designed to meet immediate needs, such as quick impact projects to establish roads, bridges, health posts, and electrification to help communities recover from the impact of conflict and eradication. For PNC municipalities that have been in the program longer, the U.S. government assistance includes strengthening producer associations, increasing marketing opportunities for licit crops, and technical assistance to Colombian civilian agencies that are working to establish a permanent presence. The 2012 INCSR comments that coca cultivation and cocaine production reductions in Colombia have demonstrated the success of a counternarcotics strategy that uses an "integrated, broad-based approach." It also warns, however, that Colombia's counternarcotics gains are not irreversible. <4.4.1. Funding for Plan Colombia> From FY2000 through FY2012, U.S. funding for Plan Colombia and its follow-on strategies totaled over $8 billion in State Department and Defense Department programs. From FY2000 to FY2009, the United States provided foreign operations assistance to Colombia through the Andean Counterdrug Program (ACP) account, formerly known as the Andean Counterdrug Initiative (ACI), and other aid accounts. In FY2008, Congress continued to fund eradication and interdiction programs through the ACP account, but funded alternative development and institution building programs through the Economic Support Fund (ESF) account. In the FY2010 request, the Obama Administration shifted ACP funds into the International Narcotics Control and Law Enforcement (INCLE) account. In addition, support for aerial eradication programs is provided from the State Department's Air Wing account. The Defense Department requests a lump sum for all counternarcotics programs worldwide under Sections 1004 and 1033, and under Section 124, of the National Defense Authorization Act. DOD can reallocate these funds throughout the year in accordance with changing needs. While not considered a formal component of the ACP Program, the Defense Department has provided Colombia with additional funding for training and equipment for a number of years, as well as the deployment of personnel in support of Plan Colombia. In its October 2008 report, the GAO stated that Plan Colombia had only partially fulfilled its drug reduction goals. In the years 2000-2006 coca cultivation and production of cocaine had actually increased by about 15% and 4%, respectively. The report concluded that while significant security gains were achieved by the Colombian government with U.S. assistance, coca farmers had taken effective countermeasures against eradications, and alternative development programs had not been implemented where the majority of coca is grown. Moreover, the report criticized the "nationalization" of Plan Colombia programs the transfer of U.S.-administered programs to the Colombians as advancing too slowly and lacking coordination. In 2008, there was significant debate in Congress about the proper balance between so-called "hard-side" security assistance (i.e., equipment and training to the Colombian military and police) and "soft-side" traditional development and rule of law programs. While some Members of Congress supported the Bush Administration's emphasis on security-related assistance to Colombia, others expressed concerns that the Administration put too much of an emphasis on the security assistance component. Many Members have expressed a desire to see a more rapid transfer of responsibility for the military operations associated with Plan Colombia from the United States to Colombia. Since FY2008, Congress has reduced assistance for security-related programs and increased economic and social aid in the annual foreign assistance appropriations legislation. For example in the FY2012 foreign operations appropriations measure, the balance between "soft-side" traditional development and rule of law assistance and "hard-side" security and counterdrug assistance was close to 50/50. Total assistance in support of Plan Colombia includes significant DOD support. The combined estimated assistance appropriated to Colombia from State Department and DOD in FY2012 was $490 million (see Table 1 ). In FY2013, the State Department's budget request, in line with other foreign aid cuts, fell to about $332 million, approximately 13% lower than the amount appropriated for State Department accounts in FY2012. Table 1 provides a more detailed breakdown of U.S. assistance to Colombia from FY2000 through the FY2013 request. The Obama Administration's FY2013 budget request of roughly $332 million for Colombian foreign assistance from State Department accounts has broad support. The Senate Appropriations Committee version of the FY2013 foreign aid appropriations measure, S. 3241 , would provide additional funding exceeding the request in economic support and slightly more in counternarcotics (including funds targeted at strengthening the Colombian Prosecutor General's office). The House Appropriations Committee version of the bill, H.R. 5857 , would provide an additional $10 million over the request for Foreign Military Financing (FMF), and would increase support under the International Narcotics Control and Law Enforcement (INCLE) account by $18.6 million to fund security and counternarcotics training and technical support by the Colombian government to partners regionally and worldwide. In September 2012, Congress passed a Continuing Appropriations Resolution (CR) FY2013 ( H.J.Res. 117 , P.L. 112-175 ), which was signed into law on September 28, 2012 and which expires on March 27, 2013. Under the CR, regular aid accounts are funded at the same level as in FY2012 plus .612%. <4.5. U.S.-Colombia Defense Cooperation Agreement> On October 30, 2009, the United States and Colombia signed the Defense Cooperation Agreement (DCA) to provide the United States access to seven military facilities in Colombia to conduct joint counternarcotics and anti-terrorism operations over a 10-year period. The U.S. Congress authorized $46 million for construction at the Palanquero air base in Central Colombia in the defense authorization for FY2010 signed into law in October 2009 ( P.L. 111-84 ). However, on August 17, 2010, the Colombian Constitutional Court declared the agreement unconstitutional because it had not been submitted to the Colombian Congress for approval. Since then, the Santos Administration has not submitted the agreement to Congress. The agreement had generated hostility toward Colombia from some neighboring countries, such as Venezuela and Ecuador. Not moving ahead with the agreement appears to have lowered regional tensions. The DCA did not change the cap on the number of U.S. personnel deployed in Colombia which remains the same as set by Congress in 2004 ( P.L. 108-375 ) 800 military personnel and 600 contractors. U.S. personnel presence in recent years has declined to a level below half of the authorized 1,400-person cap, which is a trend that is expected to continue. <4.6. Human Rights> Debate in the U.S. Congress has continued to focus on allegations of human rights abuses by the FARC and ELN, paramilitary groups, and the Colombian Armed Forces, and the extent of the investigation and prosecution of such crimes. For example, as previously discussed (see " Human Rights Violations by Colombian Security Forces "), the Prosecutor General's office has been assigned over 1,700 cases (involving more than 3,500 victims) of extrajudicial killings allegedly committed by members of the Colombian Armed Forces between 1985 through June 2012. The United Nations and many NGOs and human rights groups are deeply concerned that progress in reducing the backlog of cases of extrajudicial killing has proceeded slowly. They are also alarmed that while allegations of extrajudicial executions by the security forces have declined sharply in recent years, there continues to be reports that the practice has continued. Since 2002, Congress has required that the Secretary of State certify annually to Congress that the Colombian military and police forces are severing their links to the paramilitaries, investigating complaints of human rights abuses, and prosecuting those against whom credible charges have been made. Since 2002, Congress has made funding to the Colombian military contingent on these certifications. In the latest certification, issued on August 20, 2012, Secretary Clinton reported again that the Colombian government and armed forces are meeting the statutory requirements with regard to human rights. Over the years, many NGOs have criticized the positive certifications and report that they have presented evidence to U.S. State Department officials that contradict U.S. findings. Some human rights groups have called the human rights certification "a flawed but useful tool" because the certification process requires regular consultation with Colombian and international human rights groups by the U.S. government, and because over time the conditionality can improve human rights compliance. Congress has also regularly enacted another mechanism to prevent human rights abuses: the so-called Leahy Amendment in foreign operations appropriations legislation. Specifically, this provision states that units of a foreign country's security forces are prohibited from receiving assistance if the Secretary of State receives credible evidence that such units have committed "a gross violation of human rights." (The restriction had been designated as Section 620J of the Foreign Assistance Act, but re-designated as Section 620M and amended by the Consolidated Appropriations Act of 2012, ( P.L. 112-74 )). The Secretary may continue funding if she determines and reports to Congress that the foreign government is taking effective measures to bring the responsible members of these security forces to justice. A similar provision applies to DOD training of foreign security forces if the Secretary of Defense receives "credible information" that units of foreign security forces have committed "a gross violation of human rights." The most recent restriction on DOD funding appears in Section 8058 of P.L. 112-74 . There have been Colombian units that have been disqualified from receiving assistance and training under these provisions, or "not vetted for cause." Despite these measures, human rights organizations contend that the U.S. government often ignores questionable activities of Colombian security forces. <4.7. U.S.-Colombia Free Trade Agreement179> In 2003, the George W. Bush Administration announced its intention to begin negotiating an Andean region free trade agreement (FTA) with Colombia, Peru, Ecuador, and Bolivia. In its announcement, the Administration asserted that an FTA would reduce and eliminate barriers to trade and investment, support democracy, and fight drug activity. After regional talks broke down, the United States separately pursued bilateral trade agreements with Colombia and Peru. The United States and Colombia signed the U.S.-Colombia Trade Promotion Agreement on November 22, 2006, also called the U.S.-Colombia Free Trade Agreement (CFTA). Nearly five years later, the U.S. Congress approved implementing legislation for the CFTA ( H.R. 3078 / S. 1641 ) on October 12, 2011, and President Barack Obama signed the measure on October 21, 2011 ( P.L. 112-42 ). Congressional approval of the implementing legislation for the agreement was delayed because of controversy. Proponents argued that the FTA with Colombia would improve market access for U.S. businesses, increase bilateral trade in a way that benefited both countries, and reward a close ally in South America. Critics of the agreement countered that Colombia had a weak record on labor rights, unacceptably high levels of violence allegedly targeted at union members, and that perpetrators of such crime were rarely investigated or prosecuted (as described in more detail below). In congressional debate, human rights considerations raised by opponents included the victimization of labor activists and other human rights defenders. Some opponents also pointed to concerns that Colombian workers in some sectors would be displaced. Proponents maintained that Colombia had made progress over the past decade in reducing violence and enhancing security overall. The Obama Administration, as part of its export development and job growth strategy, indicated an interest in 2011 in concluding pending Bush-era free trade agreements with South Korea, Panama and Colombia once "key issues" in each agreement were addressed. The Administration introduced implementing legislation for the three agreements in early October 2011. On a same-day vote on October 12, 2011, Congress approved the U.S.-Colombia agreement with a bipartisan vote of 262-167 in the House and 66-33 in the Senate. Debate surrounding passage of the agreement centered on labor issues, including allegations of violence against trade unionists and inadequate government prosecution of such violence. As part of the CFTA legislation, Congress renewed the Andean Trade Preference Act (ATPA) through July 2013 for Colombia and Ecuador. The law provides eligible countries with unilateral preferential access to the U.S. market for certain products to encourage legitimate economic activity in place of a dependence on the illegal narcotics trade. The ATPA renewal, which along with other trade preference measures allows about 90% of Colombian imports to enter the United States duty free, gave Colombia time to transition while awaiting the CFTA's entry into force. Acknowledging that one of the key concerns of opponents of the U.S.-Colombia Free Trade Agreement involved the status of labor rights in Colombia, on April 7, 2011, President Santos and President Obama announced they had agreed upon an Action Plan Related to Labor Rights (Action Plan). This detailed plan addressed U.S. concerns about protection of labor rights in Colombia, violence against labor leaders, and improving the investigation and prosecution of labor-related violence. The Obama Administration stated that implementation of most of the measures in the plan, which consists of a series of actions the Colombian government must take within defined time frames, would be a precondition for the President to declare the CFTA's entry into force. The Action Plan can be found on the website of the Office of the United States Trade Representative (USTR). Reaction to the Action Plan has been mixed. Although many contend that the plan, if fully implemented, would represent progress on some of the problems facing labor in Colombia and view it favorably, others are concerned that weak enforcement may limit its prospects. On April 15, 2012, at the Summit of the Americas held in Cartagena, Colombia, President Obama and President Santos announced that the CFTA would enter into force on May 15, 2012. They affirmed that the commitments of the Action Plan Related to Labor Rights had been substantially met and that both countries had reviewed and revised their laws and regulations to meet their obligations under the agreement. Following its entry into force in May, the trade agreement immediately eliminated duties on 80% of the U.S. exports of consumer and industrial products, and will eliminate most remaining tariffs within 10 years of implementation. Although it is too early to evaluate its impact, U.S. investment in Colombia and trade between the two countries has grown since the agreement entered into force. <4.7.1. Issues Related to Labor Rights in Colombia> The predominant concern that the Action Plan addressed was violence against labor unionists. Labor activist killings in Colombia declined during 2002-2005, but rose again in 2006 (see Figure 2 ). Data on the number of labor unionists murdered in any given year vary by source. In 2009, the government reported a decline to 28 murders and the National Labor School (a respected Colombian NGO) reported a slight decline to 47 murders of labor unionists. In 2010, the Colombian government recorded 34 murders, while the ENS recorded 51. For more information about the reasons for the discrepancy between government and NGO counting of these murders, see CRS Report RL34759, U.S.-Colombia Free Trade Agreement: Labor Issues , by [author name scrubbed]. In 2011, both the government and ENS recorded a drop in labor unionist homicides. For the year in which the Action Plan was signed, ENS reported 29 homicides, but a continuing pattern of threats, including death threats, violence, harassment, and other practices against trade union representatives that inhibited their ability to exercise their right to free association including to engage in union activities. Violence against labor union members is in a context of high violence levels in the society in general. Colombia has greatly reduced its homicide rate over the past decade, but even in 2010 there were more than 15,400 homicides, with a rate of 34 homicides per 100,000 inhabitants (far exceeding Mexico's rate of 18.1 per 100,000 in 2010). The 51 homicides of labor unionists recorded by ENS in 2010 were less than one-half of 1% of total homicides. Critics of the Colombian government's record on protecting labor note that the politically intimidating effect of a labor murder is not equivalent to a random murder. One unknown related to the controversy about these crimes is whether individual labor union members were killed because of their union activity or for some unrelated issue. The Colombian government has responded to U.S. concerns by pointing to the improvements in curbing violence overall. Total homicides dropped by 46% from a peak in 2001 to 2010 according to data from the Colombian Ministry of Defense. As presented in Figure 2 , the reduction in labor union homicides from a peak in 2001 to 2010 is about a 70% decrease according to the ENS data and more than 80% according to the government data. Some Members of Congress who opposed the CFTA concede that the Colombian government has made progress but maintain that continued violence against labor leaders and human rights defenders make it an unfit trade partner. Other critics have raised concerns about the continued high rates of violence endured by other vulnerable groups, such as Afro-Colombian activists, land return advocates, and indigenous leaders. A major concern is the impunity for past acts of violence against labor leaders. Very few investigations have been completed. More than 2,000 incidents of violence involving killings and threats between 1991 to 2006 have been alleged. A Special Labor Sub-Unit of the Colombian Prosecutor General's office, set up in 2006, employs 25 prosecutors and 150 investigators as of August 2012 assigned to investigate and process 1,465 labor-related cases. A vast majority of these labor cases are either under investigation or in preliminary phases of the prosecutorial process. According to the State Department, the Labor Sub-Unit has achieved 499 convictions against 597 individuals who committed violent acts against trade unionists (including 91 convictions in 2011). Labor groups argue much more needs to be done to end impunity for crimes targeting trade unionists. Human Rights Watch in its World Report 2012 notes that closure of recent cases has been especially difficult. Out of the 195 trade unionist killings that Human Rights Watch reports occurred since 2007 when the Labor Sub-unit became operational, the unit has only achieved convictions in six cases. Several measures in the April 2011 Action Plan include steps to strengthen the Colombian judicial system with regard to labor violence prosecutions. Until investigations and prosecutions are completed, it is very hard to determine the motive behind killings and if indeed labor union members are targeted. Several human rights organizations, including Human Rights Watch, have urged the Colombian government to resolve labor cases that have languished in impunity. In addition to the Action Plan's measures to prevent violence against labor activists, and to strengthen the prosecution of such violence, the Action Plan sets out steps to protect internationally recognized labor rights. For instance, the Action Plan restricts the use of Colombian "labor cooperatives" (a form of labor contracting that can be exploitative which is frequently found in the sugar, flower, palm oil, mining and port industries) and imposes sanctions on businesses that are violating Colombian laws. It requires an increased presence of the International Labor Organization (ILO), an invitation that the ILO has accepted. One of the few incomplete steps laid out in the Action Plan is the hiring of an additional 380 labor inspectors which must be accomplished by 2014. When President Obama announced the U.S.-Colombia Free Trade Agreement's entry into force he asserted that most of the requirements of the Action Plan had been substantially met. The U.S. Trade Representative's office, tasked with reviewing the documentation to ensure that Colombia has completed the Action Plan steps, maintained that Colombia had met all the important milestones to date. Technical meetings between the two governments and meetings between senior labor officials from each country are being held through 2013 to ensure ongoing compliance. In the U.S. Congress, some Members have expressed continuing concern about Labor Action Plan implementation. <4.8. Concluding Policy Perspectives> With approval by the U.S. Congress of the U.S.-Colombia Free Trade Agreement in 2011 and its entry into force in May 2012, the U.S.-Colombia partnership passed a major milestone. Congress is currently engaged in oversight of continued implementation of the related Labor Action Plan in addition to its oversight of overall U.S. policy toward Colombia. Supporters of the current U.S. policy towards Colombia continue to express the importance of Colombia as a regional partner of the United States in the counternarcotics effort. Colombia has also emerged as a regional leader, providing police and justice training to nations around the world including many in Latin America. Proponents point to the progress that has been made in improving security conditions in Colombia and in weakening the FARC guerrillas. They favor maintaining security assistance to Colombia in order to help Colombian security forces continue to combat the FARC and ELN, solidify their control throughout rural areas, and eradicate illicit narcotics. Many supporters accept a gradual decline in U.S. assistance in line with across-the- board foreign aid reductions and the gradual "nationalization" of Plan Colombia programs. At the same time, they remain concerned about the use of neighboring countries' territory for refuge and re-supply by the leftist guerrillas, and that this has a potentially destabilizing effect in the region. Critics of current U.S. policy in Colombia respond that the counterdrug program has used a repressive approach to curb drug production that has provoked a negative popular reaction in some rural areas. They argue for halting aerial spraying of drug crops and limiting aid to the Colombian military. They maintain that interdiction and reducing illicit drug demand in the United States, rather than eradication, are more effective and less costly to peasant producers. Some critics of U.S. policy support a policy that focuses on providing economic and social aid to address what they consider to be the conflict's root causes, on curbing human rights abuses by successor paramilitary groups and security forces, and on providing support for a negotiated end to the fighting. Some Members of Congress, acknowledging the improvement in security conditions in Colombia, continue to have grave concerns about labor activist killings and labor rights; extrajudicial killings of Colombian civilians by the Colombian military; and the para-political scandal (linking Colombian politicians with illegal paramilitaries). Many of these human rights issues were central in the debate over the CFTA that took place in the fall of 2011 and will likely remain part of Congress's oversight agenda.

Colombia, a key U.S. ally, has made measurable progress in providing security despite having endured the longest internal armed conflict in the Western Hemisphere. It has long been a source for both cocaine and heroin. Drug trafficking has helped to perpetuate civil conflict by funding both left-wing and right-wing armed groups. Over the years, Colombia and the United States forged a close partnership focused initially on counternarcotics and later counterterrorism. Building on that cooperation, the U.S.-Colombia partnership has broadened to include development, human rights, and trade. Colombia has emerged as a regional leader providing training in security and counternarcotics throughout the hemisphere and elsewhere. President Juan Manuel Santos, inaugurated in August 2010, has governed with the backing of almost 90% of the Colombian Congress in a "national unity" coalition. In a policy he calls "democratic prosperity," Santos has continued the mission of his popular predecessor of accentuating security, while promoting economic development, creation of jobs, and poverty reduction. He has repaired relations with Ecuador and Venezuela, which had been strained under the former government. He has promoted legislative reforms, including a landmark law to compensate victims of the internal conflict; a justice reform bill that ultimately failed; and controversial "peace framework" and military justice reforms that appeared to be laying the groundwork for an eventual peace settlement. In October 2012, formal peace talks opened with the dominant leftist guerrilla organization, the Revolutionary Armed Forces of Colombia (FARC), following a surprise announcement that the government had been conducting secret exploratory talks for months. Colombia, in close collaboration with the United States, through a strategy known as Plan Colombia, has made significant progress in reestablishing government control over much of its territory, combating drug trafficking and terrorist activities, and reducing poverty. Between FY2000 and FY2012, the U.S. Congress appropriated more than $8 billion in assistance to carry out Plan Colombia and its follow-on strategies. As Colombia's security and development conditions improved, former U.S.-supported programs have been nationalized to Colombian control. Consequently, U.S. assistance with its counternarcotics, counterterrorism, judicial reform, economic development, humanitarian, and human rights components has gradually declined. The National Consolidation Plan, the current Colombian security strategy, updates Plan Colombia with a whole-of-government approach that integrates security, development, and counternarcotics by consolidating state presence in previously ungoverned areas. The 112th Congress has maintained a strong interest in Colombia's progress in trade, security, counternarcotics, and human rights. In October 2011, the U.S. Congress approved implementing legislation for the U.S.-Colombia Free Trade Agreement, which went into force on May 15, 2012. Members of Congress will continue to monitor the associated Action Plan Related to Labor Rights that addressed U.S. concerns related to labor rights and violence in Colombia. In addition to the larger debate about what role the United States should continue to play in Colombia's ongoing struggle with drug trafficking and illegal armed groups, Congress has expressed concern with a number of related issues. These include funding levels for Plan Colombia's follow-on strategies; continuing allegations of human rights abuses; and the effectiveness of counternarcotics policies such as aerial eradication and alternative development. Members will likely monitor Colombia's peace negotiations and their effect on security conditions in the country. For additional information, see CRS Report RL34470, The U.S.-Colombia Free Trade Agreement: Background and Issues.

<1. Background> During and after the breakup of the Soviet Union in 1991, the North Caucasus area of Russia experienced substantial disorder. Among such disorder, breakaway conflicts in neighboring Georgia rallied some North Caucasians to support their efforts; Chechen separatism gained ground, contributing to the breakup of the then-Chechen-Ingush Republic along ethnic lines; and ethnic Ingush clashed with ethnic North Ossetians over disputed territory. Russia's then-President Boris Yeltsin implemented a federal system that permitted substantial regional autonomy over governance and taxes. While most North Caucasus republics agreed to remain as parts of Russia, Chechnya was at the forefront in demanding independence. In 1994-1996, Russia fought against Chechen separatists in a bloody campaign that led to thousands of Russian and Chechen casualties and hundreds of thousands of displaced persons, but ceasefire accords in 1996 resulted in de facto self-rule in Chechnya. Organized crime and Islamic extremism subsequently greatly increased in Chechnya and spilled out into bordering and other areas of Russia, including the alleged bombing of apartment buildings in Moscow and elsewhere in 1999 by Chechen terrorists. Ostensibly in response to the rising cross-border violence, Russia's then-Premier Putin ordered military, police, and security forces to reenter Chechnya in late 1999. By early 2000, these forces occupied most of the region, resulting again in large numbers of civilian casualties and displaced persons. Over the next few years, government security forces acted extremely aggressively to tamp down the range and scope of the insurgency by aggressively carrying out over a thousand counter-terrorism operations (termed "zachistki" or "cleaning-up" operations) in Chechnya and elsewhere in the North Caucasus. During these operations, security forces surround a village and search the homes of the residents, ostensibly in a bid to apprehend terrorists. Critics of the operations allege that the searches are illegal and that troops frequently engage in pillaging and gratuitous violence and are responsible for kidnapping for ransom and "disappearances" of civilians. Through these sweeps, as well as through thousands of direct clashes, most of the masterminds of previous large-scale terrorist attacks were killed and such attacks became rarer, although they did not cease completely. In September 2004, terrorists attacked the Beslan grade school in North Ossetia, where 300 or more civilians, police, and troops were killed, and in October 2005, terrorists attacked the town of Nalchik in Kabardino-Balkaria, where 50 or more were killed. Although local Islamic extremist insurgents outside of Chechnya had cooperated to some degree with the Chechen insurgents for several years, in May 2005, then-Chechen rebel leader Abdul-Khalim Saydullayev decreed the formation of a Caucasus Front against Russia among Islamic believers in the North Caucasus. The goal of the front was to enhance Chechen ideological, logistical, and financial support for wider hostilities. In October 2007, his successor, Doku Umarev, declared a Caucasus Emirate embracing the North Caucasus and other Muslim areas of Russia. <2. Recent Changes in the Range and Scope of Violence> Terrorist attacks in Russia's North Caucasus area appeared to greatly increase in numbers since 2007, according to many observers. Moreover, civilian and government casualties reached levels not seen in several years and large-scale terrorist attacks again took place outside the North Caucasus. Although the number of terrorist incidents may have leveled off or even declined slightly in 2010 in Chechnya and Ingushetia from the high levels of 2009 (see below), civilian and government casualties continue to increase throughout the North Caucasus and a rising number of terrorist incidents take place outside of Chechnya. Illustrative of the new level of violence, suicide bombings took place in Moscow on March 29, 2010 the first since 2004 resulting in over 40 deaths and dozens of injuries. The rise in terrorist attacks in the late 2000s has been met by an increase in zachistki and in reported human rights abuses linked to security forces, such as abductions for ransom or "disappearances." In Chechnya, leader Ramzan Kadyrev has advocated holding families responsible for the terrorist actions of their relatives, and local security forces allegedly have tortured family members or burned their houses. The increased conflict also has placed human rights and aid workers in renewed jeopardy. Some observers suggest that the increasing scope of public discontent against zachistki and deep economic and social distress are contributing to growing numbers of recruits for terrorist groups and to increasing violence in the North Caucasus. Interethnic and religious tensions are also responsible for some of the increasing violence. The violence in the North Caucasus has spurred migration from the North Caucasus of some of the native population and most of the nonnative population. Unlike in most other federal subunits of Russia, eponymous or other native ethnic groups have strengthened their majority status in all the North Caucasian republics except in Adygea, and even there, ethnic Russians are declining as a percentage of the population. According to some reports, few ethnic Russians reportedly remain as residents in Chechnya and Ingushetia, except for military personnel. The Center for Strategic and International Studies (CSIS), a private research organization, has suggested that the incidence of jihadist-related violence started to increase in the North Caucasus in 2007 and that such violence greatly increased in 2008-2009. Data for 2010 compiled by CSIS and by the Monterey Terrorism Research and Education Program, an endeavor of the private Monterey Institute of Middlebury College, also appear to indicate a substantial but slightly slowing rate of increase of terrorist incidents in the North Caucasus in 2010. According to data compiled by the U.S. government Open Source Center, there were 1,082 violent incidents in January through November 2010, compared to 1,382 in 2009. These data may suggest that the number of violent incidents peaked in 2009 and may have evened off or be slightly lower when complete data are compiled for 2010. However, the Open Source Center data also suggest that the injuries and deaths suffered by local officials and civilians increased in 2010 compared to 2009, and that the numbers of security personnel injured or killed declined, perhaps indicating that mujahidin are increasingly targeting civilians. Recent statements from the Caucasus Emirate seem to set forth a strategy of targeting civilians. Analyst Mairbek Vatchagaev has stated that "the militants seem to have taken the idea that there is a 'peaceful civilian population' off their agenda and this attests to the radicalization of the Islamist movement in the North Caucasus . Apparently, the radical forces that insist on waging total war throughout Russia have gained the upper hand." All three data sources mentioned above appear to indicate that the incidence of violent incidents continues to broaden beyond Chechnya. According to the Open Source Center data, violent incidents in Chechnya and Ingushetia declined substantially in 2010 from the previous year, from 452 in 2009 in Chechnya to 241 in the first eleven months of 2010, and from 436 in Ingushetia in 2009 to 248 in 2010. However, this data source also reports that the number of violent incidents substantially increased in 2010 over the previous year in Dagestan, Kabarda-Balkaria, and Stavropol Territory, from 384 in Dagestan in 2009 to 412 in 2010; from 70 in Kabarda-Balkaria in 2009 to 147 in 2010; and from 6 in Stavropol Territory in 2009 to 11 in 2010. All three data sources rely on media reports and may be influenced by censorship in the North Caucasus, particularly in Chechnya. The validity of the Russian government's own data was questioned by President Medvedev at a meeting of police, security, and political officials in the North Caucasus Federal District on November 19, 2010. He mentioned that crime had increased in the North Caucasus and that crime-solving rates had declined, but retorted that "let me make this clear to the heads of our law-enforcement agencies: we cannot believe the statistics because they are often nonsense." While he reported that several dozen terrorism-related crimes had been prevented (such as by defusing improvised explosive devices) and that many "bandits" had been "neutralized" during 15 combat operations per day and over one zachistka per week in 2010 in the District, he stressed that there had been "little improvement" in halting "the number of shootings, explosions, [and] murders of civilians, religious leaders and law enforcement personnel" by terrorists. Responding to Medvedev, Aleksandr Bortnikov, the Director of the FSB, appeared to challenge Medvedev by asserting that terrorist activity in the District had declined in 2010. However, he agreed with Medvedev that the situation remained "complicated," and that it "requires additional measures, not only security and preventive measures, but also steps to stimulate the regions economy, invigorate the job market and bring down unemployment." Even though the counter-terrorist operations regime in Chechnya was formally lifted in early 2009, dozens of zachistki against alleged terrorists have continued to be carried out or have even increased in the republic as well as elsewhere in the North Caucasus, involving the declaration of counter-terrorist operations areas in villages and rural areas where civil rights are curtailed. Among prominent recent terrorist incidents: Dagestani Internal Affairs Minister Adilgerey Magomedtagirov was killed on June 5, 2009. Partly in response to this murder, President Medvedev flew to Dagestan and convened a session of the Russian Security Council to discuss regional counter-measures against terrorism. He stated that during the first half of the year, over 300 acts of terrorism had taken place in the North Caucasus (including over 100 bombings), that 75 police and other local government officials had been killed, that 48 civilians had died, and that 112 terrorists had been "eliminated." The president of Ingushetia, Yunus-bek Yevkurov, was severely wounded by a bomb blast on June 22, 2009. In July 2009, prominent human rights advocate Natalia Estemirova was abducted in Chechnya and, after passing through police checkpoints, was found murdered in Ingushetia. In August 2009, Zarema Sadulayeva and Alik Dzhabrailov, who ran a child rehabilitation center in Chechnya, were murdered. A suicide truck bombing in Ingushetia killed 25 and wounded 136 policemen and civilians in August 2009. The Caucasus Emirate's Riyadus Salikhin Battalion (see below) was implicated in the attack. President Medvedev fired the republic's Interior Minister and at a meeting of the Security Council in Stavropol he admitted that "some time ago, I had an impression that the situation in the Caucasus had improved. Unfortunately, the latest events proved that this was not so." He reportedly ordered a purge of corrupt policemen throughout the North Caucasus, called for rotating policemen into and out of the North Caucasus to combat corruption and inefficiency, and urged legal and judicial changes that would reduce procedural rights and streamline the prosecution of "bandits." In October 2009, Ingush opposition leader and human rights activist Maksharip Aushev was killed in Kabardino-Balkaria. The Nevskiy Express railway train was bombed outside of Moscow on November 27, 2009, killing 27 passengers and injuring 90. Some of the victims were high-ranking Russian officials, including a member of the Federation Council (upper legislative chamber). The same train had been bombed in 2007, allegedly by Pavel Kosolapov (an associate of Chechen rebel leader Doku Umarov and the late Chechen terrorist Shamil Basayev). Other explosions targeted trains in Dagestan the day before and the day after the Nevskiy Express bombing, although no casualties were reported. Russian media termed the Nevskiy Express bombing the worst terrorist act outside of the North Caucasian region since the August 2004 bombing of two airliners that had taken off from Moscow, killing 89. On December 2, Umarov allegedly took responsibility for ordering the Nevskiy Express bombing and warned that "acts of sabotage will continue for as long as those occupying the Caucasus do not stop their policy of killing ordinary Muslims." In March 2010, the Russian Federal Security Service (FSB) reported that it had killed Said Buryatskiy (Aleksander Tikhomirov), a purported leader of the Riyadus Salikhin Battalion, and alleged that he had been involved in the bombing. On January 6, 2010, a suicide bomber killed six policemen and wounded 20 in Dagestan. On March 29, 2010, female suicide bombers killed 40 civilians and wounded more than 70 at two Moscow Metro stations. Umarev took responsibility for the attack, stating that it was carried out by the Riyadus Salikhin Battalion as revenge for what he termed a February 2010 "massacre by Russian invaders" of several children and adults in Chechnya. He reiterated to ethnic Russians/non-Muslims that the "war will come to your streets, and you will feel it with your own lives and skins." On March 31, 2010, a double suicide bombing in Kizlyar, in Dagestan, killed 12 individuals, mainly police officers, and injured 23. On May 26, 2010, a suicide attack at a concert hall in Stavropol killed seven individuals and injured another 40. In July 2010, 3-5 attackers killed two guards at the Baksanskaya hydroelectric power plant in Kabarda-Balkaria and set off explosions that destroyed two turbines. The attack was the most prominent to date against North Caucasian infrastructure, and President Medvedev ordered stepped-up security at infrastructure facilities. The Russian FSB blamed the attack on Amir Abdullah (Asker Dzhappuyev), the commander of mujahidin in the Caucasus Emirate's "province" of Kabarda, Balkaria and Karachay. On August 28, 2010, about 60 Mujahidin attacked Ramzan Kadyrov's native village, Tsentoroy, reportedly killing six police and wounding over two dozen police and civilians. On September 9, 2010, a car-bomb attack occurred at a crowded marketplace in Vladikavkaz, killing 19 adults and children and injuring over 190. President Medvedev responded that "we will certainly do everything to catch these monsters, who have committed a terrorist attack against ordinary people. What's more, a barbarous terrorist attack. We will do everything so that they are found and punished in accordance with the law of our country, or in the case of resistance or other cases, so that they are eliminated." The Caucasus Emirate's Ingush Vilayet reportedly took responsibility, stating that the attack was aimed against "Ossetian infidels" on "occupied Ingush lands." On October 19, 2010, 3-5 Mujahidin raided the Chechen Republic legislative building in Grozny. They may have been targeting Kadyrev and Nurgaliyev, who reportedly may have been planning a meeting in the building. One suicide bombing occurred as the insurgents stormed the building, and others took place after a firefight, reportedly killing three and wounding 17 police and civilians. In his November 2009 address to the Russian Federal Assembly (legislature), President Medvedev stated that the security situation in the North Caucasus "is the most serious internal problem," of Russia, and announced that he would soon appoint "someone with enough authority to effectively coordinate" stepped-up socioeconomic development programs in the region. In January 2010, President Medvedev appointed Krasnoyarsk Territory Governor Aleksandr Khloponin as the presidential representative of the newly created North Caucasus Federal District. Khloponin was also appointed a deputy premier, which placed him more directly under the authority of Premier Vladimir Putin. Medvedev stated that Khloponin would wield authority over economic development and would work to combat "mass unemployment, economic crime, cronyism and bribery." Unlike the previous year, President Medvedev did not mention instability in the North Caucasus during his address to the Federal Assembly on November 30, 2010. However, Alexander Khloponin, presidential envoy in the North Caucasus Federal District (see below), hastened to state just after the address that many of Medvedev's proposed domestic welfare initiatives would impact the area, and that the actions called for in the previous year's address for the North Caucasus remained the modus operandi . That same day, Ministry of the Interior official Sergey Chenchik reported that over 600 terrorist crimes had been committed in the Federal District, resulting in the deaths of 242 law enforcement personnel, 127 civilians, and 351 militants, and that all the crimes had been solved with the killing or detention of the "bandits." Also on November 30, 2010, law enforcement officials announced that a zachistka had been launched in the village of Balakhani in Dagestan "to track down militants and to see if weapons, ammunition or explosives were illegally being stored." In line with Medvedev's call in his 2009 address to the Federal Assembly for greater socioeconomic development efforts in the North Caucasus, an official strategy was promulgated in September 2010. It sets forth goals for the development of the area through 2025, stressing investments in agriculture, tourism, health resorts, energy and mining, and light industry. It also calls for encouraging ethnic Russians to resettle in the area, including by initially setting employment quotas for ethnic Russians. Eventually, by encouraging interethnic harmony, the strategy suggests, the practice of allocating jobs by ethnicity and clan rather than merit might be eliminated. The strategy sets forth an optimum scenario where average wages increase by 250% and unemployment decreases by 70% by 2025. A timeline for implementing the strategy was to be developed by December 2010, but has been delayed. To bolster entrepreneurship, a regional development bank with charter capital of $16 million will be set up, to augment the public-private investment fund with capital of about $200,000. Putin heads an inter-agency commission to monitor the projects; the commission plans to hold its first meeting in late 2010. <3. Impact of the August 2008 Russia-Georgia Conflict> Several Russian policymakers and others have suggested that the August 2008 Russia-Georgia conflict contributed to increased instability in the North Caucasus. Russian analyst Viktor Nadein-Raevsky has claimed that "external forces and the so-called Wahhabi underground ... aiming to weaken Russia and to sever the Caucasus from it laid great hopes on Georgia's attack." These groups "had planned a large-scale offensive in the Russian Caucasus in the wake of Georgia's aggression. When it proved to be a failure these forces changed tactics," and launched terrorist attacks instead. Dagestani President Mukhu Aliyev also asserted in late November 2009 that the activity of foreign terrorists had increased in the republic since August 2008. According to the Center for Strategic and International Studies, there was a "lull in violence" in the North Caucasus during the Russia-Georgia conflict, but "following the conflict, the level of violence in the North Caucasus rose sharply, particularly in Ingushetia." Several observers have accused Russia of hypocrisy in recognizing the independence of South Ossetia and Abkhazia while suppressing separatism in Chechnya. These observers warn that separatists in the North Caucasus could be encouraged by the example of Abkhazia and South Ossetia. Attempting to refute such a linkage, Prime Minister Putin claimed in September 2008 that before the conflict, some groups in the North Caucasus had advocated separatism because they felt that Russia was not defending the rights of South Ossetians. He asserted that by defending South Ossetia, Russia averted destabilization of the North Caucasus. Offering what may be a more plausible rationale, Russian analyst Aleksey Malashenko has argued that Russia's use of overwhelming force against Georgia served as a potent example to the North Caucasus (as was the case of Chechnya) that Russia would continue to use force to safeguard its interests in the Caucasus. He has suggested that this example will constrain separatism, as will the fear of civil conflict and the fear of breaking what are regarded as essential economic ties with Moscow. He has warned, however, that Russia's ongoing civil rights abuses in the North Caucasus are spurring the growth of Islamic terrorism. Some residents of the North Caucasus have criticized Russia's economic assistance to Abkhazia and South Ossetia which ostensibly are foreign countries after being recognized by Moscow in the wake of the Russia-Georgia conflict while the North Caucasus remains mired in poverty. Russian analyst Alexey Malashenko has warned that the global economic downturn and Russia's boosted financial commitments to Abkhazia and South Ossetia could result in fewer Russian subsidies to the North Caucasus, perhaps triggering more discontent. <4. Recent Developments in the North Caucasus> <4.1. Chechnya> Some observers have argued that Russia's efforts to suppress separatist and Islamic extremist movements in its Chechnya region have been the most violent in Europe in recent years in terms of ongoing military and civilian casualties. The high levels of conflict in Chechnya appeared to ebb markedly in the mid-2000s with the killing, capture, or surrender of leading Chechen insurgents. However, Russian security forces and pro-Moscow Chechen forces still contend with residual insurgency. Russia's pacification policy has involved setting up a pro-Moscow regional government and transferring more and more local security duties to this government. An important factor in Russia's seeming success in Chechnya has been reliance on pro-Moscow Chechen clans affiliated with regional president Ramzan Kadyrov. Police and paramilitary forces under his authority allegedly have committed flagrant abuses of human rights, including by holding the relatives of insurgents as hostages under threat of death until the insurgents surrendered. Another technique has been the torching of relatives' homes and crops. Russia's efforts to rebuild the largely devastated region have been impressive but are undermined by rampant corruption. Some types of crimes against civilians reportedly have decreased, such as kidnapping and disappearances, according to the Norwegian Helsinki Committee, a nongovernmental organization (NGO). Many displaced Chechens still fear returning to the region, and a sizeable number have emigrated from Russia. Remaining rebels in Chechnya have split into three basic groups, one represented by Doku Umarev, another represented by mujahidin vying with Umarev, and perhaps until recently, a third somewhat disparate group represented by Akhmed Zakayev, who stresses independence for Chechnya more than jihad. In late 2007, Umarov declared himself the amir of the Caucasus Emirate and declared an end to the rebel Chechen Republic of Ichkeriya. Umarov allegedly called for establishing Sharia (Islamic law) in "all lands in Caucasus, where mujahidin who gave oaths to me wage Jihad ... including Dagestan, Chechnya, Ingushetia, Ossetia, the Nogai steppe and the combined areas of Kabardino-Balkaria and Karachai-Cherkessia." In August 2008, a colleague of Umarov's declared that the Caucasus Emirate could include other areas of Russia where mujahidin had given oaths to Umarov, such as Tatarstan. In 2007, Umarev ousted Zakayev as "foreign minister" and in August 2009, the Shariah Court of the Caucasus Emirate sentenced him to death for abandoning Islam for "democratic religion." In August 2010, Umarev's leadership of the Caucasus Emirate was challenged by amirs 'Mansur' Hussein Gakayev, Aslanbek Vadalov, Tarkhan Gaziyev, and Jordanian Abu Anas Muhannad. Umarev responded by stripping them of their posts and requesting them to return financing for jihad. In October 2010, they formed their own Chechen section of the Caucasus Emirate, led by Gakayev. Zakayev announced his support for this group. Umarev asserted that the dissident mujahidin had allied with exiled Russian financier Boris Berezovskiy, with Zakayev, and other "Satanic" forces. According to Interior Minister Rashid Nurgaliyev, the bombing at the Chechen legislative building in October 2010 may have represented an effort by Gakayev's group to assert its terrorist credentials. Chechen leader Ramzan Kadyrov declared that "the act of sabotage may have been organized by drunkard and alcoholic Akhmed Zakayev and the special services of some foreign states." He also continued to assert that there were only 50-60 terrorists left in Chechnya, but Maksim Shevchenko, the head of the Public Chamber's working group on North Caucasus affairs, suggested that the attack indicated that "sociopolitical difficulties are causing more and more volunteers to join the underground and the sectarian ideology of the militants is turning them into suicide bombers." He also alleged that "the armed underground clearly is being influenced now by foreign non-Islamic states pitting the Muslims against Russia." Other Russian observers suggested that the government should re-instate the counter-terrorism regime and increase the number of federal security forces in Chechnya. <4.2. Ingushetia> According to some observers, Ingushetia in recent years experienced increasing disorder and violence approaching that in neighboring Chechnya, which threatened to make it a "mini-failed state." The Chechen-Ingush Autonomous Republic, divided in the late Soviet period into separate Chechen and Ingush Republics, has proven unable to demarcate a common border. This has contributed to tensions between Chechens and Ingushes. Stalin's deportation of the Ingush during World War II and their return in the 1950s to find that some of their lands had been ceded to the North Ossetian Autonomous Republic, has contributed to Ingush-Ossetian clashes. In October 1992, hundreds of Ingush reportedly were killed and over 60,000 forced from their homes in the Prigorodny District of North Ossetia. According to Congressional testimony by Russian human rights advocate Gregory Shvedov in June 2008, there are up to 200 terrorists based in Ingushetia. Small-scale rebel attacks intensified in 2007 and 2008, prompting Russia to deploy more and more security, military, and police forces to the republic. Since 2007, there allegedly have been more killings, attacks, and abductions in Ingushetia perpetrated by government and rebel forces, criminals, and others than in any other republic in the North Caucasus. Ingushetia prosecutor Usman Belkharoyev has reported that more than 70 security personnel were killed in armed attacks in Ingushetia in 2008, compared to 32 in 2007. He also reported that 167 police and troops were injured in such attacks in 2008, compared to 80 in 2007. According to the Center for Strategic and International Studies, the level of violent incidents in Ingushetia, particularly violent deaths, continued to increase in 2009. What Russian analyst Sergey Markedonov termed a "loyal opposition" movement in Ingushetia that supports Russian rule in the republic increasingly opposed the leadership of Federal Security Service official Murat Zyazikov, who became governor in 2002 after an election that many observers viewed as manipulated by Moscow. Another group, the Islamic extremists, wants to evict "kafirs" (infidels) and "murtads" (apostate Muslims) and create a North Caucasus emirate. This "loyal opposition" organized several rallies in 2007 and 2008 to protest local government corruption, extrajudicial killings, and other alleged abuses by security forces. On August 31, 2008, opposition figure Magomed Yevloyev was shot by police and dumped along the road. The Ingush opposition appealed to U.N. Secretary-General Ban Ki-moon, condemning the killing as a sign of the "genocide" against the Ingush that was prompting more and more Ingush to seek independence from Russia. After Russia recognized the independence of Abkhazia and South Ossetia, an opposition People's Assembly of Ingushetia composed of emissaries from nearly two dozen clans called for Ingushetia's secession from Russia if Zyazikov was not removed from office. Opposition activist Magomed Khazbiyev likewise stated that "We must ask Europe or America to separate us from Russia." On 18 October, 2008, a Russian military convoy came under grenade attack and machine gun fire near Nazran. Russia officially reported that two soldiers had been killed, but other reports were that as many as 40-50 Russian soldiers were killed. On October 30, 2008 President Zyazikov was removed from office and Army Col. Yunus-Bek Yevkurov was nominated by President Medvedev and quickly approved by the Ingush legislature. Yevkurov declared that he would suppress the local insurgency while reducing abuses against civilians by federal forces. Analyst Mairbek Vatchagaev has reported that in 2009, "bombings and armed attacks are everyday occurrences in Ingushetia, with several such incidents sometimes taking place during a single day." In May 2009, federal security forces assisted by Chechen units launched large-scale zachistki aimed at eliminating terrorists. Yevkurov was severely wounded by a car bomb in June 2009. In August 2009, a bomb devastated Nazran's police department, resulting in dozens killed or wounded. In October 2009, human rights advocate Maksharip Aushev was killed, who had supported Yevkurov's efforts to get security forces to commit fewer human rights abuses. President Yevkurov denounced the killing and suggested that security forces might have been involved in the killing. In June 2010, the Federal Security Service(FSB) announced that a zachistka had resulted in the capture of Emir Magas (aka, Ahmed Yevloev or Ali Taziev), the head of the Ingush Jamaat. Reportedly, he also was the military amir of the Caucasus Emirate, the second in command under Umarev. In late September 2010, Yevkurov asserted that the apprehension of Magas and the elimination of other mujahidin leaders had led to the easing of terrorism in the republic. According to the Open Source Center, the number of violent incidents in Ingushetia in 2009 (436) nearly matched that in Chechnya (452), the leader in such violence. In 2010, the number of violent incidents appeared to decrease to 248 in Ingushetia, according to data for the first eleven months of 2010 compiled by the Open Source Center. Some observers have warned that since Russia has strengthened ethnic Ossetian influence by recognizing the "independence" of South Ossetia, this ethnic group will be even less amenable to Russia's encouragement of their conciliation with ethnic Ingush, including by encouraging North Ossetia to permit some Ingush to resettle in Prigorodny. In September 2010, an ethnic Ingush suicide bombing occurred in North Ossetia's Vladikavkaz, possibly marking a shift in tactics by the mujahidin away from attacks on security forces in Ingushetia and toward attacks on North Ossetia. <4.3. Dagestan> The majority of the citizenry in Dagestan, a multi-ethnic republic, reportedly support membership in the Russian Federation rather than separatism. In August 1999, however, some Islamic fundamentalists with the support of Chechen rebels declared the creation of an Islamic republic in western Dagestan. Russian and Dagestani security forces quickly defeated this insurgency. There has been some growth in Islamic extremism in recent years. In late 2007, thousands of security personnel were deployed for a zachistka against the village of Gimry in central Dagetan, which continued for several months and resulted in the arrest of dozens of villagers on charges of terrorism. During 2008, attacks on government offices spread throughout Dagestan. Some of these attacks allegedly were triggered by a local government crackdown on practicing Muslims. The International Crisis Group NGO has claimed that the extremist Islamist group Sharia Jamaat is responsible for a large share of the rising violence that has resulted in the killing of hundreds of local officials in Dagestan. The recruitment efforts of Sharia Jamaat benefit from the allegedly arbitrary and corrupt actions of local police and security forces. In 2007, Sharia Jamaat endorsed Umarov's goal of establishing a North Caucasian Emirate. In mid-March 2009, Dagestani Interior Minister Lieutenant-General Adilgerey Magomedtagirov claimed that there remained only about 50-70 militants in Dagestan, because of intensified counter-terrorist efforts during 2008. He pointed out that "we recently killed Omar Sheykhullayev [on February 5, 2009], the emir of Dagestan who was appointed by Doku Umarov. Before him there was [Ilgar Mollachiyev, who was killed on September 7, 2008], also an emir and the closest associate of Doku Umarov and Khattab. He was killed along with ten other people. I think all we need right now is a bit more time, and we will deal with these groups as well." Appearing to belie Magomedtagirov 's assessment of the situation, counter-terrorism operations legal regimes were declared at least four times in February 2009. In March 2009, one was declared in mountain areas of Dagestan, where several insurgent groups allegedly including some foreign mujahedin engaged in fierce fighting with security forces. A mujahedin killed in April 2009 was claimed to be an emissary of Al Qaeda who had arrived from Turkey, and another Al Qaeda emissary killed in August 2009 was said to have been an organizer of jihad in Dagestan who worked under Al Qaeda's North Caucasian regional leader Mohanned. In December 2009, the Dagestani Interior Ministry reported that attacks on police had increased from 100 in 2008 to 193 in 2009, and that 76 police had been killed and 155 wounded in 2009. It also reported that 15 civilians had been killed and 30 wounded in 2009. In 2010, violent incidents appear to occur daily in Dagestan, ranging from suicide and roadside bombings to armed attacks on Russian and local security forces. According to the Open Source Center, the number of violent incidents increased in the republic from 384 in 2009 to 412 in the first eleven months of 2010, placing it at the top in terms of such violence in the North Caucasus. In September 2010, the Russian Interior Ministry announced that it would establish an added local police contingent in Dagestan composed of former soldiers. Reportedly, the establishment of a force of local residents was aimed in part to reduce the number of federal police casualties in Dagestan, the highest in the North Caucasus. In early November 2010, President Medvedev ordered Khloponin to discuss progress with republic leaders in combating terrorism and threatened that "if someone cannot do the job he should not be doing it, and I will adopt corresponding decisions." However, just after this admonition, a series of terrorist attacks occurred in Dagestan, resulting in added police being deployed to protect government buildings. Although FSB head Aleksandr Bortnikov reported to President Medvedev on November 19, 2010, that "bandit activities" had declined in 2010 in Dagestan, the First Deputy Head of the Interior Ministry's Main Directorate for the North Caucasus Federal District, Valeriy Zhernov, reported at a meeting the day before that in January-November 2010, 231 terrorist crimes were committed in Dagestan (including 95 bombings and 136 shootings), compared to 162 such crimes in 2009 (including 49 bombings and 113 shootings). His superior, Interior Minister Rashid Nurgaliyev, stressed at the same meeting that "the level of terrorist threat is the highest in two regions of the North Caucasus Federal District, Kabarda-Balkaria and Dagestan." <4.4. Other Areas of the North Caucasus> The influence of Islamic fundamentalism that embraces jihad reportedly has spread throughout the North Caucasus, leading to the formation of terrorist groups in Chechnya, Dagestan, Ingushetia, Kabarda-Balkaria, and Karachay-Cherkessia. According to testimony by Shvedov, 700 to 900 rebels are active in various areas of the North Caucasus, even though there are parts of Northern Caucasus where there are almost no rebels. He warns that "the most important point [is not] the number of active rebels nowadays. It's an issue of the number of supporters among the civilian population." Shvedov states that the civilian population has become widely radicalized and is able to quickly mobilize to join the rebels in attacks. In March 2010, security forces killed Anzor Astemirov (Emir Seifullah), the leader of Kabarda-Balkaria's Yarmuk Jamaat, in Nalchik, the republic's capital. An ethnic Kabardin, he allegedly was the third-ranking officer in the Caucasus Emirate, behind Umarev and the military emir. He also was the head of the Sharia Court. In the 1990s until the early 2000s, he allegedly was peaceable, but then joined the mujahidin. In 2005, he carried out a large-scale attack in Nalchik. He reportedly was instrumental in helping to create the Caucasus Emirate to unite the struggle of North Caucasian Muslims and strongly opposed Zakayev by pronouncing a death sentence against him. Emir Abdullah (Asker Jappuev), a deputy to Astemirov, quickly became the Jamaat's new leader and launched new attacks in the republic. According to the Open Source Center, the number of violent incidents in Kabarda-Balkaria doubled in the first eleven months of 2010 over those of the previous year, from 70 to 147. Using a somewhat similar accounting of "terrorist crimes," the First Deputy Head of the Interior Ministry's Main Directorate for the North Caucasus Federal District, Valeriy Zhernov, has stated that there were 117 terrorist crimes registered in Kabarda-Balkaria in January-November 2010 (including 57 bomb attacks and 60 shootings), compared to 21 in 2009 (including 11 bomb attacks and 10 shootings). Commenting on Zhernov's data, Russian Interior Minister Rashid Nurgaliyev argued that "the leaders of bandit groups are increasingly focused on the incitement of interethnic conflicts." On November 29, 2010, Nurgaliyev visited Kabarda-Balkaria to discuss improvements to local law enforcement in response to the great increase in terrorist crimes in the republic. Republic Governor Arsen Kanokov reportedly stated that "the operational situation really is difficult. We are like at war. Interior ministry servicemen and civilians are getting killed." <5. Contributions to Instability> Former President Putin has claimed that terrorism in the North Caucasus has been caused mainly by foreign forces, but President Medvedev has appeared to stress domestic as well as international factors. Former President Putin claimed in a speech to the State Council in February 2008 that foreign elements had been responsible for the guerrilla attack on Dagestan in late 1999 that started the second Chechnya conflict. According to Putin, the conflict "was a case of the undisguised incitement of separatists by outside forces wishing to weaken Russia, and perhaps even to cause its collapse." While he remained vague, a "documentary" aired on a Russian state-owned television channel in April 2008 alleged that France, Germany, Turkey, and the United States instigated and supported Chechen separatism. Putin also has in recent years blamed "international criminal networks of arms and drug traffickers," for supporting Chechen terrorists, and has been careful to assert that "terrorism must not be identified with any religion or cultural tradition," in order to sidestep criticism from the Islamic world for his actions in the North Caucasus. In June 2009, President Medvedev argued that "no doubt, the situation [in the North Caucasus] is partially influenced by ... extremism brought from abroad," but he appeared to shift the responsibility for the conflict by stressing that the "problems in the North Caucasus ... are systemic. By saying that I am referring to the low living standards, high unemployment and massive, horrifyingly widespread corruption...." At May 2010 meeting of the Council for Civil Society Institutions and Human Rights, President Medvedev argued that there needed to be a youth policy for the North Caucasus, including to ameliorate the 20% unemployment in the region, which heavily impacted youth. He also requested his presidential staff to study the issues of dwindling schooling and healthcare in the region. He dismissed calls to investigate past extrajudicial killings and urged focusing on the future. He also objected to discussants distinguishing between a region and Russia, stating that "Dagestan is part of Russia," and rejected use of the term "guerillas" instead of "terrorists." He called for forging a new "Russian identity" in the region that would reduce interethnic conflict, and implored North Caucasian ethnic groups to stop being extra "touchy" and "sensitive" about the actions of governors he appoints. In October 2010, Medvedev's envoy Khlopinin suggested that the expansion of gangs and crime and the extinction of private enterprise in the North Caucasus was due more to poor governance and corruption than to ethnic conflict. At the same time, he emphasized that "in the run up to the Olympics, which will take place in Sochi in 2014 special services of many Western countries and individual provocateurs [will] inflame or stir up interethnic and international conflicts." These instigators were actively fostering ethnic conflict in Karachay-Cherkessia, contention between Ossetians and Ingush, and a campaign in Stavropol Territory to secede from the North Caucasus Federal District, he claimed. The North Caucasus suffers from extremely high rates of unemployment and poverty. Dagestan and Ingushetia have the most unemployment and poverty in Russia, and major income inequality has fueled attacks against corrupt and wealthy officials. Ingushetia's economy suffered greatly during the Chechnya conflict, mainly from the influx of displaced persons which in effect doubled the population during intense periods of fighting in 1995 and 2000. Evidence of economic distress as a factor in the rise of terrorism in Kabarda-Balkaria Republic includes the closure of the main industry, the Tyrnyauz Mining Complex, as well as the shuttering of many defense-related factories, and the decline of the agricultural sector. Infrastructure such as roads and airports also is in disrepair, and social services are inadequate. According to Shvedov, the educational system in much of the North Caucasus is getting worse and unemployment is increasing. Shvedov warns that the lack of career prospects has contributed to growing support for "Wahhabi agendas" among the population. Ethnic tensions are another factor contributing to violence in the North Caucasus. Besides those between Ossetians and the Ingush (mentioned above), in early 2006, the Putin administration abolished the Dagestani State Council, which represented the 14 largest ethnic groups, and whose chairman (Magomedali Magomedov, an ethnic Dargin) served as the chief executive of the republic. The State Council had helped to mollify ethnic tensions. Putin then appointed an ethnic Avar as the president of the republic. With the expiration of the president's term in early 2010, some Dagestanis called for reestablishing the State Council. Instead, Medvedev appointed Magomedsalam Magomedov (the son of former president Magomedali Magomedov), thus reinstating a Dargin in the office. Magomedsalam Magomedov selected Magomed Abdullayev, an Avar, as the prime minister (President Medvedev allegedly favored Abdullayev for the post). The selection of Abdullayev triggered protests among some ethnic Kumyks, the third largest ethnic group in Dagestan, who called for the post of prime minister to be retained by an ethnic Kumyk. Supporting informal ethnic quotas, Magomedsalam Magomedov urged the sitting speaker of the Dagestani legislature, an Avar, to step down so that Magomed-Sultan Magomedov, an ethnic Kumyk, could become speaker. Increasing Circassian nationalism has contributed to tensions and violence in Adyghea, Karachay-Cherkessia, and Kabarda-Balkaria, three republics with large numbers of ethnic Circassians (termed Adyghe, Kabardin, and Cherkess in the three republics), where they have clashed with Karachay and Balkar ethnic groups. In November 2008, a Congress of the Circassian People called for unifying Circassians in a new federal republic, even though Russian officials had warned it against issuing such a call. On November 26, 2009, reportedly about 3,000 Circassians demonstrated for ethnic rights in Karachay-Cherkessia. Some Circassians from Kabarda-Balkaria took part in this demonstration. Two days later, officials in Kabarda-Balkaria denounced leaders of the demonstration as terrorists. On November 30, some Circassian rights advocates issued an appeal to create an independent Circassian state. The next day, the legislature of Kabarda-Balkaria called for Circassian rights advocates to be arrested as terrorists and spies, and unidentified attackers beat some of the Circassian rights advocates. In April 2010, Khloponin allegedly ordered the president of Karachay-Cherkessia, Boris Ebzeyev, to appoint an ethnic Circassian (Cherkess) as prime minister, to end prolonged protests by Circassians. Under prior practice, posts had been divided among the largest ethnic groups in the republic. Ebzeyev had eschewed the practice in 2008 and had appointed an ethnic Greek (a tiny ethnic group) as prime minister. Ethnic Russian Cossacks and Abazins also protested that they were not being accorded any top posts. The Adyge Khase, a Circassian (Cherkess) group, called for the formation of a separate Cherkess republic. Ebzeyev eventually appointed Muradin Kemov, a Circassian, as prime minister. During 2010, some Circassian groups have increased calls for the cancelation of the planned Winter Olympics in Sochi, asserting that the area was the site of the 19 th century Tsarist "genocide" against the Circassians. Russian analyst Aleksey Malashenko suggests that the North Caucasus region is undergoing "re-traditionalization," which will result in the consolidation of Sufi and other traditional forms of Islam as part of the political and social fabric of the region. While Moscow and its local agents focus on combating visible elements of "Wahabbism," the region is becoming broadly Islamic and less integrated politically and socially with the rest of Russia, Malashenko warns. He also suggests that to the extent that sitting officials and favored Islamic leaders try to retain their unrepresentative control in the North Caucasus and ignore economic problems, Islamic extremist violence will continue. Analyst Mark Kramer likewise suggests that disaffection among youth in the North Caucasus is so deep and widespread that they are prone to distrust such favored Islamic leaders and institutions and to be receptive to underground Islamic extremism. Reportedly, authorities have enlisted the assistance of Sufi Imams in Dagestan, Ingushetia, and Chechnya to identify "Wahabbi" Muslims, who are then arrested, killed, or disappear. Young Muslims may be targeted as "Wahabbis" if they end their prayers at the mosque too soon (Sufis pray longer), attend the mosque frequently, or attend early services at the mosque. In Kabarda-Balkaria, Karachay-Cherkessia, and Adygea, where there are few Sufis and Islam does not have such deep roots as elsewhere in the North Caucasus, Muslims allegedly may be targeted as "Wahabbis" merely for attending the mosque or praying in public. There are some reports that foreign Sunni Salafi terrorists operating in the North Caucasus in turn are targeting Sufis. Analysts Emil Souleimanov and Ondrej Ditrych have urged students of events in the North Caucasus not to fail to consider the role of clans, members of which may become radicalized by zachistki and repression by Moscow-installed authorities. According to these analysts, "in the North Caucasus, there has occurred over time a mutual intertwining of ... jihadist ideology and the mechanism of blood feud.... It is the young people in particular who ... are the ones who are physically able [to take revenge. They were] not raised in the established traditions in these regions of traditionalist Sufi Islam and [are] thus more susceptible to absorbing the extremist ideologies of jihad." These analysts caution that "rather than vague ideas of global jihad, the resistance in the North Caucasus is far more driven by the ideas of North Caucasian, mountain dweller Muslim solidarity and the necessity of a joint struggle in the name of a common religion (Islam) and the liberation of holy ground from the yoke of the 'infidels'." U.S. analyst Gordon Hahn has warned that the Caucasus Emirate proclaimed by Chechen Doku Umarev in 2007 forms the hub of Islamic terrorism in Russia and receives substantial material and ideological support from the global terrorist network. The Caucasus Emirate provides ideological, financial and weapons support and loose guidance and some coordination for the activities of perhaps up to three dozen republic/regional and local combat jamaats (assemblies or groups of believers) in the North Caucasus and Volga areas, Moscow, and elsewhere. The Caucasus Emirate may take the lead when major terrorist operations are planned. In April 2009, Umarov announced that the former 'Riyadus Salikhin' Martys' Battalion (which had taken responsibility for attacking the grade school in Beslan in September 2004 and which appeared defunct after its leader, Shamil Basiyev, was killed in 2006) had been revived and was carrying out suicide bombings across Russia. Hahn reports that major ideologists of the global jihadi movement have praised these bombings and have urged greater material and other support for the Caucasus Emirate. After several warlords repudiated their allegiance to Umarev, in late November 2010, he attempted to reassure local and international supporters that the rebel command of the Caucasus Emirate was still united, was still cooperating with other mujahidin in Tatarstan, Bashkortostan, and other areas of Russia, and was still carrying out terrorist operations. <6. Implications for Russia> Ethnic prejudice by Russians against North Caucasian migrants reportedly has contributed to a substantial share of hate crimes in Russia. The Moscow Human Rights Bureau estimated that about 170 xenophobic attacks occurred in Russia in 2010, leaving 39 people dead and about 213 injured. These numbers have declined in recent years, perhaps partly attributable to the creation of an extremist crimes subunit in the Interior Ministry. Some hate crimes in Moscow and elsewhere against North Caucasians have been linked to military and police veterans of the Chechnya conflict. Reacting to the hate crimes, Caucasian youths in Moscow formed a group they termed "Black Hawks" to carry out revenge attacks. Members of the Congress of the Peoples of the Caucasus have attempted to intercede between the "hawks" and Slavic ultranationalist groups. Seemingly indicating that ethnic prejudice by Russians against North Caucasians remains potent, on December 7, 2010, an ethnic Russian soccer fan was killed in Moscow during a clash with North Caucasians. The next day, soccer fans demonstrated, breaking shop windows and shouting ethnic slurs against North Caucasians and other ultra-nationalist slogans. On December 11, 2010, up to 5,000 soccer fans including neo-Nazis, ultra-nationalists, and others marched in protest in Moscow against the killing, shouting ethnic slurs against North Caucasians and later clashing with North Caucasians on the subway and elsewhere in the city. President Kadyrov denounced the "thugs who beat up and knifed non-Slavic-looking people," and stated that real soccer fans would not have shouted "'kill' and 'get people from the Caucasus.'" While seeming to blame foreign interests for fomenting the violence in Moscow, he also stressed the people of Chechnya call for the reestablishment of law and order in Moscow and the punishment of the "criminals" who attacked Caucasians. He termed the ethnic violence a "disgrace" and stated that the incident demonstrated that "one of the priority areas of the state's policy" should be "to firmly speak up against xenophobia and against provocations aimed at dividing Russia. This is what shows the genuine patriotism of Russians." Kadyrov's harsh methods of combating terrorism have contributed to vendettas. Kadyrov's reportedly widespread human rights violations have received the acquiescence, if not support, of central authorities, and his methods have been used to certain degrees by other leaders in the North Caucasus. As one sign of such support, Vladimir Vasilyev, head of the Duma Security Committee, stated during a March 2009 visit to Chechnya that the region "could be an example to other regions of how terrorism should be countered. The experience and positive practice employed here in the fight against terrorism are of great interest, particularly against the background of the unstable situation that remains tense in some regions of the North Caucasus." Some observers speculate that Russia's encouragement and support for individuals from the North Caucasus to travel to Abkhazia and South Ossetia to fight against Georgia in 2008 might have gained sentiments that Caucasian guerrillas could defeat government forces. Personnel from Chechnya's former Vostok (East) Battalion served in South Ossetia, and "the Adyghe and Cherkess formed groups of fighters and, alongside Chechens, participated in removing the Abkhaz government-in-exile from the Kodori gorge. They also temporarily patrolled Georgian villages in the Gali region of Abkhazia." Among other repercussions, surreptitious arms transfers from Georgia through South and North Ossetia to other North Caucasian areas could increase. On the other hand, a perhaps favorable repercussion from Russia's viewpoint might be the easing of population pressures in North Ossetia if some residents move to South Ossetia, where there is more arable land. Russian analyst Boris Mezhuyev has asserted that the ongoing disorder in the North Caucasus has caused increasing numbers of the Russian elite to contemplate granting independence to the area. He has suggested that Vladimir Putin might someday be criticized for keeping Chechnya as part of Russia rather than permitting it to have a relationship with Russia that is similar to that of Abkhazia. Among such advocates of granting independence, Stanislav Belkovskiy, the director of Russia's National Strategy Institute, stated in December 2010 that "I remain a supporter of the theory of secession and independence for the North Caucasus. At least for the Muslim republics . [In fact,] the North Caucasus is not under Russia's control in terms of either mentality, or law, or security . The sooner that Russia amputates this diseased organ, the fewer negative consequences [growing foreign Islamic influence] will have on the main part of Russia." He also warned that much of Russia's re-development budget allotted to the North Caucasus is being used by local "business interests" to deepen their influence throughout Russia by buying up domestic firms. <7. International Response> The United States and several other countries and international organizations have maintained that while Russia has the right to protect its citizenry from terrorist attacks, it should not use "disproportionate" methods that violate the human rights of innocent bystanders. They have objected to Russia's 2006 counter-terrorism law, which permits police and other security forces to declare a "counter-terrorism operations regime" in a locality and to detain suspects for up to 30 days, search homes, ban public assemblies, and restrict media activities without any pre-approval by the courts or legislative oversight. As a result of this and other permissive laws and government actions, Human Rights Watch, a nongovernmental organization, has argued that Russia's security forces "believe they may act with impunity when carrying out any operation related to counter-terrorism." The U.N. Human Rights Committee in October 2009 reflected these concerns when it urged Russia to "take stringent measures to put an end to enforced disappearances, extrajudicial killings, torture, and other forms of ill-treatment and abuse committed or instigated by law enforcement officials in Chechnya and other parts of the North Caucasus; ensure the prompt and impartial investigations by an independent body of all human rights violations allegedly committed or instigated by state agents, [and] prosecute perpetrators," among other measures. The European Court of Human Rights of the Council of Europe (COE) has ruled in dozens of cases brought by Chechens that the Russian government used indiscriminate force that resulted in civilian casualties and failed to properly investigate and prosecute Russian personnel involved. Hundreds of cases remain to be adjudicated. According to Russian human rights advocate and jurist Karinna Moskalenko, the Russian government has paid damages awarded by the Court to the plaintiffs, but has not taken the verdicts into account by reforming the justice system. In many cases, the plaintiffs have been attacked and even killed by unknown assailants in Chechnya and elsewhere before their cases are adjudicated. In June 2008, the Parliamentary Assembly of the COE appointed Dick Marty a rapporteur on the North Caucasus to report on the human rights situation in the region. He prepared three reports about the situation in the region. In the third report in June 2010, Mr. Marty agreed with Medvedev that the clan culture, corruption, and police inefficiency were causes of violence in the North Caucasus, and pointed to a culture of vengeance, inefficiency of the judicial system, high unemployment, Islamic extremism, and ethnic prejudice between Russians and Caucasians as other factors. He stated that the large number of cases heard by the European Court of Human Rights "points to the fact that the North Caucasus has for many years been the European region where the worst and most massive violations of human rights take place." In over 150 decisions, he argued, the Court had rejected the assertions of the Russian government that "abductions, arson attacks on houses, and murders of human rights defenders are carried out solely by 'bandits.'" Instead, the evidence has pointed to the lack of professionalism and discipline among law enforcement agencies and to a cowed judiciary. Mr. Marty indicated his deep dismay that the COE's Committee of Ministers has failed to take Russia's human rights record into full account in assessing Russia's compliance with the commitments of membership in the COE. Mr. Marty's report was considered by the COE's Parliamentary Assembly in June 2010. For the first time, the Russian delegation voted in favor of a COE report on the North Caucasus. Members of the Russian delegation, including Yunus-bek Yevkurov, the President of Ingushetia, and Leonid Slutskiy, a Duma deputy, expressed agreement with much of Mr. Marty's "balanced and accurate" report, but they argued that the human rights situation in the region was much improved compared to the past and that Russia needed the support of the COE to carry out further reforms. They also alleged that foreigners had fostered much of the terrorism in the region, but Mr. Marty replied that "infiltration had taken place because injustice in the region had created fertile ground for radicalization," and called for Yevkurov to denounce human rights abuses by his security services. Based on the report, the Parliamentary Assembly of the COE in June 2010 approved a resolution recommending that the Russian government combat terrorism in a law-based fashion, prosecute members of security forces involved in human rights violations, ensure that victims of human rights abuses have access to the courts, and carry out the decisions of the European Court for Human Rights. The Parliamentary Assembly reiterated that "the situation in the North Caucasus region, particularly in the Chechen Republic, Ingushetia and Dagestan, constitutes today the most serious and most delicate situation from the standpoint of safeguarding human rights and upholding the rule of law, in the entire geographical area covered by the Council of Europe." A debate on the situation in the North Caucasus was held at the European Parliament that resulted in the approval of a strongly-worded resolution in October 2010. The resolution stated that the situation of human rights defenders in the North Caucasus region, particularly in Chechnya, was alarming, and that a climate of fear prevailed in Chechnya. It condemned indiscriminate violence against the civilian population from both armed opposition groups and law-enforcement bodies, and "strongly condemned" the burning of homes of relatives of alleged terrorists. The resolution called for the Russian government to facilitate access to the North Caucasus by human rights nongovernmental organizations (such as Memorial), the media, and governmental organizations (such as the Council of Europe, the OSCE, and the U.N.). It expressed regret that continued human rights abuses in Russia "are having a very negative impact on Russia's image and credibility in the world and casting a shadow over relations between the European Union and the Russian Federation, which are important and should develop into a strategic partnership." The resolution also called for the EU-Russia human rights consultations to be stepped up and to include input from the European Parliament, the Duma, and Russian judicial authorities and civil society and human rights organizations. It urged that recommendations contained in the June 2010 COE resolution be carried out by Russia. It condemned the filing of criminal charges against Russian human rights advocate Oleg Orlov, argued that the charges violated Orlov's free speech rights, and urged that the charges be dropped, and pointed that because he was awarded the European Parliament's 2009 Sakharov Prize, he "is thus under the European Parliament's special moral and political protection." <8. Implications for U.S. Interests> The former Bush Administration appeared to increasingly stress the threat of terrorism in Chechnya and the North Caucasus, although there continued to be criticism of Russian government human rights abuses in the region. Russian analyst Igor Obdayev has stated that U.S. worldwide anti-terrorism efforts were instrumental in reducing terrorist financing in the North Caucasus. In keeping with such an Administration stress, the State Department in April 2008 reported that "the majority of terrorist attacks [in Russia during 2007] continued to occur in the North Caucasus, where the pacification of much of Chechnya has correlated with an increase in terrorism in Dagestan and Ingushetia.... There was evidence of a foreign terrorist presence in the North Caucasus with international financial and ideological ties." Similarly, in June 2008 at the 16 th session of the U.S.-Russia Working Group on Counter-terrorism, the two sides mentioned that they had cooperated on a case involving financial support for terrorist activity in Chechnya." In a "get acquainted" meeting on April 1, 2009, Presidents Obama and Medvedev pledged to cooperate in countering terrorism, although the North Caucasus was not publicly singled out. In the first few days of the Obama Administration, the State Department issued its annual human rights report for 2008, which contained (as in 2007) lengthy descriptions of human rights abuses in the North Caucasus. The human rights report for 2009 stressed that the Russian "government's poor human rights record in the North Caucasus worsened" during the year. In July 2009, the State Department called for bringing the killers of Natalia Estemirova in Chechnya to justice, and in August 2009, it called for bringing the killers of Zarema Sadulayeva and Alik Dzhabrailov in Chechnya to justice. The U.S. Mission to the OSCE also has raised concerns about these killings, as well as about the killing of Dagestani journalist Abdulmalik Akhmedilov in August 2009 and Ingush opposition politician and government human rights council member Maksharip Aushev in October 2009. During her October 2009 visit to Moscow, Secretary of State Hillary Clinton reportedly did not stress U.S. concerns about human rights problems in the North Caucasus, although she did mention "attacks against human rights defenders" in Russia as a concern. During her visit, a civil society working group, set up as part of the U.S.-Russia Bilateral Presidential Commission, held an initial meeting, but no details were released. The working group has held two meetings in 2010, but has not publicized specific work on the North Caucasus. The chairs of the U.S.- Russia Counterterrorism Working Group met in November 2009 and agreed to focus on Afghanistan with particular regard to counterterrorism/terrorist finance issues; strengthen U.N. Security Council Resolution 1267 sanctions; counter the ideological dimension of violent extremism; and work on improving the bilateral exchange of transportation security issues. Among other recent U.S. actions: In May 2010, the State Department released its Advancing Freedom and Democracy Report that details its diplomatic initiatives in 2009. Its section on Russia did not mention efforts to address human rights abuses in the North Caucasus, beyond mentioning that support is given to NGOs that provide training and support for legal services to displaced persons. On June 23, 2010, Secretary of State Clinton designated Caucasus Emirates leader Doku Umarov as a terrorist under Presidential Executive Order 13224, which targets terrorists and those providing support to terrorists or acts of terrorism, to help stem the flow of financial and other assistance to Umarov. In July 2010, the State Department issued a statement on the anniversary of the killing of Natalya Estemirova, stating that "we will continue to shine the spotlight on this case as part of our efforts to protect the brave journalists and civil society activists across the globe who, like Natalya, speak out against abuses and work to secure fundamental freedoms for their fellow citizens." In August 2010, the State Department's Country Reports on Terrorism reported that most terrorism in Russia remained linked to the North Caucasus. Omnibus Appropriations for FY2009 ( P.L. 111-8 ), signed into law on March 11, 2009, called for $9.0 million for the North Caucasus for humanitarian, conflict mitigation, human rights, civil society, and relief and recovery assistance. The Administration's budget request for FY2010 called for $6.0 million for conflict mitigation and reconciliation activities in the North Caucasus, "to help stem the spread of violence and instability." The request also called for unspecified amounts of assistance for the North Caucasus to promote economic opportunities, youth employment, health, sanitation, and community development, and to discourage "the spread of extremist ideologies." The conference agreement on Consolidated Appropriations for FY2010 ( H.R. 3288 ), signed into law on December 16, 2009, called for not less than $7.0 million for the North Caucasus, slightly less than that provided in FY2009 but still above the Administration's budget request. The conference agreement also repeats language used for several years that directs that 60% of the assistance allocated to Russia will be withheld (excluding medical, human trafficking, and Comprehensive Threat Reduction aid) until the President certifies that Russia is facilitating full access to Chechnya for international nongovernmental organizations providing humanitarian relief to displaced persons. See Table 2 for a breakdown of spending by program for the North Caucasus for FY2007-FY2008. In addition to the provisions in H.R. 3288 , Congress has raised concerns about ongoing terrorism and human rights violations in the North Caucasus. H.Res. 1315 (Hastings), introduced on April 29, 2010, called on the Secretary of State to designate the Caucasus Emirate as a foreign terrorist organization. H.Res. 1539 (Hastings), introduced on July 20, 2010, urged the Secretary of State to raise the issue of human rights abuses in the North Caucasus and elsewhere in Russia during meetings of the OSCE and other international forums. According to some international NGOs and the State Department, all foreign NGOs face constraints by the authorities on their access and operations in Chechnya. While almost all NGOs operating in Chechnya have offices there with local staff, most continue to retain their main or at least branch offices outside the region. However, if the security situation continues to improve in Chechnya and deteriorate elsewhere in the North Caucasus, NGOs may consider moving more operations to Chechnya. Access to Chechnya by international staff is strictly controlled by the regional branch of the Federal Security Service (FSB), according to reports, and NGOs must provide detailed monthly information on activities and travel to the FSB and other authorities. At times, the local authorities have limited or refused access, although reportedly the FSB has been more cooperative in recent months. Local authorities in Chechnya, Ingushetia, and Dagestan closely oversee the finances and programs of foreign NGOs. In addition, the Russian Migration Service and other federal offices require financial and program information. Chechen officials repeatedly have turned down requests by UNHCR to open an office in Grozny to monitor whether returnees are ensured international standards of safety and dignity. The State Department's Bureau of Consular Affairs advises "U.S. citizens against travel to Chechnya and all other areas of the North Caucasus, including North Ossetia, Ingushetia, Dagestan, Stavropol, Karachayevo-Cherkessiya, and Kabardino-Balkariya, areas of continued civil and political unrest."

Terrorist attacks in Russia's North Caucasus—a border area between the Black and Caspian Seas that includes the formerly breakaway Chechnya and other ethnic-based regions—appeared to increase substantially in 2007-2009. Moreover, civilian and government casualties reached levels not seen in several years and terrorist attacks again took place outside the North Caucasus. Although the number of terrorist incidents may have leveled off or even declined slightly in 2010 from the high levels of 2009, the rate of civilian and government casualties continued to increase throughout the North Caucasus in 2010 and a rising number of terrorist incidents took place outside of Chechnya. Illustrative of the new range and scope of violence, the Moscow subway system was bombed in March 2010, resulting in over 40 deaths and dozens of injuries. Before the recent rise in terrorism, it seemed that government security forces had been successful in tamping down their range and scope by aggressively carrying out over a thousand sweep operations ("zachistki") in the North Caucasus. During these operations, security forces surround a village and search the homes of the residents, ostensibly in a bid to apprehend terrorists. Critics of the operations allege that the searches are illegal and that troops frequently engage in pillaging and gratuitous violence and are responsible for kidnapping for ransom and "disappearances" of civilians. Through these sweeps, as well as through thousands of direct clashes, most of the masterminds of previous large-scale terrorist attacks were killed. Some observers suggest that the increasing scope of public discontent against zachistki and deep economic and social distress are contributing to growing numbers of recruits for terrorist groups and to increasing violence in the North Caucasus. Interethnic and religious tensions are also responsible for some of the increased violence. Many ethnic Russian and other nonnative civilians have been murdered or have disappeared, which has spurred the migration of most of the nonnative population from the North Caucasus. Russian authorities argue that foreign terrorist groups continue to operate in the North Caucasus and to receive outside financial and material assistance. The United States generally has supported the Russian government's efforts to combat terrorism in the North Caucasus. However, successive Administrations and Congress have continued to raise concerns about the wide scope of human rights abuses committed by the Russian government in the North Caucasus. The conference agreement on Consolidated Appropriations for FY2010 (P.L. 111-117), calls for $7.0 million to continue humanitarian, conflict mitigation, human rights, civil society and relief and recovery assistance programs in the North Caucasus. It also repeats language used for several years that directs that 60% of the assistance allocated to Russia will be withheld (excluding medical, human trafficking, and Comprehensive Threat Reduction aid) until the President certifies that Russia is facilitating full access to Chechnya for international nongovernmental organizations providing humanitarian relief to displaced persons.

<1. Overview> The U.S. Congress has expressed deep concern over Russia's annexation of Crimea and its role in the ongoing crisis in Ukraine. Among other things, the crisis has heightened concerns in the United States and in Europe about the future direction and scope of the transatlantic security relationship and the cornerstone of that relationship, the North Atlantic Treaty Organization (NATO). Some policy makers and analysts have called for a reassessment of the transatlantic community's progress in realizing its goal of a Europe "whole, free, and at peace," citing security concerns in some of NATO's Central and Eastern European member states and ongoing territorial disputes in countries on the alliance's borders, such as Moldova, Ukraine, and Georgia. Questions about NATO's commitment and capacity to defend its member states and about the nature of the alliance's relationship with Russia have moved to the forefront of discussions about NATO's future. These questions are expected to feature prominently at NATO's next summit of heads of state and government, scheduled to take place in Wales on September 4-5, 2014. The crisis in Ukraine has also exposed longer-standing tensions within NATO regarding its strategic focus. Since the end of the Cold War, NATO has evolved from an exclusive focus on territorial defense and deterrence in Europe to overseeing a range of military and crisis management operations across the globe. This transformation was predicated largely on the perception that Russia no longer posed a security threat to NATO, and on a conviction that the primary security challenges facing the allies emanated from beyond the Euro-Atlantic region. However, some NATO members, including many former members of the communist bloc, have consistently expressed concern that the alliance's transformation could come at the expense of its capacity to uphold its commitment to collective defense, enshrined in Article 5 of the North Atlantic Treaty. After more than a decade of war in Afghanistan and against the backdrop of a militarily resurgent Russia, some allies are calling for a renewed NATO focus on collective defense. Debates about NATO's mission come against the backdrop of continued economic stagnation in Europe and long-standing U.S. concerns about a downward trend in European defense spending, shortfalls in European defense capabilities, and burden sharing within the alliance. In 2013, total defense spending by NATO European allies as a percentage of GDP was about 1.6%; and just three NATO allies (Greece, the UK, and the United States) exceeded the alliance's goal of spending 2% of GDP on defense. Since 2001, the U.S. share of total allied defense spending has grown from 63% to 72%. Analysts in the United States have long asserted that defense spending in many European countries is inefficient, with disproportionately high personnel costs coming at the expense of much-needed research, development, and procurement. In 2013, only four allies met a NATO guideline to devote 20% of defense expenditures to the purchase of major equipment, considered a key indicator of the pace of military modernization. These trends correlate with significant shortfalls in key military capabilities, including strategic air- and sealift; aerial refueling; and intelligence, surveillance and reconnaissance (ISR). NATO Secretary General Anders Fogh Rasmussen and others have argued that the budgetary constraints facing allied governments could spur much-needed defense cooperation among European allies. At NATO's May 2012 summit, the allies committed to a "Smart Defense" initiative that calls for cooperation, prioritization, and specialization in pursuit of needed defense capabilities. Some critics maintain that this is just the latest in a long line of post-Cold War efforts to enhance capabilities that have had mixed success, at best. They argue that the limited outcomes may reflect a general lack of public support for military engagement and divergent threat perceptions both across the Atlantic and within Europe. As noted above, within Europe, some allies have emphasized the need for territorial defense capabilities, while others have stressed the importance of more flexible, rapidly deployable units and civilian-military crisis management operations. An increasingly strained budget environment and heightened concerns about the security threat from Russia appear to be amplifying these differences. U.S. officials have consistently underscored their firm commitment to the transatlantic security relationship and the collective defense of the alliance. However, far-reaching defense budget cuts in the United States, the Obama Administration's "rebalance" to Asia, and the withdrawal over the past two years of two of the U.S. Army's four Brigade Combat Teams based in Europe have raised questions about future U.S. commitments to European security. Russia's actions in Ukraine have heightened these concerns. <2. NATO and U.S. Military Response> Reflecting the views of the United States and its European allies, NATO Secretary General Rasmussen has characterized Russia's military aggression as "the most serious crisis in Europe since the fall of the Berlin Wall," and declared that NATO can "no longer do business as usual with Russia." NATO's response to the crisis thus far has focused on demonstrating support for Ukraine and its territorial integrity; reaffirming the allied commitment to defensing Central and Eastern European allies; and rebuking Russia. In early April, NATO announced the suspension of all "practical" civilian and military cooperation with Russia in the framework of the NATO-Russia Council. Political dialogue between the two sides will continue. Cooperative activities in the NATO-Russia Council that could be affected include a helicopter maintenance fund and a counternarcotics initiative in Afghanistan, and some joint counter-terrorism initiatives. <2.1. NATO Support for Ukraine> The allies have agreed to strengthen political and military cooperation with the government in Kyiv. This includes providing military trainers to assist in Ukraine's military modernization efforts and improving the interoperability of Ukrainian and allied armed forces through exercises and joint operations. In June, Secretary General Rasmussen announced the creation of several new NATO trust funds to help develop Ukrainian defense capacity, including in the areas of logistics, command and control, cyber defense, and assisting retired military personnel to adapt to civilian life. Total contributions to these trust funds has not as yet been publicly disclosed. NATO has not provided Ukraine with military hardware and is not expected to do so. This does not, however, preclude bilateral military assistance from individual allies. For example, as discussed below, the United States has provided Ukraine with non-lethal military aid (see, " Ukraine "). All NATO allies have thus far ruled out providing Ukraine with lethal military aid, arguing, among other things, that such assistance could lead to a further escalation of the conflict. <2.2. NATO Reassurance Measures in Central and Eastern Europe> Since Russia's annexation of Crimea, NATO has sought to reinforce its commitment to defending central and eastern European allies. Measures taken thus far have centered on air defense and surveillance, maritime deployments, and military exercises. Despite calls from some member states, NATO has thus far ruled out permanent troop deployments in the region. Air Defense and Surveillance: NATO member states have deployed additional fighter jets to the alliance's Baltic Air Policing mission and NATO is carrying out aerial surveillance flights over Poland and Romania. In April, NATO increased the Air Policing Mission from four to 16 fighter jets. The mission to protect Baltic airspace has been led by NATO allies on a rotational basis since 2004 (the Baltic countries do not have their own air forces). Denmark, France, Poland, and the UK are each currently contributing four fighter aircraft to the mission. Canada has also deployed jets to Romania to conduct training exercises with the Romanian air force. Since mid-March 2014, NATO airborne warning and control system (AWACS) surveillance aircraft have been conducting twice daily flights to monitor events in Ukraine, one over Poland and one over Romania. NATO has used surveillance images to monitor Russian troop movements along the Ukrainian border. Maritime deployments: NATO has deployed two maritime groups on patrols to the Baltic and Mediterranean Seas. One group of 5-7 mine clearance vessels has been patrolling the Baltic Sea since late April. It includes ships from Belgium, Estonia, France, Germany, the Netherlands, and Norway. A second maritime contingent of frigates has been patrolling the Mediterranean since May. It includes ships from Canada, Germany, Norway, Turkey, and the United States. In mid-July, a third NATO maritime group participated in naval exercises in the Black Sea. The group of four ships (from Italy, Turkey, and the UK) conducted interoperability exercises with naval units from Greece, Italy, Romania, Turkey, and the United States. Military Exercises: NATO member states have conducted several military exercises in Central and Eastern Europe, and have planned at least one major exercise in Ukraine in September. From May 16-23, about 6,000 allied troops conducted a military exercise in Estonia aimed at repelling a potential attack on Estonian territory. Troops from Belgium, Denmark, Estonia, France, Latvia, Lithuania, Poland, the UK, and the United States participated in the NATO exercise, dubbed "Steadfast Javelin 1." The U.S. Army-led Rapid Trident 2014, originally scheduled to take place in western Ukraine in July, has been tentatively postponed until mid-September. The Army anticipates that up to 14 nations, including many NATO member states, will participate in the exercise, which will reportedly feature a combined U.S.-Ukrainian battalion headquarters practicing a peacekeeping operation. Last year's Rapid Trident exercise in Ukraine included 1,300 troops from 17 nations. Although they have welcomed these measures, some allies in Central and Eastern Europe have called for a more robust demonstration of NATO's willingness and capacity to defend them. Most notably, leaders in Poland and the Baltic State have advocated permanent NATO troop deployments on their territories (see " Security Situation and Concerns in Central and Eastern Europe "). Other allies have cautioned against a further "militarization" of NATO relations with Russia, highlighting, among other things, NATO's 1997 pledge to refrain from permanently stationing substantial combat forces in countries that joined NATO after the collapse of the Soviet Union. Officials in Germany, for example, have said that permanent troop deployments in member states formerly aligned with the Soviet Union could represent a counter-productive provocation of Russia. <2.3. U.S. Reassurance Measures in Central and Eastern Europe Operation Atlantic Resolve and the Proposed European Reassurance Initiative> As well as being a key proponent of the NATO response thus far, the Obama Administration has taken additional military measures intended to reassure Central and Eastern European allies. These efforts, under the umbrella of U.S. European Command's Operation Atlantic Resolve , have consisted primarily of enhanced U.S. troop rotations in the region and joint military exercises with allies and partners. Measures taken to date include: deployment in March and April of an additional six F-15 fighter jets to the Baltic Air Policing mission; deployment in March of an aviation detachment of 12 F-16s and 300 personnel to Lask Air Base in Poland; deployment of 175 marines to Romania to supplement the Black Sea rotational force, which will now consist of about 400 marines; and deployment of 150 paratroopers each to Poland, Lithuania, Latvia, and Estonia. According to the Department of Defense, these and other U.S. troops have participated in at least ten land-based military exercises with NATO Central and Eastern European and other allies this spring and summer. The United States has suspended all military-to-military activities with Russia, including two previously scheduled trilateral exercises with Canada and Norway. The Defense Department has also enhanced U.S. naval presence in the Black and Baltic Seas. In March, April, and May 2014 four U.S. naval vessels (the USS Truxton , the USS Donald Cook , the USS Taylor , and the USS Vella Gulf ) were at varying times deployed to the Black Sea for naval exercises. The USS Oscar Austin has conducted naval exercises and port visits in the Baltic Sea. <3. Security Situation and Concerns in Central and Eastern Europe> <3.1. Poland and the Visegr d Four> Russia's annexation of Crimea and its continued support for separatist forces in eastern Ukraine have sharpened concerns in Central and Eastern Europe about Vladimir Putin's possible future intentions. Geographical proximity and long-standing historical relationships, including the experience of Soviet invasion and domination during the Communist era, color regional attitudes toward Russia. Many officials and analysts in Central and Eastern Europe relate that they have not been especially surprised by Russia's actions in Ukraine and assert that their past efforts to convey concerns about President Putin's revanchist ambitions went largely unheeded in the United States and Western Europe. Poland, the Czech Republic, and Hungary joined NATO in 1999, and Slovakia joined in 2004. All four countries regard NATO as the central pillar and guarantor of their national security, and all four have demonstrated their commitment to the alliance by participating in the NATO-led mission in Afghanistan, among other activities. In addition to their membership in NATO and the EU, these four countries cooperate on a range of regional issues and interests as the Visegr d Group (V4). Energy dependence is a central consideration in V4 relations with Russia: about 59% of the natural gas consumed in Poland, 80% in Hungary, 84% in Slovakia, and 57% in the Czech Republic comes from Russia. In recent years, Russia has been actively trying to extend its influence in the region through energy deals and the acquisition of energy infrastructure. While business usually centers on natural gas, Hungary also agreed to a deal with Russia's state nuclear company in early 2014 for the upgrade of a Hungarian nuclear power plant, financed by a 10 billion (about $13.4 billion) loan from Moscow. In February 2014, the V4 foreign ministers released a joint statement reiterating "their strong interest in maintaining the sovereignty, independence, unity, and territorial integrity of Ukraine..." All V4 members agreed to the 5 rounds of limited sanctions (travel bans and asset freezes) imposed by the EU against Russian individuals and companies between March 17 and July 26 in response to the annexation of Crimea and the conflict in eastern Ukraine. (The EU's common position is that the Crimea referendum was illegal, and no EU member states recognize its outcome. ) Furthermore, after the shooting down of Malaysian Airlines Flight 17 on July 17 and Russia's subsequent failure to halt support for separatist forces in eastern Ukraine quickly shifted the sanctions debate in Europe, the V4 countries joined their fellow EU member states in adopting wider financial and trade sanctions against Russia on July 29. Nevertheless, debates during the spring and early summer of 2014 about EU sanctions and responding to the Ukraine crisis exposed differences within the V4 significant enough that some observers questioned the future relevance of the grouping as a mechanism for coordinating foreign policy. Poland's consistent and forceful advocacy of a robust response to Russia's actions made it something of an outlier in the V4. Whether owing to a desire to preserve energy and economic ties with Russia, concerns about provoking Russia further, or the perception that Russia's actions in Ukraine are distant and do not pose a direct threat to their countries, the governments of the other three countries have tended to be more reserved. Critics of these governments' response noted an apparent preference for inaction by the governments of the Czech Republic and Slovakia, and even some outright pro-Russian stances by the prime minister of Hungary. Poland stands out among the V4 group as having the most difficult relationship with Russia. Despite a mild, temporary thaw in the relationship after the Polish President and nearly 100 high-level Polish officials were killed in a 2010 airplane crash in Russia, Polish suspicions about the nature of Putin's Russia have long persisted. Poland is by far the most populous country, the largest economy, and the most significant military actor of the V4. Like many European countries, Poland is in the midst of a long-term transformation to a smaller, more capable, and more deployable military. Despite budgetary pressures, Poland is pursuing a broad equipment acquisition program linked to the need to phase out remaining Soviet-era material. In an effort to upgrade its main battle tanks and other armored vehicles, helicopters, air defenses, drones, and individual soldier equipment, Poland has reportedly significantly increased equipment expenditures. Poland has been a leading allied participant in NATO's mission in Afghanistan. At the same time, given its enduring perception of Russia as a threat, Poland has also been a leading voice in calling for NATO to focus on its traditional vocation as an alliance of territorial defense. In the wake of the Crimea annexation, Polish officials revived a long-standing wish to base U.S. forces on their territory, calling for two NATO brigades (approximately 10,000 soldiers) to be stationed in Poland as a security guarantee. The 12 U.S. F-16s and 300 airmen deployed to Poland in March 2014 build on a small U.S. aviation detachment that was established in Poland in 2012, which has supported quarterly training rotations of 200 U.S. personnel operating F-16s and C-130s. Poland also participates in the U.S./NATO European Phased Adaptive Approach missile defense system, intended to guard against a possible Iranian missile threat. Aegis-ashore interceptors are scheduled to be deployed in Poland in 2018. Of additional note with regard to Poland's security is the 5,800 square mile Russian exclave Kaliningrad, wedged between Poland and Lithuania. Kaliningrad has a heavy Russian military presence, including the Baltic Sea Fleet and two airbases. In addition, Russia has reportedly stationed, or at least threatened to station, Iskander short-range nuclear missiles there. Compared to Poland, the militaries of the Czech Republic, Hungary, and Slovakia are significantly smaller and possess more modest capabilities. Each of the three countries also faces substantial resource constraints and budget pressures: since 2008, the Czech Republic has cut its defense spending by 16%, Slovakia by 22%, and Hungary by 29%. Nevertheless, the Czech and Hungarian forces are considered by military experts to be well-structured, well-equipped, well-trained, highly capable for their size, and experienced from participation in international deployments. The Czech government plans to increase defense spending from the current 1.0% of GDP to 1.4% by 2020, to replace equipment such as Soviet-era transport helicopters, and to continue developing niche capabilities such as chemical, biological, radiological, and nuclear defense (CBRN). Hungary intends to increase defense spending from the current 0.8% of GDP to 1.4% by 2022, to replace Soviet-era transport aircraft and helicopters, and to focus on maintaining elite special operations forces, developed in close cooperation with the United States, as well as rapidly-deployable light infantry units. Analysts observe that a low defense budget presents the Slovak military with an especially difficult challenge because it faces a need to replace a large percentage of its ageing equipment as much as 75% of Slovakia's defense equipment is past its life cycle and the military remains heavily dependent on Russian armaments. In recent years, the V4 countries have sought to expand their cooperation from largely political matters to include security and defense. The four generally consult closely with one another in attempting to present a unified regional stance within NATO and on issues related to the EU's Common Security and Defense Policy (CSDP). In 2013, the V4 countries launched plans to form an EU Battlegroup, a rapid reaction force consisting of 2,500 to 3,000 troops, to be operational by 2016. The V4 countries have also sought to increase military and industrial cooperation in line with NATO's Smart Defense and the EU's Pooling and Sharing initiative. Current or prospective areas of such cooperation include joint procurement of ammunition, armored vehicles, individual soldier equipment, and battlefield imaging systems, as well as joint logistics programs, and joint development of capabilities such as countering improvised explosive devices (IED); CBRN; joint training of helicopter pilots and air traffic controllers; and cyber defense. <3.2. The Baltic States> The three Baltic countries, Estonia, Latvia, and Lithuania, were formerly republics of the Soviet Union, having been absorbed into the USSR in 1940 after achieving independence between the two world wars. They became independent again with the breakup of the USSR in 1991 and joined both NATO and the European Union in 2004. In general terms, the view of the Baltic countries is comparable to that of Poland in perceiving Russia as an enduring threat. Size, geographic location, and energy dependence make the Baltic countries vulnerable to Russia, and events in Ukraine have significantly increased anxiety in the Baltics. All three Baltic countries also have minority populations of ethnic Russians, a significant element in the threat calculation given that claims of persecution against Russian communities have been a part of the pretext for Russia's interventions in both Georgia and Ukraine. Language issues have caused tensions between Russia and Latvia. In 2012, a referendum rejected naming Russian as Latvia's official second language, although it is the first language for about one-third of the population. In Estonia, plans to relocate a Soviet war memorial led to clashes between police and pro-Russian demonstrators in 2007. About one-quarter of Estonia's population is ethnically Russian. Estonia subsequently found itself the target of a large-scale coordinated cyberattack thought to have originated from either pro-Russian groups or from within the Russian government itself. Lithuania found itself singled out by Russia for trade sanctions in late 2013 as an expression of Russia's displeasure over energy issues and the EU's Eastern Partnership. Ethnic Russians comprise a smaller percentage of Lithuania's population, about 7%. The Baltic countries joined their NATO and EU partners in strongly condemning Russia's annexation of Crimea as illegal. All three initially called for the EU to impose harsh political and economic sanctions, but moderated their stance after economists suggested that severe EU sanctions against Russia, the Baltics' largest non-EU trade partner, could push the countries into an economic recession, with Latvia and Lithuania likely most affected. Despite the potential economic consequences of the wider EU sanctions adopted July 29, however, the leaders of the Baltic countries have backed the expanded measures as a political imperative that outweighs economic disruption and discomfort. The break-up of the USSR left the Baltic countries with virtually no national militaries, and their forces remain small and limited. The defense planning of the Baltic countries consequently relies heavily on NATO membership, and they have emphasized active participation in the alliance, including by having contributed troops to the Afghanistan mission. Analysts suggest that recent events in Ukraine are pushing the Baltic countries to recommit even more deeply to NATO. Beyond NATO's Baltic Air Policing mission (see below), some Baltic officials have urged NATO to establish a permanent base in the region. Rotating forces, increased exercises, and pre-positioning of assets may be a more likely NATO response to bolster security in the region. Lacking their own fighter aircraft, the Baltic countries rely on their NATO allies to police and defend their airspace. NATO's Baltic Air Policing mission was launched in 2004 and is based at an airbase in Lithuania. About a dozen NATO members have taken part in the mission, including the United States, UK, France, Germany, Poland, Denmark, and the Czech Republic, providing four fighters at a time on rotating four-month deployment. In 2011, the Baltic countries pledged to gradually increase their combined contribution to the mission from 2.2 million (approximately $3 million) in 2011 to 3.5 million (approximately $4.8 million) in 2015 to pay for the costs of accommodating the air policing contingents, providing ground services for their aircraft, and contributing to the cost of aviation fuel. Compared to most other members of NATO, Estonia spends a relatively high percentage of GDP on defense. The country is seeking to add a second infantry brigade by 2022, upgrade its air defense system, and modernize a range of ground warfare equipment. Estonia also hosts a NATO cyber defense center. Latvia's forces are smaller and less well equipped, and the country's defense spending has suffered from severe budgetary pressures. Latvia aims to double its defense spending as a percentage of GDP by 2020 and to procure new equipment, including armored vehicles, transport helicopters, and air defense radar. Lithuania's forces are likewise pursuing restructuring and re-equipment programs, but efforts have been similarly hindered by funding constraints. All three Baltic countries also contribute forces to the EU's Nordic Battlegroup, a rapid reaction unit of 2,400 troops expected to be ready and available for deployment in 2015 (additionally comprised of troops from Sweden, Finland, Norway, and Ireland). <3.3. Moldova> Moldova's pro-Western government has responded to recent events in Ukraine with great concern. Moldova and Ukraine have stopped armed men trying to cross the border from Transnistria to Ukraine to "participate" in demonstrations against Ukraine's government. Transnistria, Moldova's breakaway region with a strongly pro-Russian government, has redoubled its long-standing efforts to secure Russia's recognition for its independence. Russia has not yet done so, but may have little more to lose in doing so now, given international condemnation of its actions in Ukraine. In March 2014, NATO's top military commander, General Philip Breedlove, expressed concern that Russian forces could sweep across eastern and southern Ukraine to link up with Transnistria. Such a move, while very ambitious, would have the advantage of linking the region directly with Russia. However, while Moscow has shown hostility toward the Moldovan government, especially due to its signature of an Association Agreement with the European Union in June 2014, it has so far given no indications that it is planning military action against Moldova. Most observers believe that for the present Russia will continue to try to turn Moldova away from a pro-Western orientation by using indirect tactics such as imposing de facto trade sanctions, increasing support for Transnistria and separatism in Moldova's Gagauzia region, and supporting the Communist opposition to the government in the run-up to Moldova's parliamentary elections in November 2014. During a visit to Moldova on March 30, 2014, Assistant Secretary of State Victoria Nuland confirmed U.S. support for Moldova's path toward European integration and for anti-corruption efforts, strengthening border security, boosting Moldovan exports, and energy security, among other areas. Moldova does not seek NATO membership, but it does participate in NATO's Partnership for Peace program. NATO cooperation with Moldova includes such areas as defense strategy, planning and budgeting, as well as improving military education and training. Moldova currently receives very modest U.S. security assistance: an estimated $1.25 million in Foreign Military Financing in FY2014, as well as $750,000 in International Military Education and Training (IMET) funds. The Administration's FY 2015 aid request, drafted before the current conflict in Ukraine, includes the same amounts for FY 2015 for Moldova. However, Moldova may receive additional security assistance from the United States, perhaps as part of the Administration's proposed European Reassurance Initiative. <3.4. Ukraine> Ukraine's armed forces and police were unable to effectively oppose Russia's invasion of Crimea in February and March 2014. Pro-Russian gunmen took over Donetsk, Luhansk, and other towns and cities in the Donbas region of eastern Ukraine in April and May. According to many observers, the weakness of Ukrainian forces was due to many factors, including poor training, poor morale, shortages of key equipment, and treason in the military and police. However, since June 2014, Ukrainian forces have managed to overcome some of these problems and have inflicted serious defeats on the pro-Russian separatists. Ukrainian forces are seeking to surround the key "rebel" bastions in Donetsk and Luhansk and cut the separatists off from their source of supplies in Russia. Ukrainian leaders say they are seeking to avoid house-to-house fighting in big cities, which could cause a dramatic increase in military and civilian casualties. Even a prolonged siege of the cities would likely dramatically worsen the humanitarian situation. Ukrainian military spokesmen and some outside observers claim that Ukraine may be able to defeat the separatists in a matter of weeks, if Russia does not massively intervene to support them. Ukrainian leaders say that they want to negotiate the peaceful withdrawal of Russia-backed separatists from Ukraine as part of a peace plan for the region. According to U.S. policy makers, the "rebels'" deteriorating situation has caused Russia to increase its supply of tanks, artillery, armored personnel carriers, and other heavy weapons to them. Administration officials also say Russia supplied the "rebels" with the SA-11 anti-aircraft missile that was used to shoot down Malaysian Airline Flight MH17. U.S. officials have also provided satellite imaging that reportedly shows that Russian forces have launched artillery attacks on Ukrainian forces from Russian territory. They have said that Russia could be preparing to send additional, sophisticated heavy weaponry to separatists in eastern Ukraine. Analysts have expressed concern about Russia's reaction if the forces it has supplied are close to defeat. Russia could decide to abandon them (perhaps hoping to loosen U.S. and international sanctions on Russia), or it could openly invade eastern Ukraine with the forces it has deployed on the border. On July 30, NATO Supreme Allied Commander General Breedlove said that Russian troops on the border with Ukraine had increased to well over 12,000. In March 2013, Ukraine requested military aid from the United States, according to several press reports. A full list of what Ukraine is seeking has not been disclosed, but press reports claim that Ukraine has asked for arms and ammunition, communications gear, intelligence support, aviation fuel, night-vision goggles, mine-clearing equipment, vehicles, medical gear, and other items. The Administration has declined so far to send lethal military aid to Ukraine, but has provided non-lethal assistance. In an April 2014 fact sheet, the White House detailed an $18 million security assistance package for Ukraine. The amount included 300,000 Meals Ready to Eat (MREs) to Ukraine in March, at a cost of about $3 million. The Administration is also providing an additional nearly $7 million in health and welfare assistance to Ukraine's armed forces. An additional $8 million in non-lethal support includes explosive ordinance disposal equipment and handheld radios for Ukraine's military and engineering equipment, communications equipment, vehicles, and non-lethal individual tactical gear for Ukraine's border guards. On June 4, the Administration announced an additional $5 million in security assistance to Ukraine. The funding will pay for body armor, night vision goggles, and communications equipment. On June 7, the United States announced a further $10 million to assist Ukraine's State Border Guard Service, bringing total security assistance to Ukraine since the beginning of the crisis to $33 million. In testimony before the Senate Foreign Relations Committee on July 9, Assistant Secretary of Defense Derek Chollet said that during June and July, the United States delivered to Ukraine 1,929 first aid kits; 80 multiband handheld radios, 1,000 sleeping mats; over 5,000 uniform items. Ukraine received 2,000 body armor vests on July 4. He said that in July and August the United States would supply to Ukraine 50 night-vision devices, 150 thermal imagers, 1,000 Kevlar helmets, 5 explosive ordnance disposal robots, and another 96 radios. Some Members of Congress have argued for supplying lethal military aid to Ukraine and/or providing real-time intelligence support to Ukraine's armed forces, particularly in locating surface-to-air missiles, such as the one that shot down Flight MH17. Supporters of such aid say the United States needs to show resolve in the face of Russian aggression against Ukraine's territorial integrity and sovereignty. They argue such aid could serve to deter Putin from further incursions into eastern Ukraine. Some objections to lethal aid for Ukraine are that it could foreclose a diplomatic solution to the crisis; that it could actually provoke Putin to invade eastern Ukraine with his army; and that it could end U.S.-Russian cooperation in such issues as the withdrawal of U.S. equipment from Afghanistan. <4. NATO-Russia Relations> Russian actions in Ukraine have prompted a reassessment of post-Cold War efforts to build a cooperative relationship with Moscow. As noted above, on April 2, NATO suspended all practical civilian and military cooperation with Russia. In the words of NATO Deputy Secretary General Alexander Vershbow, "For 20 years, the security of the Euro-Atlantic region has been based on the premise that we do not face an adversary to our east. That premise is now in doubt." According to some analysts, Russia's annexation of Crimea validates the concerns long expressed by some NATO member states, especially in Central and Eastern Europe, regarding Russia's commitment to partnership, its unpredictability, acts of hostility toward NATO and its partners, and perceived attempts to sow disunity within the alliance. On the other hand, while Russian actions have drawn uniform condemnation from NATO and the European Union, many in Europe and the United States emphasize that Europe's long-term security will depend on cooperative relations with Russia. As noted above, some NATO members in Western Europe have expressed concern that a military response to Russian actions could significantly hinder future attempts to boost cooperation with Russia. The principal institutional mechanism for NATO-Russia cooperation has been the NATO-Russia Council (NRC), established in May 2002, five years after the 1997 NATO-Russia Founding Act provided the formal basis for bilateral cooperation. Most observers agree that despite having advanced NATO-Russia cooperation in some areas including in Afghanistan the NRC has failed to live up to its potential. These perceived shortcomings are often attributed to Russian suspicion about NATO's long-term intentions, including with respect to countries it long considered within its sphere of influence such as Ukraine and Georgia. Many European allies continue to stress that they aspire to cooperation and partnership with Russia. However, analysts expect ties to continue to be marked by contention and mistrust, at least for the time being. Moscow has objected to NATO and the United States' military responses to the crisis, calling into question the alliance's 1997 commitment codified in the NATO-Russia Founding Act not to permanently station substantial combat forces in countries that joined NATO after the collapse of the Soviet Union. Although NATO has not as yet made decisions about permanent troop deployments, Secretary General Rasmussen has responded to Russian complaints by noting that Russia "has violated every principle and international commitment it has made." On July 29, 2014, EU member states (22 of which are also members of NATO) committed to ending all future arms sales to Russia, after months of pressure from governments and analysts on both sides of the Atlantic. The embargo will not, however, apply to previously agreed sales. Compared to other European arms sales, sales to Russia are relatively insignificant. However, over the past several years, some critics have drawn attention to several high profile deals. Chief among these is a 2011 French agreement to sell Russia two amphibious assault warships in a deal worth 1.2 billion (about $1.6 billion) the first ever sale of a significant offensive military capability by a NATO member to Russia. The first of these Mistral ships is scheduled to be delivered later this year. French President Fran ois Hollande has repeatedly stated that France would honor the existing contract. Even before the annexation of Crimea, some Members of Congress and European leaders repeatedly criticized France's decision to sell the Mistral to Russia, expressing concern about Russia's military intentions, while French commentators have noted the economic and associated political benefits of the sale for France. Some Members of Congress have called on NATO to offer to purchase the Mistrals built for Russia from France. Since Russia's annexation of Crimea, Germany has cancelled the planned sale of a military training facility to Russia; the UK and United States also say they have halted military cooperation. <5. Prospects for NATO Enlargement> Russian actions in Ukraine have prompted some U.S. observers and Members of Congress to call for a more concerted NATO effort to enlarge the alliance, particularly to the east. Among other things, they argue that continued enlargement would send an important signal to aspiring members that NATO's "open door" policy will not be scaled back in the face of Russian opposition. Some proponents of enlargement add that Russia would be less willing and less able to take the aggressive actions it has in Ukraine, Georgia, and elsewhere in its near-abroad if these countries were members of the alliance. Despite these calls, most analysts consider NATO unlikely to make any significant progress toward expanding over the next several years. They point to a perception in some Western European countries that NATO has enlarged too quickly and that the alliance should agree on how to resolve a complex range of issues, including managing relations with Russia, before taking in new members. For some allied governments, ongoing territorial disputes with Russia in countries such as Georgia and Ukraine could be a strong deterrent to extending membership invitations to these countries. Four countries are currently considered formal aspirants for NATO membership: Montenegro, Bosnia-Herzegovina, Macedonia, and Georgia. Montenegro has had a Membership Action Plan (MAP) since December 2009. Although it is considered the candidate with the most advanced membership prospects, NATO officials have cautioned that Montenegrin security agencies and the defense sector require reforms to meet NATO standards and that further efforts need to be made to fight corruption and organized crime in the country. Some have also questioned the level of public support for NATO membership in Montenegro. Bosnia was formally invited to join the MAP in April 2010, but was told that its Annual National Program under the MAP would not be accepted until the country resolved the issue of immovable defense property (mainly former military bases and barracks) on its territory. The country's leaders have agreed in principle to resolve the issue, but many doubt whether Bosnia can agree on whether to join NATO, as Bosnian Serb leaders have given mixed signals on the issue and public opinion polls have shown very strong opposition to membership among the Bosnian Serb population. NATO agreed that Macedonia met the qualifications for membership in 2008, but its candidacy has been stalled due to a protracted dispute with NATO ally Greece over the country's official name. The two sides have been unable to resolve the issue during talks sponsored by the United Nations. Representatives of Ukraine's current government have said the country is not seeking NATO membership. This reflects long-standing indifference, if not opposition, to NATO membership in the country. Under former President Yanukovych, the country renounced previously asserted ambitions to join NATO. According to one March 2014 opinion poll, 34% of Ukrainians were for NATO membership, and 44% opposed, with a regional split of 74% for membership in western Ukraine and 67% opposed in the east. As the conflict in Ukraine has persisted, there has been some indication that public support for NATO membership has increased to some degree, though not significantly. Some observers assert that the Ukrainian government could be cautious about expressing ambitions to join NATO for a number of reasons, including sensitivity to public opinion and possible opposition to membership from countries within the alliance that would be reluctant to further antagonize Russia. In early April, in response to NATO Secretary General Rasmussen's assertion that the door to NATO membership for Ukraine remained open, German Foreign Minister Frank-Walter Steinmeier reportedly countered that "NATO membership for Ukraine is not pending." In September 2008, NATO and Georgia established the NATO-Georgia Commission (NGC) in an effort both to both oversee NATO assistance to Georgia after its 2008 conflict with Russia and to supervise progress toward eventual membership in the alliance, as called for at NATO's 2008 Bucharest Summit. Since then, the two sides have deepened cooperation in a variety of areas, especially on defense and security sector reform, and Georgia has contributed to ongoing NATO operations, including by deploying the second-largest non-NATO contingent in Afghanistan. Nonetheless, most observers believe that the unresolved situation in Georgia's breakaway regions of South Ossetia and Abkhazia could continue to pose a major obstacle to possible Georgian membership for the foreseeable future. They contend that as long as the territorial dispute persists, some allies could oppose defining a specific timeline for membership. Georgia has not been granted a Membership Action Plan, but Administration officials have indicated that they would support granting a MAP to Georgia at NATO's September summit in Wales. Some observers have argued that recent Russian military aggression could indirectly serve to boost support for NATO membership in Sweden and Finland. Since joining NATO's Partnership for Peace Program in 1994, both countries have been active participants in NATO operations and have taken significant steps to modernize their militaries. In a reflection of continuing sensitivities regarding relations with Russia, both have also continued to maintain long-standing policies of military "nonalignment." In 2013, Russian Prime Minister Dmitry Medvedev said that Moscow would be forced to "respond" if Finland or Sweden joined NATO, and in the past year Russian forces have performed air and land exercises near Swedish and Finnish territory. Recent Russian actions and statements have led at least one Swedish government official to advocate a "doctrinal shift" in defense policy; and Finland's current Prime Minister supports NATO membership. Nonetheless, public opinion in both countries remains firmly opposed to NATO membership. Some analysts assert that at the least, the two governments could continue to bolster defense spending and cooperation with other Nordic states and the Baltics. <6. U.S. Policy> The crisis in Ukraine has renewed focus on the U.S. commitment to European security and on overall U.S. force posture in Europe. Since the end of the Cold War, as NATO and the EU have enlarged eastward and as both organizations have pursued partnership with Russia, the perceived need for a robust U.S. military presence to defend the continent receded. Today, about 67,000 U.S. forces are stationed in Europe, primarily in Germany, Italy, and the UK; this is down from a Cold War high of about 400,000. Some allies in Central and Eastern Europe have consistently expressed concerns about the reduced U.S. force posture, and especially the recent withdrawal of two of the Army's four Brigade Combat Teams. Other allies and U.S. policy makers supported the shift, particularly given other security challenges facing the United States and NATO. The adjusted U.S. force posture has coincided with U.S. calls for European allies and the EU to enhance their own military capabilities in order to boost NATO's effectiveness and reduce Europe's dependence on the U.S. security guarantee. As discussed above, such efforts have had mixed results, at best. The Obama Administration and its supporters assert that the United States remains prepared and able to honor its commitments to the defense and security of fellow NATO member states. In addition to the aforementioned U.S. military responses to the crisis in Ukraine, they note that the United States was a key proponent of NATO's drafting of contingency plans for the defense of Poland and the Baltic States in 2009, and they draw attention to recent U.S. calls for a new round of NATO contingency planning. They add that the U.S. agreement in 2011 to establish an Air Force Aviation detachment in Poland has paved the way for the recent deployment of 12 F-16s to the country, and point out that to compensate for the reduction of U.S. Brigade Combat Teams in Europe, the Department of Defense has committed a U.S.-based rapid reaction force to rotate to Europe for joint training exercises. The current cornerstone of the U.S. commitment to NATO military capabilities in Europe is the Ballistic Missile Defense (BMD) program known as the European Phased Adaptive Approach (EPAA). The U.S. system, designed to defend alliance territory against possible missile attacks from Iran and other potential adversaries, serves as the foundation for a new NATO missile defense capability, based primarily on U.S. assets under NATO command and control. The United States has deployed missile defense ships to the Mediterranean, ready to operate under NATO control when necessary. A U.S. radar, based in Turkey, is also under NATO operational control. Interceptor sites are to be deployed in Romania in 2015 and in Poland in 2018. The United States and NATO have consistently emphasized, however, that the missile defense system is neither intended to nor capable of defending against a potential missile attack from Russia. While they have welcomed these steps, critics of the Administration's and NATO's response to Russian actions in Ukraine have argued that more should be done to support Ukraine, reassure allies in Central and Eastern Europe, and counter Russian aggression. Some have called for bolstered and possibly permanent NATO and/or U.S. troop deployments in Central and Eastern Europe, as well as more frequent military exercises, including in the Black Sea. For example, as discussed above, the Polish government has requested the deployment of two heavy brigades of NATO troops on its territory. In a March 26, 2014, letter to President Obama, House Armed Services Committee Chairman Buck McKeon and seven other Members of Congress called on the President to "increase and enhance the alert posture and readiness of U.S. forces in Europe without delay, including maintaining forward-deployed U.S. quick-reaction forces." At an April 10, 2014, hearing of the Senate Foreign Relations Committee's Subcommittee on European Affairs, Assistant Secretary of Defense for International Security Affairs Derek Chollet said that he did not foresee a significant adjustment to the U.S. military's permanent footprint in Europe, but added that forward or rotational deployments to Central and Eastern Europe were an ongoing possibility. Critics of Administration policy draw attention to the fact that only 300 U.S. forces reportedly participated in NATO's November 2013 Steadfast Jazz exercise in Estonia, Latvia, Lithuania, and Poland. The 6,000-troop exercise the largest NATO exercise to take place in the region in over 10 years was intended to certify command and control elements of the NATO Response Force, including in response to a possible attack on the territory of a NATO member state. Other analysts have questioned the Administration's commitment to missile defense, noting that in 2013, the Administration dropped Phase 4 of the EPAA, which would have deployed in Europe land- and possible sea-based versions of advanced naval BMD interceptors designed to destroy limited numbers of first generation intercontinental ballistic missiles (ICBMs). As discussed above, the United States has provided the Ukrainian government with some nonlethal military aid but has thus far declined to provide lethal military aid. Some analysts, including a former NATO military commander, have argued that the United States and other allies should consider providing additional military assistance, including intelligence and surveillance capabilities and anti-aircraft and anti-tank weapons. Congress could continue to play an important role in shaping U.S. and NATO responses to Russia's actions in Ukraine. In terms of U.S. defense policy, possible congressional action could include reexamining U.S. force posture in Europe and assessing U.S. capacity and willingness to uphold its collective defense commitments in Europe. Congress could also take an increasingly active role in determining U.S. policy toward NATO and in guiding broader discussions about NATO's future, particularly ahead of the next NATO summit, scheduled to take place in Wales on September 4-5, 2014. This could include holding hearings and/or drafting legislation on issues such as development of allied military capabilities and military burdensharing within the alliance, the allied commitment to NATO enlargement and its relations with partner countries such as Ukraine and Georgia, NATO relations with Russia, and NATO involvement in areas such as cybersecurity and energy security.

Russia's actions in Ukraine and its alleged role in the downing of Malaysia Airlines Flight 17 have caused observers and policy makers on both sides of the Atlantic, including Members of Congress, to reassess the role of the United States and the North Atlantic Treaty Organization (NATO) in upholding European security. The security concerns of NATO's Central and Eastern European member states and non-NATO member states such as Moldova and Ukraine are of particular concern. NATO has strongly condemned Russian actions in Ukraine and has taken steps aimed both at reassuring allies and partners in Central and Eastern Europe and at deterring further Russian aggression. These include demonstrations of support for Ukraine and its territorial integrity; actions to demonstrate NATO's commitment to defending Central and Eastern European allies; and measures aimed at rebuking Russia. NATO members have said they will continue to conduct previously planned military exercises in Ukraine and elsewhere in the region. The United States has been a key driver of the NATO response and has taken additional military measures intended to reassure its allies and partners in Central and Eastern Europe. These include the deployment of U.S. fighter jets and 600 paratroopers to Poland and the Baltic states, and U.S. naval vessels to the Black and Baltic Seas. In June, the Obama Administration requested congressional approval for $925 million in the Department of Defense's FY2015 Overseas Contingency Operations (OCO) budget to fund a proposed European Reassurance Initiative (ERI). Among other things, the ERI would enable augmented U.S. troop rotations and military infrastructure in Central and Eastern Europe. The United States has supplied the Ukrainian government with some nonlethal military assistance, but has thus far ruled out providing lethal military aid. Although these actions have been welcomed by supporters of the United States and NATO, some analysts and allied governments have called for a more concerted military response. Among other things, critics have called for more robust forward or permanent deployment of U.S. and NATO forces in Central and Eastern Europe; additional military exercises in the region; and additional military assistance to Ukraine, including military training and anti-tank and anti-aircraft weapons. The U.S. Congress has played an active role in guiding the U.S. response to the Ukraine crisis, including by authorizing a $1 billion loan guarantee to the Ukrainian government, $150 million in financial assistance to Ukraine and other Central and Eastern European countries, and sanctions against Russia (P.L. 113-95). However, some Members of Congress have called on the Obama Administration and NATO to take additional military action to reassure allies and deter Russia. Some Members have also called for a more resolute demonstration of NATO's commitment to enlargement, including to Georgia, a former republic Soviet republic, with which Russia had a military conflict in 2008. For example, the proposed Forging Peace through Strength in Ukraine and the Transatlantic Alliance Act (H.R. 4433) calls for additional NATO and U.S. military assistance to Ukraine and calls for immediate NATO membership for Montenegro and the granting of a NATO Membership Action Plan (MAP) to Georgia. This report addresses the NATO and U.S. military response to the crisis in Ukraine. It does not discuss political, economic, or energy policy responses. For information on these and other aspects of the crisis response, see CRS Report RL33460, Ukraine: Current Issues and U.S. Policy, by [author name scrubbed].

<1. Introduction> The United States Supreme Court recently held that the police may enter and search a home without the usually required warrant if they reasonably believe steps are being taken within the home to destroy the evidence they seek, Kentucky v. King . In doing so, the Court rejected limitations which some of the state and lower federal courts had imposed on the exigent circumstance exception to the Fourth Amendment's warrant requirement. The lone dissenter worried that her brethren may have "arm[ed] the police with a way routinely to dishonor the Fourth Amendment's warrant requirement in drug cases." <2. Background> The Fourth Amendment provides that, "The right of the people to be secure in their ... houses ... against unreasonable searches and seizures, shall not be violated, and no Warrants shall issue, but upon probable cause...." The Court has explained that "the Fourth Amendment has [thus] drawn a firm line at the entrance to the house ... '[a]bsent exigent circumstances, that threshold may not reasonably be crossed without a warrant.'" "Exigent circumstances" refers to those situations, among others, "in which police action literally must be 'now or never' to preserve the evidence of the crime," and consequently those in which "it is reasonable to permit action without prior judicial evaluation." For some courts, inexcusable exigencies occurred when the police created them in order to avoid seeking a warrant. There was no consensus, however, on the test to be used to determine whether they had done so. King was convicted in the aftermath of a Lexington, KY, "buy and bust." An informant made a street purchase of crack cocaine. A monitoring undercover officer radioed a description of the dealer to waiting uniformed officers who were to make the arrest. Before they could apprehend him, however, the dealer walked around a corner into an apartment complex breezeway. Two apartments opened onto the breezeway. The uniformed officers heard a door shut, but did not see which apartment the dealer had entered. Close to the apartment door on the left, however, they detected the strong smell of burnt marijuana. This suggested to them that the odor had drifted into the breezeway when the dealer opened and then closed the apartment on the left. They pounded on the door and shouted, "police." Hearing movement within the apartment and concluding that evidence was being destroyed, they kicked in the door. Inside they found King and two others, one of whom was smoking marijuana. A protective sweep of the apartment disclosed marijuana, cocaine, and drug paraphernalia in plain view. The three were arrested, as was the drug dealer found later in the apartment on the right. King ultimately pleaded guilty to possession of marijuana and trafficking in a controlled substance, contingent upon his right to appeal the trial court's denial of his motion to suppress the evidence secured after the officers' warrantless entry and search. The Kentucky Court of Appeals affirmed, and the Kentucky Supreme Court reversed. On the question of whether exigent circumstances justified the warrantless search of the apartment, the Kentucky Supreme Court adopted a two-part test: First, courts must determine whether the officers deliberately created the exigent circumstances with the bad faith intent to avoid the warrant requirement. If so, then the police cannot rely on the resulting exigency. Second, where police have not acted in bad faith, courts must determine whether, regardless of good faith, it was reasonably foreseeable that the investigative tactics employed by the police would create the exigent circumstances relied upon to justify a warrantless entry. If so, then the exigent circumstances cannot justify the warrantless entry. The officers in King failed the second test. "[I]t was reasonably foreseeable that knocking on the apartment door and announcing 'police,' after having smelled marijuana emanating from the apartment, would create the exigent circumstance relied upon, i.e. destruction of the evidence." That is, "[i]t was reasonably foreseeable that, upon hearing police announce their presence, the persons inside the apartment would proceed to destroy evidence of their crime." On the other hand, "[b]efore police announced their presence, there would have been no reason to destroy evidence of either the marijuana which the officers had smelled, or evidence of the original drug transaction." <3. King in the United States Supreme Court> The United States Supreme Court granted certiorari to consider the question of "when does lawful police action impermissibly 'create' exigent circumstances which preclude warrantless entry; and which of the five tests currently being used by the United States Courts of Appeals is proper to determine when impermissibly created exigent circumstances exist?" The Court, in an opinion written by Justice Alito and joined by seven other members of the Court, noted the Court's regular acknowledgement that exigent circumstances, such as the threatened destruction of evidence, will excuse compliance with the warrant requirement. Thus, the Court reasoned, where "the police did not create the exigency by engaging or threatening to engage in conduct that violates the Fourth Amendment, warrantless entry to prevent the destruction of evidence is reasonable and thus allowed." It then proceeded to explain why it found unpersuasive the various lower court justifications for a restriction of the exigent circumstance exception: bad faith, reasonable foreseeability, sufficient time to secure a warrant, deviation from standard police procedures, the threat of imminent police entry, and Court precedent. The Court rejected the argument that the exigent circumstance exception should be unavailable when the officers created the exigency in bad faith in order to avoid the warrant requirement. It observed that, "we have never held, outside limited contexts ... 'that an officer's motive invalidates objectively justifiable behavior under the Fourth Amendment.'" The reasonable foreseeability test favored by the Kentucky Supreme Court would "introduce an unacceptable degree of unpredictability." The "deviation from the preferred police practice" standard would produce yet another unclear test, the Court thought. It gave no credence to the suggestion that the exception should be unavailable if officers had sufficient probable cause and time to secure a warrant. In the mind of the Court, there are many acceptable reasons why officers might "knock and talk" or engage in other investigative techniques rather than seeking a search warrant as soon as some minimal level of probable cause exists. "Faulting the police for failing to apply for a search warrant at the earliest possible time after obtaining probable cause imposes a duty that is nowhere to be found in the Constitution." King argued that "law enforcement officers impermissibly create an exigency when they engage in conduct that would cause a reasonable person to believe that entry is imminent and inevitable. In [his] view, relevant factors include the officers' tone of voice in announcing their presence and the forcefulness of their knocks." The Court dismissed this with the observation that "the ability of law enforcement officers to respond to an exigency cannot turn on such subtleties." Finally, the Court denied its decision was controlled by Johnson v. United States . The Court in Johnson found a violation of the Fourth Amendment when police entered a hotel room after hearing shuffling within the room. Like King , Johnson involved a warrantless arrest and search occurring after officers smelled burnt drugs, knocked, and heard movement within the premises. Unlike King , however, the officers did not claim that exigent circumstances movement suggesting evidence was being destroyed justified the warrantless entry and search. The Kentucky Supreme Court had incorrectly held that the Fourth Amendment imposed a "foreseeability" limitation on warrantless searches conducted under exigent circumstances. The United States Supreme Court therefore reversed and remanded. Justice Ginsburg dissented. She "would not allow an expedient knock to override the warrant requirement." Rather, she would "accord that core requirement of the Fourth Amendment full respect." From her perspective, there was "every reason to conclude that securing a warrant was entirely feasible ... and no reason to contract the Fourth Amendment's dominion." The Court did not address whether sufficient exigent circumstances really existed in the case before it. Certiorari had been granted on the question of the permissible limits, if any, on police-created exigencies. The existence of a police-created exigency was assumed by both the Kentucky Supreme Court and the United States Supreme Court. The concern that gave rise to the "police-created exigency" doctrine in the lower courts may lead to a more demanding threshold of exigency in the future.

Authorities may enter and search a home without a warrant if they have probable cause and reason to believe that evidence is being destroyed within the home. So declared the United States Supreme Court in an 8-1 decision, Kentucky v. King, 131 S.Ct. 1849 (2011)(No. 09-1272). The Kentucky Supreme Court had overturned King's conviction for marijuana possession and drug dealing, because the evidence upon which it was based had been secured following a warrantless search which failed to conform with that court's restrictions under its "police-created exigencies" doctrine. The Fourth Amendment usually permits authorities to search a home only if they have both probable cause and a warrant. The warrant requirement may be excused in the presence of exigent circumstances, for instance, when it appears the occupants are attempting to flee or to destroy evidence. Leery lest authorities create exigent circumstances to avoid the warrant requirement, some state and lower federal courts had adopted one form or another of a police-created exigencies doctrine. The Court rejected each of these and endorsed searches conducted under the exigent circumstance exception, unless authorities had created the exigency by threatening to, or engaging in, activities which themselves violated the Fourth Amendment. In order to reach the question of limitations on police-created exigencies, the Court assumed the existence of exigent circumstances in King. The concerns from which the police-created exigencies doctrine emerged may now give rise to more stringent standards for what qualifies as an exigency.

This report describes how the International Monetary Fund (IMF) and World Trade Organization (WTO) deal with the issue of currency manipulation. It also discusses apparent discrepancies in their charters and ways those differences might be addressed. <1. International Monetary Fund> The IMF is the leading international organization in the area of monetary policy. With the end of the cold war, its membership is now nearly universal. Only North Korea, the Vatican, and four other mini-countries in Europe none having its own currency are not members of the Fund. The IMF makes loans to countries undergoing financial or balance of payments crises; provides technical assistance to governments on monetary, banking and exchange rate questions; does research and analysis on monetary and economic issues; and it provides a forum where countries can discuss international finance issues and seek common ground on which they can address common problems. Although the IMF is a monetary institution, the promotion of world growth and balanced international trade are also among its basic goals. Article I of its Articles of Agreement says, among other things, that the IMF was created in order to "facilitate the expansion and balanced growth of international trade, and to contribute thereby to the promotion and maintenance of high levels of employment and real income and to the development of the productive resources of all members as primary objectives of economic policy." It was also created to "assist in the establishment of a multilateral system of payments in respect to current transactions between members and in the elimination of foreign exchange restrictions which hamper the growth of world trade." Between 1946 and 1971, the IMF supervised a fixed parity exchange rate system, in which the value of all currencies was defined in terms of the U.S. dollar and the dollar was defined in terms of a set quantity of gold. Countries could not change their exchange rates from the level recognized by the IMF by more than 10% without the Fund's consent. Moreover, said the original language of the IMF Articles, "A member shall not propose a change in the par value of its currency except to correct fundamental disequilibrium." This system broke down in 1971 when the United States devalued the dollar twice without any consultation with the IMF. After a period of turmoil in world currency markets, an amendment to the IMF Articles was adopted in 1978. It said that countries could use whatever exchange rate system they wished fixed or floating so long as they followed certain guidelines and they did not use gold as the basis for their currencies. The new language of Article IV, which went into effect in 1978, said that countries should seek, in their foreign exchange and monetary policies, to promote orderly economic growth and financial stability and they should avoid manipulation of exchange rates or the international monetary system to prevent effective balance of payments adjustment or to gain unfair competitive advantage over other members . Some countries claim that their exchange rate policies are not in violation of Article IV because they are not seeking to gain competitive advantage (though this may be the result of their actions) but rather to stabilize the value of their currency in order to prevent disruption to their domestic economic system. To date, the IMF has not publicly challenged this statement of their objective. The Fund was required by Article IV to "exercise firm surveillance over the exchange rate policies of all members and [to] adopt specific principles for the guidance of all members with respect to those policies." The IMF adopted the requisite standards in 1977 (before the Amendment went into effect) and it updated them in 2007. The 1977 agreement said that, among other things, "protracted large-scale intervention in one direction in exchange markets" might be evidence that a country was inappropriately manipulating the value of its currency. The 2007 agreement added a requirement that "A member should avoid exchange rate policies that result in external instability." When a country's current account (balance of payments) is not in equilibrium, the IMF said in its explanation of the new provision, the exchange rate is "fundamentally misaligned" and should be corrected. The IMF can exercise "firm surveillance" but it cannot compel a country to change its exchange rate. Nor can it order commercial foreign exchange dealers to change the prices at which they trade currencies. It can offer economic advice and discuss how changes in countries' exchange rates might be in their own interest. It can also provide a forum, such as its new multilateral consultation mechanism or discussion on the IMF executive board, where other countries can urge a country to change its exchange rate procedures. However, in the end, the authority to make the change resides with the country alone. <2. World Trade Organization> The WTO is the central organization in the world trade system. When the WTO was created in 1995, countries were required to accept as a condition of WTO membership the existing trade rules embodied in the General Agreement on Tariffs and Trade (GATT). They also had to accept new rules governing other areas of international commerce, such as services and trade-related international property rights. The agreement establishing the WTO says that the members recognize "that their relations in the field of trade and economic endeavor should be conducted with a view to raising standards of living, ensuring full employment and a steady growing volume of real income and effective demand, and expanding the production of and trade in goods and services" and to do this in a manner "consistent with their respective needs and concerns at different levels of economic development." Unique among the major international trade and finance organizations, the WTO has a mechanism for enforcing its rules. If a country believes another country has violated WTO rules, to its detriment, it may request the appointment of a dispute settlement panel to hear its complaint. The other country cannot veto the establishment of a panel or adoption of a WTO decision by WTO members. The panel reviews the arguments in the case and renders judgment based on the facts and WTO rules. If the losing party does not comply with the ruling within a reasonable period of time, the WTO may, if requested by the complaining party, authorize it to impose retaliatory measures (usually increased customs duties) against the offending country or to take other appropriate retaliatory measures against that country's trade. Whether currency disputes fall under the WTO's jurisdiction is a debatable issue. The WTO rules specify that countries may not provide subsidies to help promote their national exports. Most analysts agree that an undervalued currency lowers a firm's cost of production relative to world prices and therefore helps to encourage exports. It is less clear, however, whether intentional undervaluation of a country's currency is an export subsidy under the WTO's current definition of the term. Countries are entitled, under WTO rules, to levy countervailing duties on imported products that receive subsidies from their national government. The term "subsidy" has a precise definition in the WTO. It requires that there must be a financial contribution by a government to the exporter or some other form of income or price support. Government financial support can take a variety of forms, such as direct payments to the exporter, the waiver of tax payments or special government purchases or the provision of low-cost goods or services (other than general infrastructure) that lowers the cost of production. Currency manipulation would not appear to qualify under the WTO definitions. In addition, an export subsidy is a subsidy that is "contingent on export performance." They must also be "specific to an industry" and not provided generally to all producers. In the past, most legal analysts have found that intentional undervaluation of a currency is not a subsidy that is "contingent on export performance" and not "industry specific" because everyone who exchanges currency gets the same rate even if they are not exporting. More recently, other analysts have asserted, based on an interpretation of the findings in a WTO dispute settlement case, that a subsidy may still be export contingent, even if it is available in some circumstances that do not involve exportation. Thus, they believe, subsidies provided through currency misalignment would be a prohibited subsidy under WTO rules even if non-exporters benefit from the exchange rate. Until the world financial system frayed in the 1970s, the IMF exercised strict control over exchange rates. It was inconceivable that a country could persistently value its currency at a level below that approved by the IMF. When the IMF's rules were changed in 1978, so that it no longer governed world exchange rates, the GATT rules were not adjusted to reflect the new reality of international finance. When the WTO was created in 1995, it adopted the existing GATT rules as its own without significant change and without acknowledging that the international system of exchange rates had changed substantially since the GATT was formed. <3. WTO and IMF Cooperation> The WTO and IMF both have major institutional responsibilities in the area of international trade. The WTO, and its predecessor organization, the GATT, were created specifically to facilitate the negotiation of multilateral trade agreements. One of the corresponding purposes of the IMF is to "facilitate the expansion and balanced growth of international trade" in order to facilitate high levels of employment, economic growth, and development in all its member countries." The WTO seeks to expand international trade through the reduction or elimination of tariffs or other barriers to trade. The IMF pursues this goal mainly through efforts to promote international monetary and exchange rate stability. It also has standards, which it has been reluctant to employ, for determining whether currencies are being manipulated and whether they are valued properly relative to other currencies. Trade policy issues may feature prominently in the IMF's surveillance activities, relative to its member countries, and steps to reduce barriers to trade are often included in its policy advice and its loan conditionality. IMF surveillance reports often provide important contributions for the WTO's own Trade Policy Reviews, which assess its member countries' trade policies. The IMF and GATT signed an agreement aimed at facilitating inter-agency cooperation soon after the trade organization was formed in 1947. The IMF and WTO adopted a revised and updated version of that agreement in 1996, shortly after the WTO came into being. The two organizations agreed (in paragraphs 1 and 2 of the agreement) that they "shall consult with each other in the discharge of their respective mandates," with a view towards "achieving greater coherence in global economic policymaking." Article XV of the GATT agreement says that the GATT (now WTO) shall cooperate with the IMF in order to "pursue a coordinated policy with regards to exchange questions that are within the jurisdiction of the Fund." The WTO and IMF also agreed in 1996 (in paragraph 8) that they would communicate with each other about "matters of mutual interest." WTO dispute settlement panels are specifically excluded from this agreement to communicate, but the agreement says that the IMF shall inform the WTO (specifically including its dispute settlement panels) when the WTO is "considering exchange measures within the Fund's jurisdiction [in order to determine] whether such measures are consistent with the Articles of Agreement of the Fund." Earlier (in paragraphs 3 and 4), the IMF agreed that it would inform the WTO about any decisions it had made approving any restrictions a country might impose on international payments, discriminatory currency practices, or other measures aimed at preventing a large or sustained outflow of capital. The IMF also agreed, in 1996, that it would participate in any WTO discussion of any such measures countries may have taken to safeguard their balance of payments. <4. Policy Options in the Multilateral Sphere> A number of countries have been suspected or accused in recent years of manipulating the value of their currency for the purpose of gaining unfair trade advantage. The George W. Bush and Barak Obama Administrations have had many conversations with China about exchange rate issues. Nonetheless, their officials were careful never to say publicly that China was manipulating its currency in violation of IMF rules. During his confirmation hearing on January 23, 2009, then Treasury Secretary-designate Timothy Geithner reported that "President Obama, backed by the conclusions of a broad range of economists, believes that China is manipulating its currency." The Obama Administration has not pursued this line of thought, however, in its subsequent public statements on the issue. If the Treasury Department were to find, in its semi-annual reports to Congress on the topic, that China or any other country were manipulating its currency in order to gain unfair trade advantage, certain provisions of the 1988 trade act would be triggered. TheSecretary would have to "to initiate negotiations with such foreign countries on an expedited basis, in the International Monetary Fund or bilaterally, for the purpose ofensuring that such countries regularly and promptly adjust the rate of exchange between their currencies and the United States dollar to permit effective balance of payments adjustments and to eliminate the unfair advantage." The country in question is not required, however, to meet with U.S. officials or to take any corresponding action. U.S. efforts to press China or other countries to revalue their currencies would likely be routed through the IMF, in order to secure its good offices and to mobilize international support on this issue. The 1988 trade act does not require the Administration to take this complaint about currency manipulation to the WTO in order to seek remedies through its procedures. As noted before, the IMF Articles of Agreement prohibit this currency manipulation for the purpose of gaining unfair trade advantage, but the Fund has no capacity to enforce that prohibition. By contrast, the WTO has the capacity to adjudicate trade disputes, but to date it has done nothing to suggest that trade issues linked to currency manipulation are within its zone of responsibility. If policymakers want to address this situation, several options might be considered. <4.1. Amend the Articles of the IMF> One option might be changes in the IMF's Articles of Agreement that would give the Fund more authority over international exchange rates and more authority to require that countries comply with its rules. This would restore, to some degree, the power the IMF exercised over exchange rates from 1946 to 1971. Two objections might be raised, however. First, an 85% majority vote of the IMF member countries is necessary if any change in the IMF Articles is to become effective. Most countries seem to believe that the present system of floating and fixed exchange rates is working reasonably well and there seems to be little desire, on the part of the members, to amend the IMF's current rules. Second, few countries want the IMF to have the kinds of power over their economies that it would need to compel violators comply with its rules. For example, if the IMF had the power to declare that China's currency was undervalued and to require adjustments, it would also have the power to declare the U.S. dollar or the euro were overvalued and to require the United States or the eurozone countries to make changes in their domestic policies that would bring down the relative value of their currencies. <4.2. Amend the WTO Agreements> Another possibility might be a formal change in the WTO agreements that would define currency manipulation as a prohibited form of export subsidy. It is not easy to amend WTO agreements, however, since the process basically requires the unanimous consent of all Members. Countries that manipulate their currencies could easily block the approval of the amendment. However, they might argue that currency manipulation is an acceptable trade practice notwithstanding the language of the IMF's Article IV. It seems more likely that any such change in the WTO rules will be the result of discussions during multilateral trade negotiations, in which restrictions on currency manipulation will be balanced by other changes desired by the countries that believe currency manipulation is an acceptable trade practice. <4.3. Pursue Multilateral Negotiations> Recently, the Administration has indicated that it will be raising the issue of misaligned currencies and their impact on international trade at international meetings involving world leaders. Treasury Secretary Timothy Geithner has told Congress on several occasions that the Administration is working through multilateral channels, such as the G-20 meeting of world leaders, the Asia-Pacific Cooperation (APEC) forum, and the IMF to obtain international support for the effort to press China to revalue its currency. It is also seeking discussion about the international financial imbalances and steps that might be taken to address that concern. The Administration has been talking regularly with the Chinese about this and other related topics for several years. Arguably, resolving the U.S.- China disagreement about exchange rates is a desirable objective. However, one might argue, a bilateral settlement of this dispute would be of only limited value. Unless the agreement among world leaders also includes measures that would make WTO and IMF treatment of these issues more consistent, the question whether undervalued currencies provide improper export subsidies is likely to arise again in the future. A bilateral agreement with China would not preclude other countries from undervaluing their currencies in order to undercut China and get better access to its former export markets. <4.4. Obtain Adjudication> One way for the issue to be resolved could be through WTO adjudication of disputes involving the United States and other countries. In the past, currency issues have not been pursued via the WTO dispute settlement process. The United States might seek WTO adjudication of this issue by taking China or other countries to a dispute resolution panel, on the basis of a claim that China's currency policy improperly subsidizes Chinese exports. Alternatively, the United States could take action under its domestic trade laws to address the problem and let other countries decide what they will do about the issue. Congress is considering legislation ( H.R. 2378 , reported by the House Ways and Means Committee on September 24, 2010) which would seek to address the question of undervalued exchange rates in a way that the sponsors believe is consistent with WTO rules. It provides that countervailing duties may be imposed to address possible subsidies that might result when other countries' currencies are fundamentally undervalued. It says that these subsidies may be treated as being "contingent upon export performance" (a key element of the WTO definition) even if others not exporting also benefit from the subsidy. If this legislation is enacted into law and duties are levied on Chinese imports, some analysts believe that China will assert that it is inconsistent with WTO rules and will seek remedies through the WTO dispute settlement process. There may be a role for the IMF in this adjudication process, if world leaders decide that it should be involved . Article II of the GATT agreement says that the valuations used in countries' tariff schedules shall be "expressed in the appropriate currency at the par value accepted or provisionally recognized" by the IMF. Though the par value exchange system is gone, this language might be construed as giving the IMF some role in determining whether the exchange rates used in trade agreements and schedules are appropriate. Currency values may be adjusted, it says, as long as this "will not impair the value of the concessions provided" in trade agreements. This language, as well as similar language in Article VII, dates from before the adoption of the present floating exchange rate system. However, the effect of inappropriate exchange rates on trade agreements seems to be a continuing concern. Article XV says that, when disputes between signatory countries involve questions about balances of payments, foreign exchange reserves or exchange arrangements, GATT countries shall "consult fully with the International Monetary Fund" and shall accept the IMF's determination as to matters of fact and as to whether a country's exchange arrangements are consistent its obligations under the IMF Articles of Agreement. GATT Article XV also says that countries "shall not, by exchange action, frustrate the provisions of this agreement nor, by trade action, the intent of the provisions" of the IMF Articles of Agreement. Traditionally, these references to "exchange arrangements" have been seen as referring (as they did when the GATT was created in 1947) to currency controls, exchange licenses, transaction taxes and other official actions that limit a potential purchaser's ability to get the foreign exchange needed to purchase goods from abroad. The GATT allows countries to impose temporary import restrictions when they face balance of payments difficulties (Article XII) or when they are at risk for a serious decline in their foreign exchange reserves (Article XVIII). In recent decades, however, the term "exchange arrangements" has expanded to reflect new developments in the world economy. The language of Article IV, adopted by the IMF in 1978, says (section 2) that each member country shall notify the IMF of the exchange arrangements it intends to apply in other words, whether its currency will float in value or be pegged to another currency. It says the IMF shall oversee the international monetary system to ensure that each country's exchange arrangements are compatible with its obligations under Article IV. IMF Article IV also says that, in its oversight of countries' exchange arrangements, the Fund shall exercise firm surveillance over the exchange rate policies of its member countries. In effect, a case can be made that the term "exchange arrangements" arguably has become synonymous with the concept "exchange rate regime" and "exchange rate policies." As it is used in GATT Article XV, the term "exchange arrangement" refers to issues that are the sole province of the IMF. Thus, one could argue that the meaning of the term in the GATT should reflect its current meaning at the IMF and not the meaning prevalent in 1947. An undervalued currency encourages exports by reducing their cost and it discourages imports by making them more expensive than they might be otherwise. Consequently, one might argue that countries with this type of exchange arrangement are engaging in "exchange action" that may have the effect of frustrating "the provisions of the [GATT] agreement." There has never been a definitive ruling by the GATT or WTO on the meaning of Article XV, including how provisions of the GATT agreement might be frustrated by exchange action. Some might argue that currency undervaluation raises the price of imports in a way that unilaterally rescinds tariff concessions approved during multilateral trade talks. Accordingly, a case could be made that the WTO should use the broader meaning of the term "exchange arrangements" and take currency valuation arrangements into account in its dispute settlement process. There has also been increased interest, in recent years, in the issue of currency manipulation and its impact on world trade and financial relationships. It could be argued, therefore, that this might be an appropriate and perhaps auspicious moment for issues relating to the trade impact of currency manipulation to be raised in the WTO dispute adjudication process. <4.5. Improve the IMF-WTO Agreement> The final option for rectifying the disconnect between WTO and IMF treatment of currency manipulation issues might involve some change or reinterpretation of the WTO-IMF inter-agency agreement. As noted above, the agreement states they will "cooperate in the discharge of their respective mandates" in order to achieve "greater coherence in global economic policymaking." Arguably, the different ways in which they approach the issue of currency manipulation and its impact on international trade does not further or facilitate such "greater coherence." The member countries of the two institutions might encourage them to identify other occasions where their rules and procedures are not consistent or mutually supportive. Changes in the existing inter-agency agreement can be adopted by a majority vote of each institution's governing board. However, it is not clear that changes in the text of the agreement are needed to promote greater cooperation between the two institutions. Paragraph 14 of the agreement says that the "Director-General of the WTO and the managing Director of the Fund shall be responsible for the implementation of this Agreement and, to that effect, shall make such arrangements as they deem appropriate." The GATT Agreement and the WTO-IMF inter-agency agreement both give the IMF a role in WTO dispute settlement procedures. A more up-to-date interpretation of those agreements, which take into account changes that have taken place during the intervening years in IMF operations and procedures, might help address some of the concerns discussed above. The IMF no longer determines par values for national currencies. Nevertheless, it does have standards and procedures for determining whether currencies are appropriately valued or whether they are being manipulated inappropriately. Consequently, the language in Articles II and IV of the GATT Agreement, in which currency values and exchange rate procedures must be consistent with the Articles of the IMF, would seem to give the IMF some role in any WTO discussions about whether currency manipulation "impairs the value of the concessions provided" in trade agreements. Likewise, as Article XV of the GATT Agreement seems to give the IMF plenary authority to determine whether the "exchange arrangements" used by the parties to the dispute are consistent with IMF requirements. The way the GATT now interprets the term "exchange arrangements" appears to be antiquated and it seems to predate the meaning which the IMF now gives to that term. Agreement by the leaders of the two institutions that they will use a consistent meaning of the term might help diminish some of the apparent inconsistencies in their operations. Even if the meaning of the inter-agency agreement is adjusted, as discussed above, to reflect the contemporary functions of the IMF, however, the IMF can play a role advising the WTO about exchange and currency manipulation issues only if it takes an official position on the question in hand. To date, the IMF has consulted with China behind the scenes and it has used its good offices to facilitate multilateral discussions, involving China, the United States, and several other relevant countries, as regards the appropriate valuation of China's currency. No official action has been taken by the IMF on this issue. As noted previously, the IMF has no way of enforcing decisions it might make as to whether countries are complying with the exchange rate provisions of Article IV. The IMF has adopted standards which make the requirements of Article IV operational, but it has not used those standards officially to assess the activities of particular countries. Perhaps the IMF's member countries are concerned that its prestige might be injured if the IMF Executive Board made an official determination that a country was manipulating its currency, in violation of its obligations in the IMF, and nothing happened as a result. A decision of this sort could be more meaningful, however, if it were to be the basis of information the IMF could provide to the WTO about the currency exchange aspects of disagreements that were being examined by a dispute settlement panel. Adjusting the terms of the inter-agency agreement between the IMF and WTO, or re-interpreting the meaning of that agreement in the light of current practices, might be one option policy makers could use to address the trade implications of currency manipulation.

Congress has been concerned, for many years, with the possible impact that currency manipulation has on international trade. The International Monetary Fund (IMF) has jurisdiction for exchange rate questions. The World Trade Organization (WTO) is responsible for the rules governing international trade. The two organizations approach the issue of "currency manipulation" differently. The IMF Articles of Agreement prohibit countries from manipulating their currency for the purpose of gaining unfair trade advantage, but the IMF cannot force a country to change its exchange rate policies. The WTO has rules against subsidies, but these are very narrow and specific and do not seem to encompass currency manipulation. Recently, some have argued that an earlier ruling by a WTO dispute resolution panel might be a way that currency issues could be included in the WTO prohibition against export subsidies. Congress is currently considering legislation to amend U.S. countervailing duty law, based on this precedent, that the proponents believe is consistent with WTO rules. Others disagree as to whether the previous case is a sufficient precedent. Several options might be considered for addressing this matter in the future, if policymakers deem this a wise course of action. The Articles of Agreement of the IMF or the WTO Agreements could be amended in order to make their treatment of currency manipulation more consistent. Negotiations might be pursued, on a multilateral as well as a bilateral basis, to resolve currency manipulation disputes on a country-by-country basis without changing the IMF or WTO treatment of this concern. Some countries might argue that the actions of another violate WTO rules and seek a favorable decision by a WTO dispute resolution panel. Finally, the IMF and WTO could use their interagency agreement to promote better coordination in their treatment of this concern. .

<1. Most Recent Developments> On December 22, 2006, President Bush signed P.L. 109-449 ( S. 362 ), establishing NOAA and Coast Guard programs to manage marine debris and address its adverse effects on endangered species. On December 9, 2006, the Senate agreed to the House-amended S. 362 . On December 9, 2006, the House passed the Senate-amended H.R. 5946 . On December 7, 2006, the Senate passed H.R. 5946 , amended to incorporate language (1) requiring a study of sea turtle excluder devices in shrimp trawls, and (2) implementing the Agreement on the Conservation and Management of the Alaska-Chukotka Polar Bear Population. On December 6, 2006, the Senate passed H.R. 4075 , after amending this bill to incorporate language implementing the Agreement on the Conservation and Management of the Alaska-Chukotka Polar Bear Population. (This report replaces CRS Issue Brief IB10144, The Endangered Species Act (ESA) in the 109 th Congress: Conflicting Values and Difficult Choices , by [author name scrubbed] et al.) <2. Background and Analysis> <2.1. Overview> The 1973 ESA ( P.L. 93-205 , as amended; 16 U.S.C. 1531-1543) was a comprehensive attempt to protect species at risk of extinction and to consider habitat protection as an integral part of that effort. A stated purpose of the ESA is to protect the ecosystems of which listed species are a part. Under the ESA, species of plants and animals (both vertebrate and invertebrate) may be listed as either endangered or threatened according to assessments of the risk of their extinction. More flexible management can be provided for species listed as threatened. Distinct population segments may also be listed as threatened or endangered, but only of vertebrate species. Consequently, some populations of chinook, coho, chum, and sockeye salmon in Washington, Oregon, Idaho, and California are protected under the ESA, even as other healthy populations of these same species in Alaska are not listed and may be commercially harvested. More limited protection is available for plant species under the ESA. Once a species is listed, powerful legal tools, including penalties and citizen suits, are available to aid species recovery and protect habitat. Use of these tools, or the failure to use them, has led to conflict. The ESA is administered by the Department of the Interior's Fish and Wildlife Service (FWS) for terrestrial and freshwater species and some marine mammals, and by the National Marine Fisheries Service (NMFS; also popularly referred to as NOAA Fisheries) in the Department of Commerce's National Oceanic and Atmospheric Administration (NOAA) for the remaining marine and anadromous species. The U.S. Geological Survey's Biological Resources Division conducts research on species for which FWS has management authority; NMFS conducts research on the species for which it is responsible. As of September 20, 2006, a total of 1,132 species of animals and 747 species of plants had been listed as either endangered or threatened, of which the majority (567 species of animals and 744 species of plants) occur in the United States and its territories and the remainder only in other countries. Of the 1,311 U.S. species (an increase of 49 species since December 31, 2002), 1,070 are covered in recovery plans (an increase of 70 species since December 31, 2002). Of the U.S. species, 475 have designated critical habitat (CH) in some portion of their range. At times, efforts to protect and recover listed species are controversial; declining species often function like the proverbial canary in the coal mine, by flagging larger issues of resource scarcity and altered ecosystems. Past resource debates in which ESA-listed species were part of larger issues include Tennessee's Tellico Dam (water storage and construction jobs versus farmland protection and tribal graves, as well as snail darters); Pacific northwest timber harvest (protection of logging jobs and communities versus commercial and sport fishing, recreation, and ecosystem protection, as well as salmon and spotted owls); and Texas's Edwards Aquifer (allocation of water among various users with differing short- and long-term interests, as well as several spring-dependent species). <2.2. Major Provisions of Domestic Law> <2.2.1. Listing> Species may be listed on the initiative of the appropriate Secretary or by petition from an individual, group, or state agency. The Secretary must decide whether to list the species based only on the best available scientific and commercial information, after an extensive series of procedural steps to ensure public participation and the collection of scientific information. In deciding whether a species needs the protections of the ESA, the Secretary may not take into account the economic effects that listing may have; economic and other considerations are taken into account in structuring alternatives for assisting the species after listing. In addition, FWS and NMFS may identify selected species by adding them to a list of "candidate species" believed at sufficient risk to warrant protection, but such protection is precluded by work to protect listed species. As of September 13, 2006, there were 279 species on the list of candidate species. <2.2.2. Critical Habitat> With certain exceptions, if a species is listed, the Secretary must designate critical habitat (CH) in areas where the species is currently found or which might provide additional habitat for the species' recovery. However, if the publication of this information is not prudent (e.g., might encourage vandals or collectors), the Secretary may decide not to designate CH. The Secretary may postpone designation for up to one year after listing, if the information is not determinable (16 U.S.C. 1533). As of June 16, 2006, FWS had designated CH for 36% of listed domestic species. As a practical matter, CH has not been designated for most listed species largely because FWS prefers to allocate its limited resources to listing new species, based on its regulation (50 C.F.R. 402.02) that takes away much of the legal value of designating CH to the recovery of the species. Yet FWS consistently loses legal challenges for failure to designate CH, and several courts have found the regulation in question to be an erroneous interpretation of the law, because it does not take into account the duty to avoid adverse modification of CH. Others have asserted the value of CH; for example, scientists with the Center for Biological Diversity published a study in April 2005, concluding that CH designation enhances species recovery. On April 28, 2006, the Keystone Center's ESA Working Group on Habitat released a report on habitat protection and the ESA. One of the conclusions of participants in this study was that identification of the habitat that species require to recover is better done in the context of recovery planning, after more rigorous analysis and deliberation have been completed, rather than at the time of listing. CH is frequently misunderstood by the public as posing a significant direct restriction on private landowners' authority to manage land. While a landowner may experience some additional procedures and possible restrictions on land management because of the presence of an ESA-listed species (through the ESA's prohibitions on taking a listed species), and the presence of CH may shed light on whether "harm" has occurred, the duty to avoid adverse modification of CH is an express obligation only for federal agencies and actions, or private (nonfederal) actors in actions with a federal nexus (i.e., actions that involve any federal funding, permit, or license). (See also " Issues in the 109 th Congress ," below.) <2.2.3. Prohibitions and Penalties> The ESA contains prohibitions on the "take" of endangered species; take means to "harass, harm, pursue, hunt, shoot, wound, kill, trap, capture, or collect or attempt to engage in any such conduct" (16 U.S.C. 1532; harassment and harm are further defined in regulation at 50 C.F.R. 17.3). There has been controversy over the extent to which habitat modification is prohibited. A 1995 Supreme Court decision held that the inclusion of significant habitat modification was a reasonable interpretation of the term "harm" in the ESA. The ESA provides civil and criminal penalties for violations. <2.2.4. Permits and Consultation> Proposed actions that may have adverse impacts on listed species may be permitted in two ways. First, under 7 of the ESA, if federal agency actions (or actions of a nonfederal party that require an agency's approval, permit, or funding) may affect a listed species, the federal agency must ensure that those actions are "not likely to jeopardize the continued existence" of any endangered or threatened species, nor to destroy or adversely modify CH. To review the possible effects of their actions on listed species and CH, federal agencies must consult with the appropriate Secretary. If the Secretary finds that an action would jeopardize a listed species or destroy or adversely modify CH, the Secretary must suggest reasonable and prudent alternatives that would avoid these harms. Pending completion of the consultation process, agencies may not make irretrievable commitments of resources that would foreclose any alternatives. The Secretary issues a written statement, called a biological opinion , that may allow the agency or the applicant to take individuals of a species incidental to otherwise lawful activities without triggering the ESA's penalties, subject to terms and conditions specified in the opinion (16 U.S.C. 1536), or may conclude that jeopardy cannot be avoided, in which case the agency may seek an exemption for the action from the Endangered Species Committee. For actions without a federal nexus (i.e., no federal funding, permit, or license), the appropriate Secretary may issue permits under 10 of the ESA to allow the incidental take of species during otherwise lawful actions. An applicant for a permit must submit a habitat conservation plan (HCP) that shows the likely impact of the planned action; steps to be taken to minimize and mitigate the impact; funding for the mitigation; alternatives that were considered and rejected; and any other measures that the Secretary may require. The use of this section has been vastly expanded, and streamlined procedures are provided for activities with minimal impacts (50 C.F.R. 17.22). <2.2.5. Exemptions> Proponents of a federal action may apply for an exemption from the prohibition against jeopardy for that action (not for a species). Under the ESA, a high-level Endangered Species Committee (commonly called the "God Squad") decides whether to allow a project to proceed despite likely harm to a species. To date, this process has been little used and only one exemption (Grayrocks Dam, WY) has been granted and carried out. The committee is required to accept the President's determination (under specified circumstances) on an exemption in declared disaster areas. The ESA committee must grant an exemption if the Secretary of Defense determines that an exemption is necessary for national security (16 U.S.C. 1536). DOD has claimed that requirements under the ESA conflict with its readiness activities, but DOD has not requested any exemptions to date. (See also " Issues in the 109 th Congress ," below.) Other statutes may provide for waivers of ESA provisions; for example, 102(c) of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 provides for a waiver of the ESA (and NEPA) to the extent the Attorney General determines is necessary to ensure expeditious construction of barriers and roads at borders. In the 109 th Congress, 2(b) of H.R. 3693 would have waived ESA provisions to the extent the Secretary of Homeland Security deemed necessary to prevent illegal border crossings. In addition, Section 2(b)(2)(A) of H.R. 5235 asserted that P.L. 108-148 , the Healthy Forests Restoration Act of 2003, exempted certain actions by federal land management agencies from ESA consultation and would require a National Academy of Sciences study of the impacts of P.L. 108-148 . Section 3 of H.R. 5678 would have waived ESA review and consultation for certain pipeline repair and replacement activities where best practices have been developed or adopted by an interagency committee. <2.2.6. Emergencies> 50 C.F.R. 402.05 provides for ESA procedures in case of emergencies, basically requiring only very informal consultations during an emergency with more complete consultation after the emergency has passed. According to FWS, any hurricane-related federal activities in presidentially declared disaster areas would trigger the emergency consultation provisions of the ESA. Specifically, for the 2005 Gulf of Mexico hurricanes, FWS stated that restoring "any infrastructure damaged or lost due to the hurricane back into the original footprint does not require ESA consultation with the Service." In the 109 th Congress, S. 2079 / H.R. 4200 would have authorized emergency procedures to comply with ESA 7 for pre-approved management practices for federal land damaged by a catastrophe ( 104(e)) and for catastrophic event research and recovery projects ( 105(c)). The House passed H.R. 4200 (amended) on May 17, 2006. The Senate Agriculture Committee's Subcommittee on Forestry, Conservation, and Rural Revitalization held a hearing on H.R. 4200 on August 2, 2006. <2.2.7. Recovery Plans> The appropriate Secretary generally must develop a recovery plan for the survival and conservation (defined in 3(3) of the ESA as "to bring any endangered species or threatened species to the point at which the measures provided pursuant to this Act are no longer necessary" i.e., recovery) of a listed species; these plans are not binding on federal agencies or others, but rather serve as guidelines. At first, recovery plans tended to cover popular species, like birds or mammals, but a 1988 amendment forbade the Secretary from favoring particular taxonomic groups (16 U.S.C. 1533). <2.2.8. Land Acquisition and Cooperation> The federal government may acquire land to conserve/recover listed species, and the ESA authorizes money from the Land and Water Conservation Fund for land acquisition (16 U.S.C. 1534). The appropriate Secretary must cooperate with the states in conserving protected species and must enter into cooperative agreements to assist states in their endangered species programs, if the programs meet certain specified standards. If there is a cooperative agreement, the states may receive federal funds to implement the program, but must normally provide a minimum 25% match. Under the 1988 amendments, the Cooperative Endangered Species Conservation Fund was authorized to provide state grants. While regular annual deposits to this fund are set by a formula (16 U.S.C. 1535(i)(1)), spending from the fund requires annual appropriation. <2.2.9. Miscellaneous> Other provisions specify exemptions for certain captive raptors and their progeny, regulate subsistence activities by Alaskan Natives, prohibit interstate transport and sale of listed species and parts, control trade in parts or products of endangered species owned before the ESA went into effect, and specify rules for establishing experimental populations (16 U.S.C. 1539). <2.3. Major Provisions of International Law> For the United States, the ESA is the domestic implementing legislation for the Convention on International Trade in Endangered Species of Wild Fauna and Flora (CITES; TIAS 8249), signed by the United States on March 3, 1973; and the Convention on Nature Protection and Wildlife Preservation in the Western Hemisphere (the Western Hemisphere Convention; 50 Stat. 1354; TS 981), signed by the United States on October 12, 1940. CITES parallels the ESA by dividing its listed species into groups, according to the estimated risk of extinction, but uses three major categories (called Appendices), rather than two. In contrast to the ESA, CITES classifies species based solely on the risk that trade poses to their survival. The ESA makes violations of CITES violations of U.S. law if committed within U.S. jurisdiction (16 U.S.C. 1538). The ESA also regulates import and export of controlled products and provides some exceptions. On August 18, 2003, FWS published a draft policy for enhancement-of-survival permits for foreign species listed under the ESA. The permits would allow imports of endangered species into the United States for scientific research and for the enhancement of survival of the species in their range country (i.e., the country where the population of the species in question naturally exists). The comment period on this draft policy has closed, but FWS has not yet published its final policy. In addition, the Multinational Species Conservation Fund (MSCF) in FWS benefits tigers, the six species of rhinoceroses, Asian and African elephants, marine turtles, and great apes (gorillas, chimpanzees, bonobos, orangutans, and the various species of gibbons). This fund supports conservation efforts benefitting these species, often in conjunction with efforts under CITES. In the 109 th Congress, P.L. 109-363 reauthorized and amended the Neotropical Migratory Bird Conservation Act ( P.L. 106-247 ; 16 U.S.C. 6101 et seq.) to increase the federal share of costs for projects funded (Title III) and reauthorized the Great Ape Conservation Act of 2000 ( P.L. 106-411 ; 16 U.S.C. 6301 et seq.) to provide grants and emergency assistance to address conservation needs (Title VII). A number of other bills were considered in the 109 th Congress: Several bills would have expanded species eligible for assistance from the MSCF by creating a Flagship Species Conservation Fund ( H.R. 93 ), a Great Cats and Rare Canids Conservation Fund ( H.R. 1707 ), and a Crane Conservation Fund ( S. 943 / H.R. 3520 ). S. 270 would have established a framework for legislative and executive consideration of unilateral economic sanctions against foreign nations, such as could be imposed in relationship to CITES. H.R. 3469 would have provided measures to improve the conservation of coral reef species and further the obligations of the United States under CITES. <2.4. Is Species Protection and Restoration Working?> The answer to this question depends on what is measured. Since a major goal of the ESA is the recovery of species to the point at which ESA protection is no longer necessary, this seems a good starting point. Since the ESA was enacted in 1973, 40 U.S. and foreign species have been delisted. The reasons cited by FWS are (a) recovery (17); (b) extinction (9, but some may have been extinct when listed); (c) new understanding of the taxonomy of the species, making some ineligible for listing under current law (7); and (d) new information, including a determination that erroneous data were provided to FWS at the time of listing (7). Recovered species include alligators, peregrine falcons (two subspecies), and three species of kangaroos. Extinct species include the dusky seaside sparrow, Guam broadbill (a bird), and two small fish living in desert springs. However, it can be quite difficult to prove whether extraordinarily rare species are simply that or, in fact, are already extinct. For example, a rare shorebird thought by many to be extinct was rediscovered in a remote area of Canada a few years ago; it might just as easily have quietly gone extinct without being rediscovered. Rare species are, by definition, hard to find. Some have asserted that the ESA is a failure since only 17 species have been delisted as recovered, as of January 25, 2006. Others note that full recoveries are relatively few because the two principal causes of extinction habitat loss and invasive non-native species are increasing. In addition, some scientific studies have demonstrated that most species are listed only after they become very depleted (e.g., median population of 407 animals for endangered vertebrates, according to one study), thereby making recovery difficult. Another measure of "success" might be the number of species that have stabilized or increased their populations, even if the species are not actually delisted. If this standard is used, the ESA could be considered a success, since a large number (41%, according to one study) of listed species have improved or stabilized their population levels after listing. Other species (e.g., red wolves and California condors) might not exist at all without ESA protection, and this too might be considered a measure of success, although these species are still rare. On May 17, 2005, the House Committee on Resources released an oversight report entitled Implementation of the Endangered Species Act of 1973 . It reviewed and critiqued various ways that recovery might be measured. One approach is to look at what proportion of the recovery objectives identified in species recovery plans have been achieved. Table 1 indicates how recovery has progressed related to the length of time since species were listed. On September 8, 2006, GAO released report GAO-06-730, entitled Endangered Species: Many Factors Affect the Length of Time to Recover Select Species . This report examined federal efforts to recover a nonprobability sample of 31 species. GAO determined that, while many factors affected the recovery of species, recovery plans played an important role in the recovery of all but one of the species examined. Critics claimed the GAO study was biased by the selection of species examined. <3. Issues in the 109th Congress> ESA reauthorization has been on the legislative agenda since the funding authorization expired in 1992, and bills have been introduced in each subsequent Congress to address various aspects of endangered species protection. The issues considered in the 109 th Congress included effects of the ESA on private and federal land use, how to better promote species recovery, agency use of scientific information, specific regional resource conflicts, and other matters. Below are descriptions of some of the issues that were most commonly raised. <3.1. Critical Habitat Designation> With limited exceptions, FWS or NMFS must designate CH at the time a species is listed. However, some critics argue that CH designation places undue burdens on landowners or that it has little conservation benefit. Others argue (and the courts have largely agreed) that FWS and NMFS have misinterpreted and failed to enforce the current statute. There are also disagreements over the value and timing of CH designation. (See " Critical Habitat ," above, and " ESA Listing Caps, New and Old ," below.) In the 109 th Congress, 5 of H.R. 3824 would have repealed the designation of CH and labeled current areas of CH as areas of special value for recovery planning purposes. The House Committee on Resources reported this bill (amended) on September 27, 2005 ( H.Rept. 109-237 ), and the House passed it (amended) on September 29, 2005. H.R. 1299 would have modified the CH definition as well as the process for determining and designating CH. H.R. 1837 would have limited CH designation for some aquatic habitats. S. 2110 would have designated any habitat of an endangered species or a threatened species that is considered to be CH in accordance with the priority system. <3.2. "Sound Science" and the ESA> The ESA requires that determinations of species status be made "solely on the basis of the best scientific and commercial data available ..." In several recent situations, legal, economic, and social disputes have resulted from actions under the ESA. Examples of these controversies include the Canada lynx, Florida panthers, and Klamath River Basin suckers and coho salmon. Critics in some of these disputes suggest that the science supporting ESA action has been insufficiently rigorous or mishandled by the agencies. Many rare and endangered species are little studied because they are hard to find or because it is difficult to locate enough of them to support scientific research. There may be little information on many species facing extinction, and only limited personnel or funds available to conduct studies on many of the less charismatic species, or those of little known economic import. What should be done in such instances? Some suggest that considerations other than species conservation should prevail; others seek to change the current posture of the law by changing the role of science. These considerations are complicated by the costs and time required to acquire more complete data, particularly in connection with many lesser-known species. The ESA does not elaborate on this question, but some assert that, given the protective purpose of the ESA to save and recover species and the wording of "best ... data available ," arguably dwindling species are to be given the benefit of the doubt and a margin of safety provided. This is the position taken on page 1-7 of the Endangered Species Consultation Handbook , which states that efforts should be made to develop information, but if a biological opinion must be rendered promptly, it should be based on the available information, "giving the benefit of the doubt to the species," with consultation possibly being reinitiated if additional information becomes available. This phrase is drawn from H.Rept. 96-697, p. 12 (1979), which states that the "best information available" language was intended to allow FWS to issue biological opinions even when information was incomplete, rather than being forced to issue negative opinions. The report also states that if a biological opinion is rendered on the basis of inadequate information, the federal agency proposing an action has the duty to show its actions will not jeopardize a species and a continuing obligation to make a reasonable effort to develop information, and that the statutory language "continues to give the benefit of the doubt to the species." <3.2.1. Information Quality> Section 515 of P.L. 106-554 , known as the Information Quality Act or the Data Quality Act, directs the Office of Management and Budget (OMB) to issue government-wide guidelines to federal agencies to ensure and maximize the quality, objectivity, utility, and integrity of information disseminated by federal agencies. OMB published final guidelines on February 22, 2002. The Department of the Interior and FWS have both issued additional guidelines that are available through their websites, and a process is established for interested persons to seek correction of information. Even before these latest guidelines, FWS had promulgated guidance on information quality and peer review procedures issues that also have been addressed in recent legislation. FWS and NMFS developed an Interagency Cooperative Policy on Information Standards Under the Endangered Species Act. Under this policy, FWS and NMFS are to receive and use information from a wide variety of sources, including from individuals. Submitted information may range from the informal oral, traditional, or anecdotal to peer-reviewed scientific studies, and hence the reliability of the information can vary widely. Agency biologists are to review and evaluate all information impartially for purposes of listing, CH designation, consultation, recovery, and permitting actions, and to ensure that any information used by the agencies to implement the ESA is "reliable, credible, and represents the best scientific and commercial data available." Agency biologists are to document their evaluations of all information and, to the extent consistent with the use of the best scientific and commercial data available, use primary and original sources of information as the basis for recommendations. In addition, agency managers are to review the work of FWS and NMFS biologists to "verify and assure the quality of the science used to establish official positions, decisions, and actions..." Additionally, a companion document, the Interagency Cooperative Policy for Peer Review in Endangered Species Act Activities, notes that, in addition to the public comments received on proposed listing rules and draft recovery plans, the Services are also to formally solicit expert opinions and peer review to ensure the best biological and commercial information. For listing decisions, the agencies are to solicit the expert opinions of three specialists and summarize these in the record of final decision. Special independent peer review can also be used when it is likely to reduce or resolve an unacceptable level of scientific uncertainty. <3.2.2. Court Cases on the ESA and Science29> Courts that have considered the "best data available" language have held that an agency is not obliged to conduct studies to obtain missing data, but cannot ignore available biological information, especially if the ignored information is the most current. Nor may an agency treat one species differently from other similarly situated species, nor decline to list a dwindling species and wait until it is on the brink of extinction in reliance on possible but uncertain future actions of an agency. "Best scientific and commercial data available" is not a standard of absolute certainty, reflecting Congress's intent that FWS take conservation measures before a species is conclusively headed for extinction. If FWS does not base its listings on speculation or surmise or disregard superior data, the imperfections of the studies upon which it relies do not undermine those studies as the best scientific data available "the Service must utilize the best scientific ... data available , not the best scientific data possible ." Judicial review can also help ensure that agency decisions and their use of scientific data are not "arbitrary or capricious" and that regulations are rationally related to the problems causing the decline of a species, especially when other interests are adversely affected. In Arizona Cattle Growers Association v. United States Fish and Wildlife Service , the court stated that the evidentiary bar FWS must clear is very low, but it must at least clear it. In the context of issuing Incidental Take Permits under 10(a), this ruling means the agency must demonstrate that a species is or could be in an area before regulating it, and must establish the causal connection between the land use being regulated and harm to the species in question. Mere speculation as to the potential for harm is not sufficient. An agency must consider the relevant facts and articulate a rational connection between these facts and the choices made. <3.3. Regional Resource Conflicts> One express purpose of the ESA is to "provide a means whereby the ecosystems upon which endangered species and threatened species depend may be conserved" (16 U.S.C. 1531(b)). As open space dwindles and increasing human populations put pressures on our wildlands and natural resources, the conservation of species and their habitats may highlight underlying resource crises and economic conflicts. Public values and affected economic interests may be complex and sometimes at odds. The situations described below are some of the situations that have been the subject of recent congressional oversight and legislative interest. In the 109 th Congress and reflecting several of these regional conflicts, the House Resources Subcommittee on Water and Power held an oversight hearing on June 22, 2005, focusing on the effect of the ESA on water supplies. <3.3.1. Klamath River Basin> Controversy erupted in 2001 when the Department of the Interior's Bureau of Reclamation announced it would not release water from part of its Klamath irrigation project to approximately 200,000 acres of farm and pasture lands within the roughly 235,000-acre project service area. The operational change sought to make more water available for three fish species under ESA protection two endangered sucker species, and a threatened coho salmon population. The Klamath Project straddles the Oregon/California border and has been the site of increasingly complex water management issues involving several tribes, fishermen, farmers, environmentalists, and recreationists. Upstream farmers point to their contractual rights to water from the Klamath Project and to hardships for their families if water is cut off. Others assert that the downstream salmon fishery is more valuable and that farmers could be provided temporary economic assistance, while salmon extinction would be permanent. Still others assert that there are ways to serve all interests, or that the science underlying agency determinations is simply wrong. Specifically at issue is how to operate the Bureau's project facilities to meet irrigation contract obligations without jeopardizing the three listed fish. The Trinity River diversion from the Klamath basin to central California also has ramifications for the Bureau's role in the Central Valley Project. Various 10-year and annual operation plans, and associated biological assessments (by the Bureau) and biological opinions (by FWS and NMFS) have been criticized and defended. <3.3.2. Pacific Salmon Restoration> Salmon protection in the Pacific Northwest in general presents many difficult choices, especially because of recent droughts and the connection between regional hydropower facilities and fishery management decisions. NMFS officials have listed a total of 26 distinct population segments (called evolutionarily significant units or ESUs) of Pacific salmon and steelhead trout as either threatened or endangered, and are working with state, local, and tribal officials, as well as the public, to implement recovery measures addressing habitat restoration and other concerns. Recent controversies and litigation have focused on three issues: (1) biological opinions on operation of the Federal Columbia River Power System (FCRPS) as it relates to retaining (or removing) four dams on the lower Snake River, and how properly to factor the presence of the dams into evaluations of jeopardy; (2) whether or not salmon produced in hatcheries should be included in listed ESUs of Pacific salmon; and (3) the role and extent of CH designation in the recovery of Pacific salmon. Interim decisions of the federal district court for Oregon have invalidated NMFS's approach to evaluating jeopardy to salmon from dam operations on the Columbia and Snake Rivers, and ordered increased spills of water to assist transit of juvenile salmon to the sea. In the 109 th Congress, S. 232 would have authorized the Bureau of Reclamation to assist in implementing fish passage and screening facilities at nonfederal water projects in the Columbia River Basin to meet the Bureau's ESA obligations. On March 10, 2005, the Senate Committee on Energy and Natural Resources reported S. 232 ( S.Rept. 109-31 ); the Senate passed it on July 26, 2005. H.R. 1615 would have required a National Academy of Sciences analysis of federal salmon recovery efforts and a Government Accountability Office study of the effects of partially removing four lower Snake River dams, and would have authorized partial removal of these four dams under certain conditions. Section 103 of S. 2432 / H.R. 5006 would have designated salmon restoration areas in California. H.R. 6377 and S. 4084 would have authorized implementing the San Joaquin River Restoration Settlement providing for the reintroduction of spring-run chinook salmon below Friant Dam. <3.3.3. Rio Grande Silvery Minnow> Efforts to hold back water necessary for the Rio Grande silvery minnow from competing New Mexico water users (primarily the city of Albuquerque and irrigators) ignited considerable controversy. At issue is the operation of two Bureau of Reclamation water projects on the Middle Rio Grande: the San Juan-Chama Project and the Middle Rio Grande Project. The New Mexico District Court held that withholding water from irrigators for ESA-related purposes was permissible under the water contracts at issue. Congress halted implementation and an agreement regarding the minnow has been negotiated. In the 109 th Congress, 121 (Title I, Corps of Engineers) of P.L. 109-103 authorized certain activities related to the Middle Rio Grande Endangered Species Collaborative Program (MRGESCP). S. 1540 would have directed the Secretary of the Army and the Secretary of the Interior to establish the MRGESCP to improve water management and contribute to the recovery of endangered species in the Middle Rio Grande, NM. S. 2254 would have directed the Corps of Engineers to carry out restoration projects along the Middle Rio Grande in consultation with the MRGESCP. <3.4. Counterpart Regulations: Pesticides and Fire Management Projects> In 50 C.F.R. 402.04, "counterpart" regulations are authorized that allow an action agency to determine unilaterally whether its actions are likely to adversely affect listed species, thereby avoiding 7 consultation with FWS or NMFS. Although the regulation has been on the books for years, it has not been used until recently, and hence its validity has not yet been tested in the courts. Several new counterpart regulations have recently been finalized and suits challenging the regulations have been filed. New counterpart pesticide regulations were finalized on August 5, 2004, for Environmental Protection Agency (EPA) regulatory actions on pesticides, such that when the EPA is taking action under the Federal Insecticide, Fungicide and Rodenticide Act (FIFRA; P.L. 80-104; 7 U.S.C. 136, et seq.), the EPA and FWS may execute an alternative consultation agreement under which the EPA will decide whether a proposed FIFRA action is likely to adversely affect a listed species or critical habitat. The EPA may make this determination without informal consultation with, and written concurrence from, the FWS Director. If the EPA makes such a determination, no further consultation is required. There is to be FWS oversight of the consistency of EPA's determinations with the ESA. Under 50 C.F.R. 402.43, the EPA may ask FWS for information on listed species that may be present in an area that might be affected by the FIFRA action, including the applicable environmental baseline for each species or habitat, and under new 402.44, the EPA may request FWS personnel to assist in an effects determination and must use its "best efforts" to include the FWS representative in relevant discussions. These two regulations appear to apply with or without an alternative consultation agreement. Critics note that the EPA has a poor record on consultations, and fear that the new self-consultation process will allow more harm to listed species. Supporters counter that the new process will increase EPA flexibility and efficiency. On August 24, 2006, U.S. District Court Judge John Coughenour overturned EPA counterpart regulations relating to pesticides, ruling that these regulations did not conform to the plain language or intent of the ESA 7 by excusing federal action agencies from engaging in consultation with FWS or NMFS. In addition, he held that it was illegal for FWS or NMFS to allow EPA to use emergency consultation procedures for FIFRA 18 actions. Judge Coughenour let stand the process of "optional formal consultation" in which NMFS or FWS can adopt EPA effects determinations as their own. Counterpart regulations also were finalized December 8, 2003, among the Forest Service, the Bureau of Land Management, the Bureau of Indian Affairs, the National Park Service, FWS, and NMFS, to streamline consultation on projects supporting the National Fire Plan (NFP). The alternative consultation process contained in these counterpart regulations eliminates the need to conduct informal consultation with FWS or NMFS, and eliminates the requirement to obtain written concurrence from FWS or NMFS for those NFP actions that the action agency determines are "not likely to adversely affect" any listed species or designated CH. <3.5. Private Property and Fifth Amendment Takings> The presence of endangered species on private property is sometimes welcomed by owners. Builders, for example, have been known to market a new residential development in part on the basis of the wildlife present on undeveloped parts of the tract. Still, the prohibitions in 9 (private actions) and 7 (federal nexus) may at times frustrate the economic desires of owners of land or other property. This has long been a rallying cry for the ESA's detractors, who assert that restrictions under the ESA routinely "take" property in the constitutional sense of the term. Conflicts between the ESA and property owners come about despite the existence of ESA mechanisms intended to soften its impact on property owners. Under the Fifth Amendment, property cannot be "taken" by the United States without just compensation. The Supreme Court has long tried, with limited success, to define which government actions affect private property so severely as to effect such a "taking." In briefest outline, government actions usually are deemed a taking when they cause either a permanent physical occupation of private property or a total elimination of its economic use. When the government restriction removes only part, but not all, of the property's use or value, a three-factor balancing test is used. Although these factors have been little explicated by the courts, it is clear that for a taking to occur, the property impact must be severe. Moreover, except for physical takings, the property impact is assessed with regard to the property as a whole, not just the regulated portion. More than a dozen court decisions have addressed takings challenges to ESA restrictions on land or other property, with all but one finding no taking. These cases have involved restrictions on timber cutting, reductions in water delivery to preserve instream flows needed by listed species, restrictions on shooting marauding animals resulting in loss of livestock, and prohibitions on the transport or sale of endangered species. In several of these cases, the taking claim failed because it was filed in the wrong court or was not "ripe." Where taking claims were reached by the court, they were rejected principally because the economic impact was insufficient as to the property as a whole, or because of the longstanding principle that the government is not responsible for the actions of wild animals. In the one decision favoring the property owner, ESA-related cutbacks in water delivered by a state reclamation project to water districts were held a taking by the United States of state-contract-created water rights. This decision has been controversial for several reasons, including the Department of Justice's settlement of the case (for $16.7 million) despite arguments pressed on it from several quarters that the case was incorrectly decided. ESA critics want the ESA amended to afford compensation for a broader range of property impacts than the Constitution provides perhaps by specifying a fixed percentage of ESA-related property value loss, above which compensation must always be paid. Similar provisions have been included in bills of previous Congresses. In the 109 th Congress, 14 of H.R. 3824 would have required federal compensation for property owners who forgo use of property following determinations that continued use would not comply with prohibitions on taking ESA-listed species. The House Committee on Resources reported this bill (amended) on September 27, 2005 ( H.Rept. 109-237 ), and the House passed it (amended) on September 29, 2005. Opponents of an explicit compensation standard counter that the ESA should not be singled out for a more property owner-friendly standard than other statutes' or the Constitution's. More fundamentally, they note that property rights have never been absolute, and that regulation has long been noncompensable as long as the impact on the property owner is not severe. The likely consequences of a generous compensation threshold added federal costs and/or a chill on ESA implementation are among the issues slowing action on ESA reauthorization. However, both proponents and opponents of the ESA favor enacting incentives (primarily tax benefits) to encourage landowner cooperation. Also in the 109 th Congress, 3 of H.R. 411 would have awarded compensation for ESA activities that eliminate or reduce grazing privileges. H.R. 3166 would have authorized the waiver of grazing permits in designated CH and provide compensation for waived permits. S. 2110 would have provided a variety of tax benefits. S. 4087 would have provided a tax credit to individuals who entered into agreements to protect endangered and threatened species habitat. <3.6. Making the ESA More User-Friendly> Former Interior Secretary Babbitt initiated actions to decrease ESA conflicts in several ways. Joint FWS and NMFS policies streamlined permit procedures for small landowners, and other initiatives encouraged landowners to increase protection for populations of listed species on their land. Under safe harbor agreements, landowners who increased suitable habitat could return to "baseline conditions" without penalty. No surprises agreements provided landowners with greater certainty regarding activities that might otherwise trigger penalties an incentive for landowners to develop Habitat Conservation Plans (HCP), since a landowner properly implementing such an agreement is assured that there will be no further costs or restrictions on the use of the property to benefit the species covered by the HCP, except by mutual consent or in unforeseen circumstances in which changes may be implemented by the government without costs borne by the landowner. Modifications to the no surprises rule required revoking an incidental take permit if the permitted taking would be inconsistent with the survival and recovery of the relevant listed species, and the inconsistency was not remedied in a timely fashion. These rules were reproposed and finalized in response to litigation, but may still present issues raised previously. Federal managers also focused on listing species as threatened rather than endangered, to allow FWS to take advantage of the ESA's more flexible provisions for protecting threatened species. While administrative changes have been made within the framework of existing law, there is great interest among some groups in codifying many of these changes in an amended ESA. Others are critical of HCP agreements as difficult to enforce, virtually lacking monitoring, and locking the government into inflexible long-term positions that sometimes are based on inadequate knowledge. In the 109 th Congress, 365 of P.L. 109-58 , the Energy Policy Act of 2005, established a pilot project in WY, MT, CO, UT, and NM to better coordinate certain actions among federal agencies, including consultations and the preparation of biological opinions under ESA 7. In addition, P.L. 109-294 ( S. 260 ) expanded the authority of the Secretary of the Interior to assist private landowners in restoring, enhancing, and managing endangered and threatened species habitat on private land through the Partners for Fish and Wildlife Program. A number of additional bills were introduced in the 109 th Congress: H.R. 3300 would have authorized species recovery agreements obligating the federal government to make annual payments or provide other compensation for activities that improve the recovery of listed species; S. 1497 would have required the Secretary of the Interior to provide incidental take permits to public electric utilities that adopt measures to mitigate hazards to eagles and other migratory birds; S. 2110 would have codified the no surprises policy; and Section 106(b) of H.R. 6064 and 205(c) of H.R. 6193 would have authorized the Secretary of Agriculture to provide incentive payments to landowners through the Wildlife Habitat Incentive Program to protect or restore the habitat of federally or state-listed endangered, threatened, and candidate species. <3.7. Additional Legislative Initiatives> In the 109 th Congress, bills were introduced in both the House and Senate to reauthorize and amend the ESA. The House Committee on Resources reported H.R. 3824 (the Threatened and Endangered Species Recovery Act of 2005, amended) on September 27, 2005 ( H.Rept. 109-237 ); the House passed H.R. 3824 (amended) on September 29, 2005. S. 2110 , the Collaboration for the Recovery of Endangered Species Act, was introduced on December 15, 2005. Proponents of both bills said that they were designed to make the ESA more effective by redefining the relationship between private and public property uses and species protection, implementing new incentives for species conservation, and removing what some see as undue land use restrictions. Thus, both proposals contained provisions meant to encourage greater voluntary conservation of species by states and private landowners, a concept that has been supported by many observers. Further, both proposals would have modified or eliminated certain procedural or other elements of the current ESA that some have viewed as significant protections and prohibitions, including: eliminating or changing the role of "critical habitat" (CH) (which would eliminate one aspect of the current consultation process); making the listing of all threatened and endangered species more difficult or less likely; expanding 10 permits allowing incidental take (which could incur a greater need for agency oversight and enforcement); and expanding state rather than federal implementation of ESA programs (which might make oversight more difficult). Proponents of these changes argued that tighter listing standards would enable a better focus on species with the most dire needs, and that other measures would achieve recovery of more species. Critics argued that proposed changes would create gaps in the ESA safety net of protections and prohibitions. P.L. 109-183 ( S. 1578 ) reauthorized Upper Colorado and San Juan River Basin endangered fish recovery programs. P.L. 109-225 ( S. 1165 ) expanded Hawaii's James Campbell National Wildlife Refuge to protect habitat for endangered waterbirds. P.L. 109-449 established NOAA and Coast Guard programs to manage marine debris and address its adverse effects on endangered species. Additional measures were considered by the 109 th Congress: Section 212 of S. 2012 and 209 of H.R. 5051 would have required a study of sea turtle excluder devices in shrimp trawls; S. 2012 was reported by the Senate Committee on Commerce, Science, and Transportation on April 4, 2006 ( S.Rept. 109-229 ), and was passed by the Senate (amended) on June 19, 2006. On December 7, 2006, the Senate passed H.R. 5946 , after amending this measure to substitute language from amended S. 2012 . The House passed the amended H.R. 5946 on December 9, 2006, with the turtle excluder language in 212. S. 2013 and 17 of H.R. 4075 , as passed by the House on July 17, 2006, would have implemented the Agreement on the Conservation and Management of the Alaska-Chukotka Polar Bear Population. The Senate Committee on Commerce, Science, and Transportation reported S. 2013 on February 27, 2006 ( S.Rept. 109-217 ); the Senate passed this measure (amended) on June 6, 2006. On December 6, 2006, the Senate amended H.R. 4075 to insert the language of S. 2013 and passed the amended H.R. 4075 . On December 7, 2006, the Senate amended H.R. 5946 to insert the language of S. 2013 as Title IX, and passed the amended H.R. 5946 . On December 9, 2006, the House agreed to the amended H.R. 5946 . Section 1505 of S. 732 , as reported on April 6, 2005 ( S.Rept. 109-53 ), by the Senate Committee on Environment and Public Works, would have authorized state programs for mitigating highway and surface transportation impacts, including those affecting endangered and threatened species. H.R. 4857 would have required that certain electricity consumers be informed of ESA compliance costs; the House Committee on Resources held a hearing on this bill on March 16, 2006, and reported the bill on September 28, 2006 ( H.Rept. 109-693 ). H.R. 3110 would have amended the ESA to treat distinct population segments of the Eastern oyster as separate species. On July 19, 2005, the House Committee on Resources held an oversight hearing on ESA listing of this species. S. 164 would have facilitated acquisition of UT lands to protect desert tortoise. H.R. 2323 would have promoted southern sea otter recovery and research. H.Res. 249 celebrated the rediscovery of the ivory-billed woodpecker in Arkansas. H.R. 2779 would have amended the ESA to enable federal agencies to rescue and relocate threatened or endangered species in certain circumstances where flood control levees are reconstructed, maintained, or repaired. S.Res. 219 would have designated March 8, 2006, as "Endangered Species Day." S.Res. 431 designated May 11, 2006, as "Endangered Species Day"; the Senate agreed to S.Res. 431 on April 5, 2006. Section 203 of H.R. 3908 would have amended the Internal Revenue Code to exempt payments from gross revenue for landowner incentive programs that conserve species or protect habitat. S. 3611 would have authorized the Secretary of the Interior to implement the Platte River Recovery Implementation Program for Endangered Species in the Central and Lower Platte River Basin. Section 209 of H.R. 6193 would have directed the Secretary of Agriculture to establish a pilot program to recover California endangered or threatened plant species. H.R. 6241 would have amended the Marine Mammal Protection Act to authorize the taking of California sea lions to protect endangered and threatened salmon species in the Columbia River drainage. Section 1505(c) of H.R. 3 , as agreed to by the Senate on May 17, 2005, would have provided for state mitigation funds to benefit endangered and threatened species; however, these provisions were not retained in the conference agreement, subsequently enacted as P.L. 109-59 . <3.8. Appropriations> Appropriations play an important role in the ESA debate, providing funds for listing and recovery activities as well as financing FWS and NMFS consultations that are necessary for federal projects. In addition, appropriations bills have served as vehicles for some changes in the ESA. Table 2 shows recent ESA funding. The FY2006 Department of the Interior, Environment, and Related Agencies Appropriations Act, P.L. 109-54 , provided $271.9 million for FWS's ESA activities. Overall, FY2006 FWS funding for ESA and related programs is $6.5 million less than the President's request, and $11.8 million more than the FY2005 appropriations level. FY2006 funding for ESA programs administered by NMFS was provided in the Science, State, Justice, Commerce, and Related Agencies Appropriations Act, P.L. 109-108 . Provisions in P.L. 109-148 ( H.R. 2863 , the Department of Defense, Emergency Supplemental Appropriations to Address Hurricanes in the Gulf of Mexico, and Pandemic Influenza Act) rescinded unobligated balances of $2 million from FWS's Landowner Incentive Program and $1 million from the Cooperative Endangered Species Conservation Fund. For FY2007, FWS appropriations are provided in H.R. 5386 , which passed the House (amended) on May 18, 2006; the Senate Committee on Appropriations reported this bill (amended) on June 29, 2006 ( S.Rept. 109-275 ). The 109 th Congress did not complete action on FY2007 appropriations for either FWS or NMFS. An April 2005 GAO study found that, although FWS spends almost half of its recovery funds on highest priority species, factors other than a species' priority ranking (e.g., regional office workload, opportunities for partnerships to maximize scarce recovery funds), in practice, determine how funding is allocated. GAO found that FWS does not have a process to routinely assess funding decisions to ensure that they are appropriate. <3.8.1. ESA Listing Caps, New and Old> Beginning in FY1998, Congress enacted annual limits ( caps ) on funding FWS could use for its ESA listing function. This appropriations language limits FWS discretion to transfer funds to finance additional listings, so that if courts mandate agency action on listing certain species, other listings may not be able to be funded. FWS supported these limits to assure that funding for other agency programs could not be diverted to finance additional ESA listing activities. However, courts have held that budget constraints do not excuse an agency from compliance, in some circumstances. These limits have been approved by Congress in succeeding fiscal year appropriations bills. P.L. 109-54 , FY2006 Department of the Interior appropriations, limits listing activities to $18.13 million, of which no more than $12.852 million could be used for activities related to critical habitat designation. For FY2007, the Bush Administration proposed limiting listing activities to $17.759 million, of which no more than $12.581 million could be used for activities related to critical habitat designation; the House agreed with the Administration's request, while the Senate Committee on Appropriations has reported limiting listing activities to $17.859 million, of which no more than $12.672 million could be used for critical habitat designation.

The 109th Congress considered numerous proposals to amend the Endangered Species Act (ESA; P.L. 93-205, 16 U.S.C. §§1531-1543). Major issues in recent years have included changing the role of science in decision-making, modifying critical habitat (CH) procedures, incorporating further protection and incentives for property owners, and increasing protection of listed species, among others. In addition, many have advocated enacting as law some ESA regulations promulgated during the Clinton Administration. The ESA has been one of the more contentious environmental laws. This may stem from its strict substantive provisions, which can affect the use of both federal and nonfederal lands and resources. Under the ESA, species of plants and animals (both vertebrate and invertebrate) can be listed as endangered or threatened according to assessments of their risk of extinction. Once a species is listed, powerful legal tools are available to aid its recovery and protect its habitat. The ESA may also be controversial because dwindling species are usually harbingers of broader ecosystem decline: the most common cause of listing species is habitat loss. The authorization for spending under the ESA expired on October 1, 1992. The prohibitions and requirements of the ESA remain in force, even in the absence of an authorization, and funds have been appropriated to implement the administrative provisions of the ESA in each subsequent fiscal year. In the 109th Congress, H.R. 3824 and S. 2110 proposed to extensively amend and reauthorize the ESA; the House passed H.R. 3824 (amended) on September 29, 2005. Proponents of both bills argued that they were designed to make the ESA more effective by redefining the relationship between private and public property uses and species protection, implementing new incentives for species conservation, and removing what some see as undue land use restrictions. However, critics argued that proposed changes created gaps in the ESA safety net of protections and prohibitions. The 109th Congress enacted legislation that (1) established a pilot project in Wyoming, Montana, Colorado, Utah, and New Mexico to better coordinate consultations and the preparation of biological opinions under ESA §7 (P.L. 109-58); (2) authorized certain activities related to the Middle Rio Grande Endangered Species Collaborative Program (P.L. 109-103); (3) reauthorized Upper Colorado and San Juan River Basin endangered fish recovery programs (P.L. 109-183); (4) expanded a Hawaiian National Wildlife Refuge to protect habitat for endangered waterbirds (P.L. 109-225); (5) expanded the authority of the Secretary of the Interior to assist private landowners in restoring, enhancing, and managing endangered and threatened species habitat on private land through the Partners for Fish and Wildlife Program (P.L. 109-294); (6) reauthorized and amended the Neotropical Migratory Bird Conservation Act and the Great Ape Conservation Act of 2000 (P.L. 109-363); and (7) established programs to manage marine debris and address its adverse effects on endangered species (P.L. 109-449). This report also identifies additional bills that were introduced in the 109th Congress to address specific concerns related to how the ESA is implemented and how endangered species are managed.

<1. Introduction> The Constitution grants Congress the power of the purse and provides that "No money shall be drawn from the Treasury, but in Consequence of Appropriations made by Law." It does not, however, establish any specific procedures by which Congress must consider spending legislation. Instead, Congress has developed rules and practices that govern consideration of spending and other budgetary legislation under each chamber's constitutional authority to " ... determine the Rules of its Proceedings." It is under this authority that the procedures in the Congressional Budget Act of 1974 were created. The Congressional Budget Act established the basic framework that is used today for congressional consideration of budget and fiscal policy. It provides for the annual adoption of a concurrent resolution on the budget as a mechanism for coordinating congressional budgetary decision making. The budget resolution creates enforceable parameters with which spending, revenue, and debt legislation must be consistent. It is not a law. It is not signed by the President nor can it be vetoed. Instead, its purpose is to establish a framework within which Congress considers legislation dealing with spending and revenue. The budget resolution is not intended to establish details of spending or revenue policy. Instead, details of such policy are to be included in legislation reported from the committees with legislative jurisdiction subsequent to the adoption of the budget resolution. All spending or revenue legislation reported from legislative committees, however, is expected to be consistent with the levels and priorities agreed to in the budget resolution. The spending policies in the budget resolution encompass two types of spending legislation: discretionary spending and direct (or mandatory) spending. Discretionary spending is controlled through the appropriations process. Appropriations legislation is considered annually for the fiscal year beginning October 1. Appropriations legislation provides funding for numerous activities such as national defense, education, and homeland security, as well as general government operations. Direct spending, alternately, is provided for in legislation outside of appropriations acts. Direct spending programs are typically established in permanent law that continue in effect until such time as they are revised or terminated by another law. The actual annual cost of direct spending is not determined by Congress. It is instead dictated by formulas within the legislation providing for the program. The overall cost of a program depends on the eligibility requirements and benefits set forth in the legislation. These criteria determine who will be eligible to receive benefits and how much benefit they will receive. Only by altering these formulas can Congress adjust how much money will be spent. <2. The Budget Resolution> <2.1. Content> The budget resolution sets forth levels for new budget authority, outlays, revenue, and public debt for the budget year and four outyears. The levels in the budget resolution deal with aggregates, not programmatic spending details. Assumptions concerning some major programs may be discussed in the reports accompanying the budget resolution, but these assumptions are not in the form of legislative language and are not binding on the committee of jurisdiction. Rather than including levels of spending for specific agencies or programs, the budget resolution establishes congressional priorities by dividing spending among the 20 major functional categories of the federal budget. These 20 functional categories do not correspond to the committee system by which Congress operates. As a result, the spending levels in the 20 functional categories are allocated, or "crosswalked," to the House and Senate committees having jurisdiction over discretionary spending (appropriations committees) and direct spending (legislative committees). These "crosswalked" totals appear in the joint explanatory statement of the conference report on the budget resolution and are referred to as 302(a) allocations. These 302(a) amounts hold committees accountable for staying within the spending limits established by the budget resolution. <2.2. Programmatic Assumptions> It is inevitable that Members will consider the impact on particular programs or agencies when they consider a budget resolution. Each committee is required to submit its "views and estimates" with information on the preferences and legislative plans of that committee regarding budget matters to help the Budget Committee determine spending levels for each of the functional categories. While the budget resolution does not allocate funds among specific agencies or programs, assumptions underlying the amounts set forth in the functional categories are frequently discussed in the reports accompanying the budget resolution. For example, the committee print accompanying the budget resolution for FY2009 included the following language: The Committee-reported resolution assumes approximately $2 billion for the Department of Energy's Energy Efficiency and Renewable Energy program. The funding level is $738 million above the President's request and would accommodate significant increases for programs such as wind, solar, geothermal, biomass and biorefinery R&D, hydrogen, and vehicle/building technologies. This funding level would also provide $450 million for the Weatherization Assistance Program, a program which was zeroed out in the President's budget. Report language, however, is not binding on the committees with jurisdiction over spending and revenue. In addition to report language, certain provisions often included in the budget resolution may indicate programmatic assumptions or desires. Budget resolutions frequently include "Sense of the Congress" language expressing the assumptions or desires of one or both chambers for certain programs to receive priority in funding. For example, the budget resolution for FY2010 included language concerning the sense of the Congress on Great Lakes restoration: It is the sense of the Congress that this resolution recognizes the need to address significant and long-standing problems affecting the major large scale aquatic, estuarine, and coastal ecosystems nationwide. This resolution includes funding for a new interagency initiative to address such regional ecosystems. It also includes funding to work with Great Lakes States, tribes, local communities, and organizations to more effectively address issues prioritized in the Great Lakes Regional Collaborative. This initiative could address issues such as invasive species, habitat restoration and conservation, non-point source pollution, and contaminated sediment. The resolution also supports the President's proposal to use outcome-oriented performance goals and measures to target the most significant problems and track progress in addressing these ecosystems. Budget resolutions may also include "Policy" statements. These statements sometimes include language indicating that spending levels in the budget resolution assume certain policies will be carried out. For example, It is the policy of this resolution that ... (5) TRICARE fees for military retirees under the age of 65 should not be increased as the President's budget proposes; Neither "Sense of the Congress" provisions nor "Policy" statements are binding on the committees with jurisdiction over spending and revenue. Budget resolutions often include procedural provisions, such as reserve funds or reconciliation instructions. These provisions often indicate underlying program assumptions or desires of Congress. (Further information on reserve funds and reconciliation instructions is provided below.) <2.3. Formulation of the Budget and the Budget Cycle> Federal budgeting is a cyclical activity. The President submits a budget request to Congress early in the calendar year. Congressional committees then hold hearings where they hear testimony from OMB officials, presidential advisors, and agencies who defend the President's budget recommendations. Committees then submit their "views and estimates" to the Budget Committee of their respective chamber. A committee's "views and estimates" provide the Budget Committees with information on the preferences and legislative plans of that committee regarding budget matters within its jurisdiction. House and Senate Budget Committees then consider and report a budget resolution. The Congressional Budget Act establishes a timetable for the consideration of budgetary legislation. This timetable provides various target dates that reflect when certain actions typically occur. Once the budget resolution is adopted, chambers may consider appropriations bills and any other spending and revenue legislation consistent with the budget resolution. <3. Discretionary Spending> The 302(a) allocations made to the House and Senate Appropriations Committees reflect their jurisdiction over all discretionary spending. These allocations hold the appropriations committees accountable for staying within the spending limits established by the budget resolution. In recent years, budget resolutions have also sometimes included explicit spending limits on discretionary spending. Both the House and Senate Appropriations Committees have 12 subcommittees. Each of these subcommittees is responsible for reporting one regular appropriations bill. Sometimes these bills are packaged together in what is referred to as an omnibus appropriations act. Once an Appropriations Committee has received its 302(a) allocation, it then subdivides the committee allocation among its subcommittees as soon as practicable after the budget resolution has been adopted. These suballocations are known as 302(b) subdivisions. The appropriations committees may make allocations among subcommittees, even if they do not correspond with the levels set forth in the functional categories of the budget resolution. Section 302(c) of the Budget Act provides a point of order against the consideration of any appropriations measures before the Appropriations Committee reports its subdivisions. The appropriations committees are then required to report these subdivisions to their respective chambers. The appropriations committees may revise the 302(b) subdivisions anytime during the appropriations process to reflect actions taken on spending legislation. If an appropriations committee does adjust the subdivisions among subcommittees, it must inform its respective chamber of the new levels by issuing a new 302(b) subdivision report. After extensive hearings, each of the subcommittees reports one of the regular appropriations bills to its respective full appropriations committee. Then, the full Appropriations Committee reports the bill to its respective chamber. Section 302(f) of the Budget Act prohibits consideration of any measure or amendment that would cause the 302(a) or 302(b) allocations to be exceeded. Since appropriations subcommittees usually report their bills at the maximum level of spending, amendments offered to the appropriations bill on the floor are often vulnerable to being ruled out of order since they would cause the spending to exceed the 302(b). This rule, combined with other rules and practices, makes it difficult to rearrange spending priorities within an appropriations bill through amendments on the floor. A separate amendment (or amendments) to reduce spending would need to be agreed upon prior to, or in conjunction with, one that would increase spending for an agency or program in order to offset that increase. <4. Direct Spending> House and Senate legislative committees also receive 302(a) allocations that reflect their jurisdiction over direct spending programs. Any legislation reported by these committees must be consistent with these allocations. As with discretionary spending, Section 302(f) prohibits the consideration of any measure or amendment that would cause the 302(a) allocation to be exceeded. <4.1. Reconciliation> Points of order can effectively limit spending that results from appropriations acts or new entitlement legislation to levels consistent with the budget resolution, but are not an effective control on spending that results from existing laws providing direct spending. As a result, Congress has established the reconciliation process as a way to instruct committees to develop legislation to change current revenue or direct spending laws so that these programs conform with policies established in the budget resolution. The reconciliation process is an optional two-stage process in which instructions are included in the budget resolution. Reconciliation instructions are in the form of a directive to a specific committee to recommend legislative changes. These instructions are specific and include (1) the committee responsible for making the change, (2) the dollar amount of the change, and (3) the period over which this change should be measured. Reconciliation instructions also include a deadline for the committee to submit such recommendations. For example, the budget resolution for FY2006 included the following reconciliation instruction: (a) SUBMISSIONS TO SLOW THE GROWTH IN MANDATORY SPENDING- (1) Not later than September 16, 2005, the House committees named in paragraph (2) shall submit their recommendations to the House Committee on the Budget. After receiving those recommendations, the House Committee on the Budget shall report to the House a reconciliation bill carrying out all such recommendations without any substantive revision. (2) INSTRUCTIONS- (A) COMMITTEE ON AGRICULTURE- The House Committee on Agriculture shall report changes in laws within its jurisdiction sufficient to reduce the level of direct spending for that committee by $173,000,000 in outlays for fiscal year 2006 and $3,000,000,000 in outlays for the period of fiscal years 2006 through 2010. Many changes in direct spending programs have been a result of reconciliation legislation. For example, the instructions in the above example resulted in Title I of the Deficit Reduction Act of 2005 ( P.L. 109-171 ), a reconciliation act. Other titles of that measure included language to make changes in Medicare (Title V), Medicaid and SCHIP (Title VI), and LIHEAP (Title IX). Similarly, reconciliation acts in other years have included titles making changes in diverse direct spending programs as well. The reconciliation process begins when Congress includes reconciliation instructions in a budget resolution directing one or more committees to recommend changes in current law to achieve the levels of direct spending, revenues, or the debt limit agreed to in the budget resolution. Committees respond to these instructions by drafting legislative language to meet their specified targets. The legislative language recommended by committees is packaged "without any substantive revision" into one or more reconciliation bills by the House and Senate Budget Committees. If only a single committee is instructed to recommend reconciliation changes then those changes are reported directly to its respective chamber. Once reported, reconciliation legislation is considered under special procedures on the House and Senate floor. <5. Reserve Funds> Spending allocations may be revised subsequent to the adoption of the budget resolution if provided for in the budget resolution. Congress frequently includes provisions referred to as "reserve funds" in the annual budget resolution, which provide the chairs of the House and Senate Budget Committees the authority to adjust the committee spending allocations if certain conditions are met. Typically these conditions consist of legislation dealing with a particular policy being reported by the appropriate committee or an amendment dealing with that policy being offered on the floor. Once this action has taken place, the Budget Committee chairman submits the adjustment to his respective chamber. Reserve funds frequently require that the net budgetary impact of the specified legislation be deficit neutral. Deficit-neutral reserve funds provide that a committee may report legislation with spending in excess of its allocations, but require the excess amounts be "offset" by equivalent amounts. The Budget Committee chairman may then increase the committee spending allocations by the appropriate amounts to prevent a point of order under Section 302 of the Budget Act. For example, the budget resolution for FY2009 included the following language providing for a deficit-neutral reserve fund concerning San Joaquin River restoration and Navajo nation water rights settlements: In the House, the Chairman of the Committee on the Budget may revise the allocations, aggregates, and other appropriate levels in this resolution for any bill, joint resolution, amendment, or conference report that would fulfill the purposes of the San Joaquin River Restoration Settlement Act or implement a Navajo Nation water rights settlement and other provisions authorized by the Northwestern New Mexico Rural Water Projects Act by the amounts provided in such measure if such measure would not increase the deficit or decrease the surplus for the period of fiscal years 2008 through 2013 or for the period of fiscal years 2008 through 2018. Reserve funds are not always required to be deficit-neutral. They may, instead, allow the levels of spending set forth in the budget resolution to be exceeded, as long as the policy legislation meets the conditions of the reserve fund. In some instances, the increases authorized by a reserve fund are limited to specified amounts.

The budget resolution sets forth aggregate levels of spending, revenue, and public debt. It is not intended to establish details of spending or revenue policy and does not provide levels of spending for specific agencies or programs. Instead, its purpose is to create enforceable parameters within which Congress can consider legislation dealing with spending and revenue. The spending policies in the budget resolution encompass two types of spending legislation: discretionary spending and direct (mandatory) spending. Discretionary spending is controlled through the appropriations process. Appropriations legislation is considered each fiscal year and provides funding for numerous programs such as national defense, education, and homeland security. Direct spending, alternately, is provided for in legislation outside of appropriations acts. Direct spending programs are typically established in permanent law and continue in effect until such time as revised or terminated by another law. The budget resolution establishes congressional priorities by dividing spending among the 20 major functional categories of the federal budget. These 20 categories do not correspond to the committee system by which Congress operates, and as a result these spending levels must be "crosswalked" to the House and Senate committees having jurisdiction over both discretionary and direct spending. These amounts are known as 302(a) allocations and hold committees accountable for staying within the spending limits established by the budget resolution. Each Appropriations Committee is responsible for subdividing its 302(a) allocation among its 12 subcommittees. These allocations, referred to as 302(b) subdivisions, establish the maximum amount that each of the 12 appropriations bills can spend. It is inevitable that Members will consider the impact on particular programs or agencies when they consider a budget resolution. While the budget resolution does not allocate funds among specific agencies or programs, congressional assumptions or desires underlying the amounts set forth in the functional categories are frequently communicated through the budget resolution. Report language accompanying the budget resolution, as well as certain provisions in the budget resolution, can sometimes express non-binding programmatic assumptions and desires. Budget resolutions also often include procedural provisions such as reserve funds or reconciliation instructions. These provisions may also reflect underlying program assumptions or desires of Congress.

<1. Introduction> The number of foreign-born people residing in the United States is at the highest level in U.S. history and has reached a proportion of the U.S. population 12.6% not seen since the early 20 th century. Of the 38 million foreign-born residents in the United States, approximately 16.4 million are naturalized citizens. According to the latest estimates by the Department of Homeland Security (DHS), about 10.8 million unauthorized aliens were living in the United States in January 2009. The Pew Hispanic Center recently reported an estimate of 11.1 million unauthorized aliens in March 2009, down from a peak of 12 million in March 2007. Some observers and policy experts maintain that the presence of an estimated 11 million unauthorized residents is evidence of flaws in the legal immigration system as well as failures of immigration control policies and practices. There is, indeed, a broad-based consensus that the U.S. immigration system is broken. This consensus erodes, however, as soon as the options to reform the U.S. immigration system are debated. Substantial efforts to reform immigration law have failed in the recent past, prompting some to characterize the issue as a "zero-sum game" or a "third rail." The thorniest of these immigration issues centers on policies directed toward unauthorized aliens in the United States. Although the economy appears to be recovering from the recession and some economic indicators suggest that growth has resumed, unemployment remains high and is projected to remain so for some time. Historically, international migration ebbs during economic crises (e.g., immigration to the United States was at its lowest levels during the Great Depression). While preliminary statistical trends suggest a slowing of migration pressures, it remains unclear how the current economic climate will affect immigration to the United States. Whether the Congress will act to alter immigration policies either in the form of comprehensive immigration reform or in the form of incremental revisions aimed at strategic changes is at the crux of the debate. Addressing these contentious policy reforms against the backdrop of economic turbulence sharpens the social and business cleavages and may narrow the range of options. This report synthesizes the following components of the reform debate: legal immigration; legalization; immigration control; refugees, asylees, and humanitarian migrants; and alien rights, benefits, and responsibilities; and offers a roadmap to other Congressional Research Service reports that more fully analyze the policy options. <2. Legal Immigration> The challenge inherent in this policy issue is balancing employers' hopes to have access to a supply of legally present foreign workers, families' longing to reunite and live together, and a widely-shared wish among the stakeholders to improve the policies governing legal immigration into the country. The scope of this issue includes temporary admissions (e.g., guest workers, foreign students) and permanent admissions (e.g. employment-based, family-based immigrants). <2.1. Permanent Residence> Four major principles underlie current U.S. policy on permanent immigration: the reunification of families, the admission of immigrants with needed skills, the protection of refugees, and the diversity of admissions by country of origin. The Immigration and Nationality Act (INA) specifies a complex set of numerical limits and preference categories that give priorities for permanent immigration reflecting these principles. Legal permanent residents (LPRs) refer to foreign nationals who live lawfully and permanently in the United States. Although the INA establishes a worldwide level of permanent admission at 675,000 annually, it allows for admission beyond these limits. The family-based level of LPR admissions is set at 480,000 annually, but immediate relatives of U.S. citizens may enter in a number that exceeds the statutory caps. The INA also provides a floor of 226,000 annually for the other categories of family-based LPRs. The statutory limit on employment-based LPRs is 140,000 annually. Each year, the INA allocates 55,000 for diversity visas to LPRs from countries underrepresented in the family and employment preference categories. The INA establishes per-country levels at 7% of the worldwide level. For a dependent foreign state, the per-country ceiling is 2%. During FY2009, a total of 1.1 million aliens became LPRs in the United States. Of this total, 66.1% entered on the basis of family ties. Immediate relatives of U.S. citizens made up the single largest group of immigrants 535,554 in FY2009. Other major categories in FY2009 were employment-based LPRs (including spouses and children) and refugees/asylees adjusting to LPR status 12.7% and 15.7%, respectively. A variety of constituencies are advocating a significant reallocation from the family-based to the employment-based visa categories or a substantial increase in legal immigration to meet a growing demand from families and employers in the United States for visas. Even as U.S. unemployment levels rise, employers assert that they continue to need the "best and the brightest" workers, regardless of their country of birth, to remain competitive in a worldwide market and to keep their firms in the United States. While support for the option of increasing employment based immigration may be dampened by the economic recession, proponents argue it is an essential ingredient for economic growth. Proponents of family-based migration alternatively point to the significant backlogs in family based immigration due to the sheer volume of aliens eligible to immigrate to the United States and maintain that any proposal to increase immigration levels should also include the option of family-based backlog reduction. Citizens and LPRs often wait years for their relatives' petitions to be processed and visa numbers to become available. Against these competing priorities for increased immigration are those who offer options to scale back immigration levels, with options ranging from limiting family-based LPRs to the immediate relatives of U.S. citizens to confining employment-based LPRs to exceptional, extraordinary or outstanding individuals. Legislation aimed at eliminating the diversity visa lottery arises as well. <2.2. Temporary Admissions> The INA provides for the temporary admission of various categories of foreign nationals, who are known as nonimmigrants. Nonimmigrants are admitted for a temporary period of time and a specific purpose. They include a wide range of visitors, including tourists, students, and temporary workers. Among the temporary worker provisions are the H-1B visa for professional specialty workers, the H-2A visa for agricultural workers, and the H-2B visa for nonagricultural workers. Foreign nationals also may be temporarily admitted to the United States for employment-related purposes under other categories, including the B-1 visa for business visitors, the E visa for treaty traders and investors, J visas for cultural exchange, and the L-1 visa for intracompany transfers. Some business people express concern that a scarcity of labor in certain sectors may curtail the pace of economic growth at a time when encouraging economic growth is paramount. A leading legislative response to skills mismatches is to increase the supply of temporary foreign workers (rather than importing permanent workers). While the demand for more skilled and highly-trained foreign workers garners much of the attention (e.g., lifting the ceiling on H-1B visas or set-asides of visas for foreign graduates of U.S. universities), pressure to increase unskilled temporary foreign workers, commonly referred to as guest workers, also remains. Those opposing increases in temporary workers assert that there is no compelling evidence of labor shortages and cite the growing rate of unemployment. Opponents argue that continuing temporary foreign workers programs during an economic recession would have a deleterious effect on salaries, compensation, and working conditions of U.S. workers. Most recently, some are suggesting that temporary foreign workers visas should be scaled back or placed in moratorium during the economic recession. <3. Legalization> The debate over legal immigration reform is complicated by proposals to enable unauthorized aliens residing in the United States to become LPRs, (commonly termed amnesty" by opponents and earned legalization by supporters). There are a range of options being offered, and these alternatives generally require unauthorized aliens to meet specified conditions and terms as well as pay penalty fees to legalize their status. Examples would include documenting physical presence in the United States over a specified period; demonstrating employment for specified periods; showing payment of income taxes; or leaving the United States to obtain the legal status. Using a point system that credits aliens with equities in the United States (e.g., work history, tax records, and family ties) would be another possible option. Other avenues for legalization would be guest worker visas tailored for unauthorized aliens in the United States or a legalization program that would replace guest worker visas. There are also options (commonly referred to as the DREAM Act) that would enable some unauthorized alien students to become LPRs through an immigration procedure known as cancellation of removal. Advocates for these legalization avenues maintain that unauthorized residents are working, paying taxes, and contributing to the community. Some also point out that legalization would provide employers with a substantially increased legal workforce without importing additional foreign workers. Opponents maintain that legalization rewards illegal actions at the expense of potential immigrants who are waiting to come legally. They further argue that it would serve as a magnet for future flows of unauthorized migrants. <4. Immigration Control> Reassessing immigration control policies and agencies and considering options for more effective enforcement of the INA are integral to immigration reform. Immigration control encompasses an array of enforcement tools, policies, and practices to prevent and investigate violations of immigration laws. The spectrum of enforcement issues ranges from visa policy at consular posts abroad and border security along the country's perimeter, to the apprehension, detention, and removal of unauthorized aliens in the interior of the country. If the flow of unauthorized migrants is abating during the economic recession, some may seek to divert resources from immigration control activities to other areas. Illustrative among these issues that might arise in the 111 th Congress are border security, worksite enforcement, document fraud, criminal aliens and the grounds for inadmissibility. <4.1. Border Security> Border security involves securing the many means by which people and goods enter the country. Operationally, this means controlling the official ports of entry through which legitimate travelers and commerce enter the country, and patrolling the nation's land and maritime borders to interdict illegal entries. In recent years, Congress has passed a series of provisions and funding streams aimed at strengthening immigration-related border security. Border Patrol apprehensions of unauthorized migrants along the southern border in 2008 were reportedly at the lowest level since the 1970's, with competing credit given to the economic crisis and to increased border control and enforcement. One flashpoint of this debate is the construction of a "virtual fence" as well as physical barriers along the border. P.L. 111-230 provides $600 million for emergency border security funding in supplemental FY2010 appropriations. Whether additional changes are needed to further control the border remains a question. <4.2. Worksite Enforcement> For two decades it has been unlawful for an employer to knowingly hire, recruit or refer for a fee, or continue to employ an alien who is not authorized to be so employed. The large number of unauthorized aliens in the United States, the majority of whom are in the labor force, led many to criticize the adequacy of the current worksite enforcement measures. In response, highly visible worksite raids by the U.S. Department of Homeland Security's (DHS) Immigration and Customs Enforcement (ICE) bureau during 2007-2008 have sparked praise among some and alarm among others. Critics of the ICE worksite raids assert that the government is targeting low-wage foreign workers rather than the employers who hire them. Former DHS Secretary Michael Chertoff argued, however, that cases against supervisors and employers often depend on proving knowledge and intent, making it more difficult to build a criminal case against an employer. Efforts to strengthen worksite enforcement, however, are sometimes met by fears that more stringent penalties may inadvertently foster discrimination against legal workers with foreign appearances. DHS Secretary Janet Napolitano called for a thorough review, specifically requesting ICE agents to apply more scrutiny to the selection and investigation of worksite raids, which might be signaling a policy shift. <4.3. Employment Eligibility Verification> All employers are required to participate in a paper-based employment eligibility verification system in which they examine documents presented by every new hire to verify the person's identity and work eligibility. Employers also may opt to participate in an electronic employment eligibility verification program, known as E-Verify, which checks the new hires' employment authorization through Social Security Administration and, if necessary, DHS databases. Employer organizations have long complained that E-Verify is too costly and poses practical and technical problems. Other critics maintain its expansion would make applying for jobs a hassle for all U.S. citizens and would effectively deny some law-abiding individuals the ability to work. According to DHS, however, E-Verify immediately verifies almost everyone who is authorized to work in the United States. DHS further reports that only about 0.5% of legal workers receive a tentative non-confirmation and, as a result, need to correct their records. The authorizing legislation for the optional E-Verify program was temporarily extended in March 2009 by the Omnibus Appropriations Act, 2009 ( P.L. 111-8 ) and is now scheduled to terminate on September 30, 2012. Whether to extend, revise and possibly require all employers to conduct electronic employment eligibility verification of all new hires or all of their employees will continue to be an issue in the 111 th Congress. <4.4. Document Fraud> Immigration-related document fraud includes the counterfeiting, sale, and use of identity documents (e.g., birth certificates or Social Security cards), as well as employment authorizations, passports, or visas. The INA has civil enforcement provisions for individuals and entities proven to have engaged in immigration document fraud. In addition, the U.S. Criminal Code makes it a criminal offense for a person to knowingly produce, use, or facilitate the production or use of fraudulent immigration documents. More generally, the U.S. Criminal Code criminalizes the knowing commission of fraud in connection with a wide range of identification documents. When ICE began charging aliens arrested in worksite raids with criminal offenses, including identity theft and false use of a Social Security number, advocates for the unauthorized aliens argued that such charges were excessive. These advocates maintained that showing bogus documents in order to work does not constitute identity theft and that civil penalties for document fraud should have been sufficient. Those supporting the stepped up enforcement emphasize that ICE should prosecute offenders with the full force of the laws. The integrity of the documents issued for immigration purposes, the capacity to curb immigration fraud, and the distinctions between identity theft and immigration fraud are among the central elements of the document fraud issue. <4.5. Criminal Aliens> A criminal alien, simply put, is a foreign national convicted of a criminal offense. Criminal offenses in the context of immigration law cover violations of federal, state, or, in some cases, foreign criminal law. Most crimes affecting immigration status fall under a broad category of crimes defined in the INA, notably those involving moral turpitude or aggravated felonies. It does not cover violations of the INA that are not defined as crimes, such being an unauthorized alien in the United States. There has been bipartisan agreement for over a decade to dedicate a portion of immigration enforcement resources to the removal of criminal aliens. In one of her first press conferences after becoming Homeland Security Secretary, Janet Napolitano stated that the removal of criminal aliens would be one of her top priorities. An emerging issue is whether current law on who is a criminal alien under the INA encompasses individuals whom many people would not consider dangerous. Critics of a hard-line approach cite examples of people who they argue should not be deported as criminal aliens: someone who shoplifted years ago; an elderly LPR of color who was arrested in the1960s by a police department known at that time for racism; or, a longtime LPR who pled guilty to attempted possession of a controlled substance 20 years ago all of whom could have U.S. citizen spouses and U.S. citizen children. <4.6. Grounds for Inadmissibility> Legislation aimed at comprehensive immigration reform may take a fresh look at the grounds for excluding foreign nationals that were enacted in the 1990s. All foreign nationals seeking visas must undergo admissibility reviews performed by U.S. Department of State (DOS) consular officers abroad. These reviews are intended to ensure that they are not ineligible for visas or admission under the grounds for inadmissibility spelled out in the INA. These criteria are: health-related grounds; criminal history; security and terrorist concerns; public charge (e.g., indigence); seeking to work without proper labor certification; illegal entrants and immigration law violations; ineligible for citizenship; and, aliens previously removed. Over the past year, Congress incrementally revised the grounds for inadmissibility. Two laws enacted in the 110 th Congress altered longstanding policies on exclusion of aliens due to membership in organizations deemed terrorist. The 110 th Congress also revisited the health-related grounds of inadmissibility for those who were diagnosed with HIV/AIDS. More recently, the "H1N1 swine flu" outbreak focused the spotlight on inadmissibly screenings at the border. Questions about the public charge ground of inadmissibility arose in the context of Medicaid and the state Children's Health Insurance Program (CHIP) in the 111 th Congress. While advocacy of sweeping changes to the grounds for inadmissibility has not emerged, proponents of comprehensive immigration reform might seek to ease a few of these provisions as part of the legislative proposals. The provision that makes an alien who is unlawfully present in the United States for longer than 180 days inadmissible, for example, might be waived as part of a legislative package that includes legalization provisions. Tightening up the grounds for inadmissibility, conversely, might be part of the legislative agenda among those who support more restrictive immigration reform policies. <5. Refugee, Asylee, and Humanitarian Concerns> While refugee, asylee and humanitarian concerns have traditionally been treated as distinct from immigration reform, comprehensive reform legislation may include provisions that impact these issue areas. As precedent, asylum reforms were included in the 1990 and the 1996 overhauls of the INA. Additionally, the foreign nationals who have been denied asylum or who have had temporary protected status (TPS) in the United States for many years may often be covered by legalization or status adjustment provisions. Those who would revise refugee and asylum provisions in the INA have divergent perspectives. Some express concern that potential terrorists could use refugee status or asylum as an avenue for entry into the United States, especially aliens from trouble spots in the Mideast, northern Africa and south Asia. Some assert that the non-governmental organizations and contractors for the United Nations that assist displaced people are expanding the definition of "refugee" to cover people never before considered refugees. Others argue that given the religious, ethnic, and political violence in various countries around the world it is becoming more difficult to differentiate the persecuted from the persecutors . Others maintain that current law does not offer adequate protections for people fleeing human rights violations and gender-based abuses that occur around the world, or that it is time to re-think U.S. refugee policy. As a signatory to the United Nations Protocol Relating to the Status of Refugees, the United States agrees that it will not return an alien to a country where his life or freedom would be threatened. A refugee is a person fleeing his or her country because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Asylum-seekers are individuals who apply for refugee protections after they have arrived in the United States. Those granted asylum as well as those who are determined to be refugees are eligible to become LPRs after one year in the United States. Not all humanitarian migrants, however, are eligible for asylum or refugee status. When civil unrest, violence, or natural disasters erupt in spots around the world, the United States may offer TPS or relief from removal, for example. How to establish an appropriate balance among the goals of protecting vulnerable and displaced people, maintaining homeland security, and minimizing the abuse of humanitarian policies is the crux of this issue. Specific topics include refugee resettlement, asylum policy, temporary protected status, unaccompanied alien children, and victims of trafficking and torture. War, violence, civil unrest, economic destablization, or food crisis, for example, would trigger the urgency of these issues in the 111 th Congress. The devastation caused by the January 12, 2010, earthquake in Haiti has led DHS Secretary Janet Napolitano to grant TPS to Haitians in the United States at the time of the earthquake and has raised a series of policy concerns on Haitian migration. <6. Alien Rights, Benefits, and Responsibilities> The degree to which foreign nationals should be accorded certain rights and privileges as a result of their presence in the United States, along with the duties owed by such aliens given their legal status, sparks debate. Any immigration legislation, whether it expands, alters, or retracts migration levels, will likely prompt a debate over potential trade-offs and impacts on alien rights and responsibilities. All persons in the United States, whether U.S. nationals or foreign nationals, are accorded certain rights under the U.S. Constitution. However, foreign nationals do not enjoy the same degree of constitutional protections as U.S. citizens. Aliens who legally reside in the United States, moreover, possess greater constitutional protections than those aliens who do not. Federal laws, for example, place comprehensive restrictions on noncitizens' access to means-tested public assistance, with exceptions for LPRs with a substantial U.S. work history. Aliens in the United States without authorization (i.e., illegally present) are ineligible for federal public benefits, except for specified emergency services. Nonetheless, controversies and confusion abound, particularly regarding the eligibility of families comprised of people with a mix of immigration and citizenship status, such as an LPR married to an unauthorized alien with U.S. citizen children. A corollary issue is foreign nationals who have temporary employment authorizations and social security numbers, but who are not LPRs. Although it does not address the legality of the alien's immigration status, the Internal Revenue Code makes clear that "resident aliens" are generally taxed in the same manner as U.S. citizens. Those who are temporary legal residents or "quasi-legal" migrants pose a particular dilemma to some because they are permitted to work and have likely paid into the system that finances a particular benefit, such as social security or a tax refund, for which they may not be eligible. Unintended consequences, most notably when tightening up the identification requirements to stymie false claims of citizenship results in denying benefits to U.S. citizens, add complexity to the debate. These issues are arising in the context of specific legislation on due process rights, access to health care, tax liabilities and refunds, educational opportunities, and means-tested federal assistance. <7. Legislative Prospects> In the 110 th Congress, Senate action on comprehensive immigration reform legislation stalled at the end of June 2007 after several weeks of intensive floor debate. At the same time, the House Judiciary Subcommittee on Immigration, Citizenship, Refugees, Border Security, and International Law held multiple hearings weekly in April, May and June of 2007 on various aspects of immigration reform. The House, however, did not act on comprehensive legislation in the 110 th Congress. During the 109 th Congress, both chambers passed major overhauls of immigration law, but did not reach agreement on a comprehensive reform package. During his time in the Senate, President Barack Obama supported comprehensive immigration reform legislation that included increased enforcement as well as a pathway to legal residence for certain unauthorized residents. Similar views have been expressed by the Secretary of Homeland Security Janet Napolitano. The Obama Administration has outlined its principles for comprehensive immigration reform as follows: Create Secure Borders: Protect the integrity of our borders. Support additional personnel, infrastructure and technology on the border and at our ports of entry. Improve Our Immigration System: Fix the dysfunctional immigration bureaucracy and increase the number of legal immigrants to keep families together and meet the demand for jobs that employers cannot fill. Remove Incentives to Enter Illegally: Remove incentives to enter the country illegally by cracking down on employers who hire undocumented immigrants. Bring People Out of the Shadows: Support a system that allows undocumented immigrants who are in good standing to pay a fine, learn English, and go to the back of the line for the opportunity to become citizens. Work with Mexico: Promote economic development in Mexico to decrease illegal immigration. The Obama Administration has stated that comprehensive immigration reform will be a top priority, along with other competing priorities in the areas of domestic and foreign policy. In February 2009, President Obama said, "we're going to be convening leadership on this issue so that we can start getting that legislation drawn up over the next several months." President Obama and officials in his Administration met with Members of Congress from both parties at a June 25, 2009, meeting on comprehensive immigration reform at the White House. In his 2010 State of the Union address, the President pledged to "continue the work of fixing our broken immigration system." It is precedented and usual, however, for Congress to take the lead on immigration legislation. Senate Judiciary Subcommittee on Immigration, Refugees and Border Security Chairman Charles Schumer has stated that comprehensive immigration reform legislation could be taken up as soon as later in 2009, but only if the first priority is a crackdown on illegal immigration. Senator Schumer has stated his principles for reform, summarized as follows: dramatically curtail future illegal immigration; significant additional increases in infrastructure, technology, and border personnel; illegal aliens must register their presence and submit to a rigorous process of converting to legal status and earning a path to citizenship, or face imminent deportation; biometric-based employer verification system; more room for both family immigration and employment-based immigration; encourage the world's best and brightest individuals to immigrate, but discourage businesses from using our immigration laws as a means to obtain temporary and less-expensive foreign labor; and convert the current flow of unskilled illegal immigrants into the United States into a more manageable and controlled flow of legal immigrants. The ranking Republican on the Senate Judiciary Subcommittee on Immigration, Refugees and Border Security, Senator John Cornyn, has stated his willingness to continue working on immigration reform: "Comprehensive, common-sense immigration reform remains a top priority for me. Any legislation must protect our borders, promote economic prosperity in Texas and throughout the United States, and be consistent with our American values of compassion, family, and opportunity." Senator Cornyn's articulated his principles for immigration reform, summarized as follows: strengthen border security first; strengthen interior security; create tamper-proof identification and deliver a reliable employer verification system; streamline the temporary worker programs and offer visas to more highly-skilled workers; and deliver a fair but firm solution to the millions of men, women, and children who are here in violation of our laws. Despite the similar sounds across these three sets of principles, achieving these consensus likely will be daunting. The ranking Republican on the House Judiciary Committee, Representative Lamar Smith, offers a counter perspective: "To achieve immigration reform, the choices are not just amnesty or mass deportation. A strategy of 'attrition through enforcement' would dramatically reduce the number of illegal immigrants over time." The difficulties in accomplishing immigration reform were underscored by Vice President Joseph Biden when he was asked about the chances of extending temporary migrant protection programs: "We believe, the President and I, that this problem can only be solved in the context of an overall immigration reform." Biden further stated, "We need some forbearance as we try to put together a comprehensive approach to deal with this." As the 111 th Congress nears its end, some observers are speculating that specific immigration reform measures that have a tradition of bipartisan support, such as legislation that would enable some unauthorized alien students to become LPRs (DREAM Act), revise the H-1B visas process, or amend provisions pertaining to victims of trafficking, might be handled independent of comprehensive immigration reform.

There is a broad-based consensus that the U.S. immigration system is broken. This consensus erodes, however, as soon as the options to reform the U.S. immigration system are debated. The number of foreign-born people residing in the United States is at the highest level in U.S. history and has reached a proportion of the U.S. population—12.6%—not seen since the early 20th century. Of the 38 million foreign-born residents in the United States, approximately 16.4 million are naturalized citizens. According to the latest estimates by the Department of Homeland Security (DHS), about 10.8 million unauthorized aliens were living in the United States in January 2009. The Pew Hispanic Center recently reported an estimate of 11.1 million unauthorized aliens in March 2009, down from a peak of 12 million in March 2007. Some observers and policy experts maintain that the presence of an estimated 11 million unauthorized residents is evidence of flaws in the legal immigration system as well as failures of immigration control policies and practices. The 111th Congress is faced with strategic questions of whether to continue to build on incremental reforms of specific elements of immigration (e.g., employment verification, skilled migration, temporary workers, worksite enforcement, and legalization of certain categories of unauthorized residents) or whether to comprehensively reform the Immigration and Nationality Act (INA). President Barack Obama has affirmed his support for comprehensive immigration reform legislation that includes increased enforcement as well as a pathway to legal residence for certain unauthorized residents. This report synthesizes the multi-tiered debate over immigration reform into key elements: legal immigration; legalization; immigration control; refugees, asylees, and humanitarian migrants; and alien rights, benefits, and responsibilities. It delineates the issues for the 111th Congress on permanent residence, temporary admissions, border security, worksite enforcement, employment eligibility verification, document fraud, criminal aliens, and the grounds for inadmissibility. Addressing these contentious policy reforms against the backdrop of economic crisis sharpens the social and business cleavages and narrows the range of options. The report will be updated as events warrant.

<1. Introduction> In 1970, the K visa category was created for foreign national fianc (e)s of U.S. citizens. The first visa within the category, the K-1 visa, is a nonimmigrant visa that grants temporary admission to the United States for fianc (e)s in order for them to marry their U.S. citizen petitioners. Since the visa's creation, Congress has passed additional legislation that has added protections for fianc (e)s and their children. There were 35,925 K-1 visas issued by the U.S. Department of State (DOS) in FY2014. The K-1 visa has drawn increased attention due to a mass shooting in San Bernardino, CA, on December 2, 2015. One of the suspected shooters, Tashneen Malik, reportedly came to the United States on a K-1 visa to marry the other suspected shooter, Syed Rizwan Farook. The investigation of the couple, after the fact, reportedly brought to light suspicions to the couple's support of violent jihadists. Due to these events, Congress and the public have raised questions about the K-1 visa and its security screening. For instance, how well are individuals screened for fraud and security risks, and are there any gaps in the screening process? After the shooting, President Barack Obama asked the U.S. Department of Homeland Security (DHS) to review the U.S. visa program. Some members of Congress have also called for the inclusion of visa applicants' social media accounts as an added screening measure. This report will review the K-1 visa, providing information on the background of the program. Next, the report will cover the requirements of the visa and its application procedures, including the filing of a petition, the application for a visa, and the national security screening. The following section will describe K-1 visa holders' admission to the United States and their adjustment of status to lawful permanent residency. The last section will provide statistics on the issuance of the K-1 visa and the source countries of visa holders. <2. Background> P.L. 91-225 established the K nonimmigrant visa category in 1970 for fianc s, fianc es, and the derivative children of the fianc (e). The law amended the Immigration and Nationality Act (INA) in an effort to address the difficulties faced by U.S. citizens who wished to bring their fianc (e)s to the United States to be married. There are four subcategories within the K visa category. P.L. 91-225 created the first two categories (K-1 visa and K-2 visa), and in 2000 the Legal Immigration Family Equity Act (LIFE Act; Title XI of P.L. 106-553 ) created the last two categories (K-3 visa and K-4 visa). The K-1 visa is for noncitizens seeking to enter the United States to marry a U.S. citizen, and the K-2 visa is for their children. The K-3 visa is for noncitizens who married a U.S. citizen abroad and want to enter the United States while they wait for their immigration petition, or for an immigrant visa to become available, and the K-4 visa is for their children. Subsequent legislation was enacted in order to provide protections to the fianc (e) (also referred to as the beneficiary). The International Marriage Broker Regulation Act of 2005 (IMBRA; Title VIII, Subtitle D, of P.L. 109-162 ) requires the disclosure of the use of an international marriage broker and the petitioner's criminal convictions for certain crimes, notably sexual crimes. Additionally, IMBRA provides requirements with regard to international marriage brokers and requires the Department of State to provide beneficiaries with a pamphlet containing facts about the K-1 visa, domestic violence, and their rights. The Adam Walsh Child Protection and Safety Act of 2006 ( P.L. 109-248 ) further prohibits U.S. citizens from petitioning for a K-1 visa if they have been convicted of certain offenses against a minor (unless the Secretary of DHS can determine, under his/her sole discretion, that the petitioner poses no risk to the beneficiary). <3. Requirements and Procedures> In order for a foreign national to be issued a K-1 visa, the petitioner who is filing on the fianc (e)'s behalf must be a U.S. citizen and must provide the following evidence: The parties have met in person within two years of the petition's filing, though the Secretary of DHS may waive this requirement. The parties have a bona fide intention to marry. The parties are legally able and willing to conclude a valid marriage in the United States within 90 days of the fianc (e)'s arrival. In addition to the determination that a foreign national is qualified for a K-1 visa, a decision must be made as to whether the foreign national is admissible or excludable under the INA. <3.1. File a Petition> A U.S. citizen petitioner must file Form I-129F, Petition for Alien Fianc (e), with DHS's U.S. Citizenship and Immigration Services (USCIS), along with supporting documents. Additional requirements, established in IMBRA, mandate that the petitioners provide criminal records related to certain crimes and that they notify USCIS if they used an international marriage broker to meet the beneficiary. IMBRA also requires the petitioners to obtain a waiver if they have filed two or more K-1 petitions in the past or have had a K-1 petition approved in the two years before their current petition. Furthermore, if the petitioners are subject to the Adam Walsh Child Protection and Safety Act, they must demonstrate they pose no risk to the beneficiary. <3.2. Apply for a Visa> After USCIS approves a petition, it is sent to the U.S. Embassy or Consulate in the home country of the foreign national to determine eligibility for a K-1 visa for admission to the United States. The petitioner and beneficiary (including eligible children) must provide a completed Form DS-160, Online Nonimmigrant Visa Application, valid passports, divorce or death certificates for any previous spouses, police certificates from their present countries of residence and other countries they lived in for at least six months, medical examinations, evidence of financial support, photographs, evidence of relationship, and fees. Once all necessary documents are provided and security clearances are completed, the consular office schedules an interview to determine eligibility. Although the K-1 visa is a nonimmigrant visa, due to the beneficiary's intention of remaining in the United States, the consular office treats it as an immigrant visa and seeks to determine whether the individual would be admissible as an immigrant. Additionally, DOS has issued instructions with regard to consideration of these applications. <3.3. National Security Screening21> The K visa applicant is required to submit his or her photograph and fingerprints, as well as full name (and any other name used or by which he or she has been known), age, gender, and the date and place of birth, as are all foreign nationals seeking a visa. The visa applicant's personal data are added to the Consular Consolidated Database (CCD), a biometric/biographic database that screens all visa applicants, including those seeking a K visa. CCD links with other databases to flag problems that may have an impact on the issuance of the visa, which include DHS's Automated Biometric Identification System (IDENT) and the Federal Bureau of Investigation (FBI) Integrated Automated Fingerprint Identification System (IAFIS). In addition to performing biometric checks of the fingerprints for all visa applicants, DOS uses facial recognition technology to screen visa applicants against a "watchlist" of photos of known and suspected terrorists obtained from the Terrorist Screening Center (TSC), as well as the entire gallery of visa applicant photos contained in the CCD. To screen K visa applicants, as well as all other visa applicants, consular officers use the Consular Lookout and Support System (CLASS) database, which has name-searching algorithms to ensure matches between names of visa applicants and any derogatory information contained in CLASS. DOS reports that about 70% of the records in CLASS come from other agencies, including DHS, the FBI, and the Drug Enforcement Administration (DEA). DOS also employs an automated CLASS search algorithm that runs the names of all visa applicants against the CCD to check for any prior visa applications, refusals, or issuances. Consular officers have long relied on the Security Advisory Opinion (SAO) system, which requires a consular officer abroad to refer selected visa cases for greater review by intelligence and law enforcement agencies. If consular officials receive information about a K visa applicant that causes concern, they send a dedicated and secure communication to the National Counterterrorism Center (NCTC). In a similar set of SAO procedures, consular officers send suspect names, identified by law enforcement and intelligence information, to the FBI for a name check. There is also the "Terrorist Exclusion List" (TEL), which lists organizations designated as terrorist-supporting and includes the names of individuals associated with these organizations. In June 2013, DOS began "Kingfisher Expansion" (KFE) in partnership with the NCTC for conducting interagency counterterrorism screening of all visa applicants. The consular official submits the K visa applicants' electronic visa applications as a "vetting package" to the NCTC. In turn NCTC uses an automated process to compare the vetting package with its holdings, most notably the Terrorist Identities Datamart Environment (TIDE) on known and suspected terrorists and terrorist groups. A "hit" in KFE triggers a Washington-based interagency review of the visa application. KFE also conducts post-issuance reviews of valid visas to check for new information on emerging threats. The deadly attack in San Bernardino raised questions as to whether immigration officials should be pre-emptively trawling the social media accounts of visa applicants, after early rumors that Tashneen Malik (using a pseudonym) had posted declarations of loyalty to the Islamic State on Facebook that day. A former DHS official who currently serves as a consultant to ABC News asserted that DHS had a policy of not reviewing the social media accounts of visa applicants during his tenure at DHS. According to media accounts, the FBI was also criticized for not uncovering evidence of pro-jihadist messages that Malik reportedly had e-mailed in 2012. Multiple media sources have reported that FBI Director James Comey has subsequently stated that there was "no evidence of a posting on social media" by either of the suspects in the San Bernardino shootings. DHS initiated three pilot programs earlier in 2015 to specifically incorporate appropriate social media review into its vetting of applicants for certain immigration benefits. <4. Admission to the United States and Adjustment of Status> If the beneficiary is issued a K-1 visa, it is normally valid for six months. DHS Customs and Border Protection (CBP) officers inspect all arrivals to the United States at ports of entry and again screen the K visa holder against the various DHS databases and "watch lists." Once in the United States, the K-1 nonimmigrant is required to marry the U.S. citizen petitioner within 90 days. K-1 visa holders are permitted to work in the United States during this time if they file for employment authorization. The foreign national is eligible for lawful permanent residence as an immediate relative if the marriage takes place within 90 days and the fianc (e) is otherwise admissible. This status is conditional for two years. If the marriage does not occur within 90 days, the K visa expires and the foreign national must depart from the United States. <5. K-1 and K-2 Statistics> From FY2000 to FY2014, DOS issued a total of 430,900 K-1 visas, with an additional 65,833 K-2 visas issued to the children of K-1 visa beneficiaries. Since FY2000, K-1 visa issuances have fluctuated, though they have experienced an overall rise. FY2014 was the peak year thus far in the 21 s century for fianc (e) visas, with DOS issuing 35,925 K-1 visas, an increase of 36% from FY2013. The lowest number of K-1 visa issuances in the 21 st century, at 21,471 visas, was in FY2000. In terms of source countries for all K visa holders, the Philippines led with 8,525 K visas in FY2014. In comparison, Chinese nationals were issued the second largest number of K visas at 2,177 visas; and Mexican nationals were issued the third largest portion of K visas at 2,101 visas. In FY2014, Asia was the top receiving region of K visas with 18,864, or 46% of all K visas issued. Additionally, North America and Central America was the second largest source region with 19% of K visas, while Europe was the third largest source region with 18% of K visas. Figure 2 presents the regional breakdown of K visas that DOS issued in FY2014, and Figure 3 shows the top 12 source countries.

The K nonimmigrant visa category was created in 1970 through P.L. 91-225, which amended the Immigration and Nationality Act (INA). Within the K visa category, the K-1 visa is a visa for fiancé(e)s of U.S. citizens and the K-2 visa is a visa for the fiancé(e)'s children. Congress later enacted legislation to provide protections for fiancé(e)s, specifically creating requirements around the use of international marriage brokers, the disclosure of the U.S. petitioner's criminal background, the provision of information to fiancé(e)s on their rights, and additional protections for minors. A mass shooting on December 2, 2015, in San Bernardino, CA, where one of the suspected shooters entered the United States on a K-1 visa, has drawn increased attention to the visa category. This tragedy has spurred questions surrounding the K-1 visa national security screening process and any possible gaps. Some Members of Congress have suggested including a review of K-1 applicants' social media accounts into the screening process. In order to qualify for a K-1 visa, a U.S. citizen must file on behalf of his/her fiancé(e) and provide evidence that (1) the parties have met in person within two years of the petition's filing, (2) the parties have a bona fide intention to marry, and (3) the parties are legally able and willing to be married in the United States within 90 days of the fiancé(e)'s arrival. The petitioner must first file a petition with the Department of Homeland Security's (DHS's) U.S. Citizenship and Immigration Services (USCIS). Once the petition is approved, it is sent to a U.S. Embassy or Consulate in the home country of the foreign national, where it is determined if the fiancé(e) is eligible for admission to the United States. Although the K-1 visa is a nonimmigrant visa, the fiancé(e) intends to remain in the United States and is therefore also subject to the admission requirements of immigrant visas. K visa applicants' national security screening entails the use of biographical, biometric, and photographic data. The data are entered into consular-based databases, such as the Consular Consolidated Database (CCD) and Consular Lookout and Support System (CLASS), which flag problems that may have an impact on the issuance of a visa or matches to any derogatory information. Consular offices send suspect individuals' applications for greater review to other agencies, such as the Federal Bureau of Investigation (FBI) and the National Counterterrorism Center (NCTC). In 2013, NCTC began conducting interagency counterterrorism screening of all visa applicants and in 2015, DHS began pilot programs to incorporate social media screening into its vetting of applicants for certain immigration benefits. Once visa applicants have been approved and their security clearances are completed, they can travel to the United States, where they must marry their U.S. citizen petitioners within 90 days of their arrival. Once married, the fiancé(e) adjusts to a conditional residency and after two years can become a lawful permanent resident. In FY2014, the U.S. Department of State issued 35,925 K-1 visas. Asia received the largest portion of K visas at 46%, with the Philippines being the country with the highest number of K visas at 8,525 visas.

Criminal prosecutions involving classified information inherently create a tension between the government's legitimate interest in protecting sensitive national security information and a criminal defendant's rights under the United States Constitution and federal law. In many cases, the executive branch may resolve this tension before any charges are formally brought by simply forgoing prosecution in order to safeguard overriding national security concerns. "Graymail" colloquially refers to situations where a defendant may seek to introduce tangentially related classified information solely to force the prosecution to dismiss the charges against him. However, in other cases, classified information may actually be material to the defense and excluding it would violate the defendant's constitutional rights. This tension was the primary factor leading to the 1980 enactment of the Classified Information Procedures Act (CIPA), which "provides pretrial procedures that will permit the trial judge to rule on questions of admissibility involving classified information before the introduction of the evidence in open court." These procedures are intended to provide a means for the court to distinguish instances of graymail from cases in which classified information is actually material to the defense. <1. Background> Courts have generally agreed that CIPA does not create any new privilege against the disclosure of classified information, but merely establishes uniform procedures to determine the materiality of classified information to the defense in a criminal proceeding. The U.S. Court of Appeals for the Second Circuit (Second Circuit) has held that CIPA "presupposes a governmental privilege against disclosing classified information" in criminal matters. Therefore, before discussing the specifics of the Classified Information Procedures Act in criminal prosecutions, this report will first provide a general overview of the government's ability to restrict disclosures in civil litigation by asserting the state secrets privilege. The state secrets privilege is a judicially created evidentiary privilege that allows the government to resist court-ordered disclosure of information during civil litigation if there is a reasonable danger that such disclosure would harm the national security of the United States. Although the common law privilege has a long history, the Supreme Court first described the modern analytical framework of the state secrets privilege in the 1953 case of United States v. Reynolds. If the state secrets privilege is appropriately invoked to cover protected information in civil litigation, it is absolute; the disclosure of the underlying information cannot be compelled by the court. Still, a valid invocation of the privilege does not necessarily require dismissal of the lawsuit. In Reynolds , for instance, the Supreme Court did not dismiss the plaintiffs' claims, but rather remanded the case to determine whether the claims could proceed absent the privileged evidence. Controversy has arisen with respect to the question of how a case may proceed in light of a successful claim of privilege. Courts have varied greatly in their willingness to either grant government motions to dismiss a claim in its entirety or allow a case to proceed "with no consequences save those resulting from the loss of evidence." Whether the assertion of the state secrets privilege is fatal to a particular suit, or merely excludes privileged evidence from further litigation, is a question that is highly dependent upon the specific facts of the case. <2. The Classified Information Procedures Act> Prosecutions implicating classified information can vary factually, but an important distinction that may be made among such prosecutions regards whether the defendant already has access to the classified information in question. In cases where the defendant is accused of leaking classified information, she may already be privy to such information, and the government may be seeking to prevent further disclosure to the general public. However, in the case of terrorism prosecutions, the more typical concern is likely to be how classified information can be used as part of the prosecution's case against the defendant. In these cases, protective orders preventing disclosure to the defendant, as well as to the public, may be sought by the government. Constitutional issues related to withholding classified information from a criminal defendant 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. <2.1. Pretrial Conferences, Required Notice, and Appeals> CIPA contains a number of provisions that are intended to create opportunities to resolve issues related to the use of classified information in advance of trial in a secure setting. For example, at any time after charges have been filed against a defendant, any party may request a pretrial conference to discuss issues related to the potential disclosure of classified information. Among the issues that may be discussed are schedules for discovery requests and hearings to determine the relevance, admissibility, and materiality of classified information. CIPA also requires a defendant to notify the court and the prosecution of any classified information that he reasonably expects to disclose or cause the disclosure of. If a defendant fails to provide such notice, he may be penalized by being precluded from using such evidence at trial. In order to ensure that the disclosure of classified information is not premature, the government may also take an interlocutory appeal of any CIPA ruling, rather than waiting until a trial has concluded. In this way, the government does not have to risk disclosure of classified information that would later have been determined by a reviewing court to be protected. Such appeals will be expedited by the court of appeals. <2.2. Protective Orders and Security Clearances> In order to safeguard classified information that is disclosed, CIPA authorizes courts to issue protective orders prohibiting or restricting the disclosure of such classified information. In some cases, protective orders may limit disclosure to individuals or attorneys, even from those who have received security clearances from the government. However, some defendants may be ineligible for the necessary security clearances. In these cases, courts may issue protective orders prohibiting cleared counsel from sharing any classified information with the defendant. In the event that the defendant's attorneys are also unable to obtain the necessary security clearances, courts have appointed counsel with the necessary security clearance to represent the defendant in matters where disclosure of classified information may be necessary. However, in some cases, cleared counsel have been prohibited from disclosing the classified information to the uncleared defendant or uncleared defense counsel. For example, in In re Terrorist Bombings of United States Embassies in East Africa , the court entered a protective order limiting disclosure of classified material to certain persons who had obtained sufficient security clearances. The defendant's attorneys were able to obtain security clearances, but the defendant was not. Because of this, the defendant's attorneys were unable to share with their client all the information they learned from the classified documents. Other facts deemed by the court to be relevant to the defendant's case were declassified or stipulated by the government. The defendant in this case argued that this restriction on communication violated his Sixth Amendment right to have the assistance of counsel. The Second Circuit rejected this claim, noting that the right to the assistance of counsel does not preclude every restriction on communication between defense counsel and the defendant. In this instance, the court believed that the restrictions were justified because the disclosure of the classified information "might constitute a particularly disastrous security breach one that, perhaps, might place lives in danger." Furthermore, the Second Circuit found that the restrictions were limited and carefully tailored because they permitted cleared defense counsel to discuss the "relevant facts" with the defendant. <2.3. 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, including classified information. CIPA authorizes a court to permit the government to propose redactions to classified information provided to the defendant as part of discovery, but "does not give rise to an independent right to discovery" of classified information. Alternatively, a court may permit the government to summarize the classified information, or to admit relevant facts in lieu of providing discovery. In support of such procedures, the government may submit an affidavit written statement explaining why the defendant is not entitled to the redacted information. The statement may be viewed by the court ex parte and in camera . <2.3.1. Required Disclosures by the Prosecution> Under federal law, there are certain classes of information that the prosecution must provide if requested by the defendant. For example, Brady material, named after the seminal Supreme Court case Brady v. Maryland , refers to information in the prosecution's possession which is exculpatory or tends to prove the innocence of the defendant. This may encompass statements by witnesses that contradict, or are inconsistent with, the prosecution's theory of the case. Such information 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 by the courts. Additionally, Jencks material refers to written statements made by a prosecution witness, who has testified or may testify. For example, this would include a report made by a witness called to testify 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 may have, to show either inconsistency or incompleteness of the in-court testimony. Subsequently, this requirement was codified by the Jencks Act. Classified information that is also Jencks or Brady material is still subject to CIPA and may be provided in a redacted or substituted form, but the operation of Jencks and Brady may differ in this context. For example, 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 the defendant's input. <2.3.2. Depositions> 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 raised was the ability of the defendant to depose "enemy combatant" witnesses who 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 U.S. Court of Appeals for the Fourth Circuit (Fourth Circuit) 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, such as summaries of the witnesses' statements. 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. <2.4. Admissibility of Classified Information> CIPA provides the government with an opportunity to request a hearing to determine the use, relevance, or admissibility of any classified information that may be disclosed at trial. This hearing may be conducted in camera if the Attorney General certifies that a public proceeding might result in disclosure of classified information. Before the hearing, the government may be required to give the defendant notice of the classified information at issue and its relevancy to the charges against the defendant. If the information in question is held to be material to the defense, but the government still objects to its disclosure, the court is required to accept that assertion without scrutiny and impose nondisclosure orders upon the defendant. However, in such cases the court is also empowered to dismiss the indictment against the defendant or impose other sanctions that are appropriate. Therefore, once classified information has been determined through the procedures under CIPA to be material, it falls to the government to elect between permitting the disclosure of that information or the sanctions the court may impose, including dismissal of charges against the defendant. <2.4.1. Substitutions> If the court concludes that classified information is admissible and authorizes its disclosure at trial, CIPA establishes a framework by which the government may petition the court to permit certain alterations to evidence in order to introduce the relevant information in an alternative form. These substitutions may occur during discovery or at trial. During discovery, a court may, "upon a sufficient showing," permit the government to "delete specified items of classified information," "substitute a summary of the information," or "substitute a statement admitting relevant facts that the classified information would tend to prove." Prior to the introduction of evidence at trial, a court may likewise permit the government to redact, summarize, or substitute classified information, but only so long as the substitution "provide[s] the defendant with substantially the same ability to make his defense as would disclosure of the specific classified information." If the substitute is rejected by the court, disclosure of classified information may still be prohibited if the Attorney General files an affidavit with the court objecting to disclosure. However, if the Attorney General files such an objection, the court may dismiss the indictment; find against the government on any pertinent issue; strike testimony; or take any other action as may be appropriate in the interests of justice. Two recent CIPA cases, both of which involved federal prosecutions of former intelligence officials for allegedly disclosing classified information, provide insight into the scope of a court's authority to permit evidentiary substitutions. In United States v. Drake , a federal district court approved the government's request to submit evidentiary substitutions for unclassified , but otherwise protected, information. In United States v. Sterling , the court permitted the prosecution to use evidentiary substitutions for evidence introduced in its own case-in-chief, as opposed to merely providing substitutes for evidence introduced by the defendant. Both of these rulings are discussed in more detail in the following sections. <2.4.1.1. Substitutions for Unclassified Information> Section 6(c) of CIPA specifically provides the government with the authority to make evidentiary substitutions for classified information during a criminal prosecution. However, in some cases prosecutors have also sought to submit substitutions for unclassified information that the government believes would threaten national security if disclosed as part of the evidentiary record. For example, in U nited S tates v. Drake , the government sought to make substitutions for evidence that, though not classified, was protected under a separate statutory evidentiary privilege expressly applicable to the National Security Agency (NSA). The Drake case involved an unauthorized disclosure prosecution against a former NSA employee under the Espionage Act. Drake was accused of leaking classified information relating to the NSA Inspector General investigation that found that the agency had inefficiently used resources in developing a specific secret program. After a series of CIPA hearings in which the court determined which classified information sought by the defense was relevant and admissible, the government provided the court with proposed evidentiary substitutions for admissible evidence that included substitutions and redactions for both classified and unclassified evidence. As to the substitutions of unclassified evidence, the government argued that though not classified, the evidence was "protected material" under 50 U.S.C. Section 402 a statutory privilege that protects against the "disclosure of the organization or any function of the National Security Agency, or any information with respect to the activities thereof." In short, the government asserted that admissibility decisions under CIPA, including determinations of the adequacy of a substitution, remained subject to statutory, military, and other traditional common law privileges, as CIPA had never altered "the existing law governing the admissibility of evidence." In addition, the government argued that courts retain "inherent authority outside of CIPA to resolve the legal and evidentiary issues relating to the protected information through the use of substitutions." The defense objected to the government's proposed use of substitutions for unclassified evidence arguing that CIPA provided the exclusive basis upon which a court could permit substitutions for evidence in a criminal case. As CIPA, by its terms, applied only to classified information, the court, according to the defendant, had no grounds to permit substitutions, redactions, or summaries with respect to unclassified information. Even if the court had authority to permit substitutions for unclassified information protected by a valid privilege, the defense asserted that the NSA privilege, which had previously only been asserted in civil cases, had no application in a criminal trial. The federal district court held that the government was permitted to submit substitutions for unclassified information protected under the NSA's statutory privilege, as CIPA does not "foreclose the consideration of substitutions for information based upon an assertion" of an otherwise applicable government privilege. Relying on the Fourth Circuit's decision in U nited S tates v. Moussaoui , the district court determined that federal courts have the inherent "authority to allow or reject substitutions for unclassified information that is protected by a Government privilege." In Moussaoui , the defense had requested access to a witness for use at trial. The government objected, noting that the witness in question was an enemy combatant, a national security asset, and, therefore, unavailable. The Fourth Circuit accepted the government's position, holding that although CIPA was inapplicable to the unclassified testimony in question, the statute provided a "useful framework" for considering the appropriateness of substitutions. Thus, rather than providing the defense with unfettered access to the witness, the Fourth Circuit permitted the witness to be deposed with specific precautions. Drawing an analogy to Moussaoui , the Drake court held that as long as the NSA privilege was applicable, the court was not prohibited from allowing adequate substitutions for protected evidence. Specifically, for the Drake court CIPA did not represent the exclusive means by which a court could permit evidentiary substitutions. The court next turned to whether the NSA privilege was applicable in a criminal prosecution. As no court had yet held that the NSA statutory privilege applied in criminal cases, the district court looked to the analogous state secrets privilege generally considered a common law evidentiary privilege with application primarily in the civil context to inform its decision. Citing a case from the U.S. Court of Appeals for the Second Circuit (Second Circuit), in which it was determined that the state secrets privilege was applicable to criminal cases, the district court determined, by analogy, that the NSA privilege would similarly apply in the criminal context. Accordingly, as the NSA had asserted an applicable government privilege, the agency was free to submit substitutions for unclassified evidence protected under 50 U.S.C. 402. <2.4.1.2. Substitutions for Prosecution Evidence and Defense Evidence> A second dispute that has arisen in the context of allowing substituted evidence in criminal leak prosecutions has been whether CIPA permits the government to submit substitutions for its own evidence. Typically in CIPA cases, the defense will submit a 5(a) notice, which provides the court and the prosecution with notice of any classified information that the defense reasonably expects to disclose or cause to be disclosed at trial. Following this submission, the court will generally hold CIPA hearings in which the court makes "all determinations concerning the use, relevance, or admissibility of classified information that would otherwise be made during the trial or pretrial proceedings." After the court determines what evidentiary items are relevant and admissible, the government will generally propose any necessary substitutions for that evidence. Thus, substitutions generally are submitted in place of classified information that the defense expects to use in its own case. However, in U nited S tates v. Sterling , the government gave notice to the court that it also sought to submit substitutions for classified information it wished to introduce itself for use in its case-in-chief. Sterling involves a former Central Intelligence Agency (CIA) officer who was convicted of disclosing classified information to author James Risen. During preliminary hearings in the case, the defense objected to the prosecution's use of substitutions for its own evidence. CIPA, the defense asserted, permitted the court to grant a request to use substituted evidence in only two scenarios: (1) under Section 4, in complying with the prosecution's discovery obligations, and (2) under Section 5 and Section 6, for use "in lieu of classified information that the defense intends to use in any pretrial or trial proceeding." "Notably absent," argued the defense, "is any statutory provision allowing for the Government to use substitutions or redactions for information it seeks to introduce into evidence at trial." Although unable to cite to any previous cases that had interpreted CIPA as distinguishing between evidence introduced by the defense and evidence introduced by the prosecution, or any express language within the statute that clearly made such a distinction, the defense relied upon the history and primary purposes of CIPA as the basis for its argument. First, the defense argued, the statute was "intended to implement procedures that allow for the defense to gain access to classified information so as not to impede a defendant's right to a fair trial." Second, the defendant argued that CIPA was enacted to combat the practice of "graymail," where a "criminal defendant threatens to reveal classified information during the course of his trial in the hope of forcing the government to drop the charge against him." Neither concern, the defense argued, was triggered where the government is permitted to substitute evidence it seeks to present in its own case-in-chief. In response, the government argued that nothing in the text of CIPA distinguished between evidence submitted by the prosecution and evidence submitted by the defense. In the view of the government, CIPA authorizes the government to propose substitutions "upon any determination by the court authorizing the disclosure of specific classified information." The government relies on the text of CIPA, noting that neither Section 4, 6, nor 8 of CIPA states that the provided substitution authority only applies to defense evidence. Additionally, contrary to the defense's reading of the legislative history, the government argued that while "graymail" was undoubtedly a concern behind CIPA, the legislative history suggests that Congress was also concerned with the disclosure of any classified evidence at trial, regardless of which party introduced the evidence. The government contended that CIPA, when read as a whole, was enacted to establish procedures for use in criminal prosecutions involving classified information that prevents "the disclosure in the course of trial of the very information the laws seek to protect." The substitution provisions of CIPA that exist to protect classified information, would, according to the government, therefore apply to any classified information that arises during trial, not simply classified information that the defense seeks to introduce. The U.S. District Court for the Eastern District of Virginia rejected the defense's interpretation of CIPA. Instead, based on "reasons stated on the record during a sealed hearing," the court held that the government "will be permitted to use limited substitutions and redactions in exhibits subject to the court's determination that the exhibits are relevant, not cumulative, and not shown by the defense to be unfairly prejudicial." While the sealed nature of the opinion makes it unclear what the basis was for the court's ruling, the fact that it ruled for the government suggests that the court found the government's arguments to be persuasive. <2.4.1.3. Consequences> Together, the Drake and Sterling cases reinforce that CIPA does not represent the exclusive means by which a court can prevent disclosure of sensitive or classified information within criminal proceedings. CIPA is not intended to alter the rules of evidence, and therefore does not affect traditional powers of the judiciary to craft certain methods for safeguarding protected information. Thus, rather than imposing procedural limitations on the court, CIPA may be more accurately characterized as supplementing judicial authority to resolve evidentiary disputes in criminal cases involving classified information. Additionally, the statute has not been read by the courts as simply establishing a procedure by which defendants are provided with access to classified information necessary to their defense; rather, the statute also serves the broader purpose of protecting the disclosure of classified information generally by providing the government with procedures for carrying out prosecutions without risking the disclosure of protected information. <2.4.2. Confrontation Clause and the Silent Witness Rule> In some cases, the use of CIPA procedures can also implicate constitutional concerns. As described above, there may be instances where disclosure of classified information to the defendant would be damaging to national security. In these instances, the prosecution may seek to present evidence at trial in a manner that does not result in disclosure to the defendant. One proposed scenario 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 be viewed as unconstitutionally infringing upon the defendant's Sixth Amendment right to confrontation. Similar confrontation issues may be raised by use of the "silent witness rule," a procedure that may be offered by the government as a substitution for classified information that would be otherwise admissible in a criminal defendant's trial. Under this procedure, a witness whose testimony may include classified information will respond to questions by making references to particular portions of a classified document. The classified document may be made available to the parties, the court, and members of the jury. However, it is not made available to members of the public that may be in the gallery of the court. In this way, the witness may testify without disclosing classified information to members of the public at large. If the defendant is not allowed to personally review classified information in the same manner that it is made available to the jury, the use of the silent witness rule may violate the defendant's right to confront the evidence used against him. For example, in United States v. Abu Ali , the trial court permitted the prosecution to use the silent witness rule, while only providing the defendant and uncleared counsel with a redacted version of the document. In contrast, the members of the jury were allowed to hear the testimony using an unredacted version of the same document. The Fourth Circuit subsequently held this procedure to be unconstitutional, stating: If the government does not want the defendant to be privy to information that is classified, it may either declassify the document, seek approval of an effective substitute, or forego its use altogether. What the government cannot do is hide the evidence from the defendant, but give it to the jury. Such plainly violates the Confrontation Clause. The use of the silent witness rule for selected pieces of classified evidence has been approved by courts under CIPA when its use has not raised Confrontation Clause issues. For example, in Sterling , the government sought an interlocutory appeal from a district court order permitting government witnesses to testify using pseudonyms from behind physical screens, but allowing the jury and defense to have a key to the witnesses' true names. Specifically, the government sought to preclude the jury and defense from knowing the witnesses' true identities. Sterling had argued that such exclusions would violate his right to have a public trial and to confront witnesses against him. Sterling also argued that, in his particular case, the use of such security measures was "unduly suggestive," as the jury may confuse the purposes of the secrecy measures used in the witnesses' testimony and make inferences about the sensitive nature of the information he had allegedly disclosed. Sterling argued that these inferences would be prejudicial because the actual sensitivity of such information was a contested issue in his trial. The Fourth Circuit held that the district court had correctly allowed the defense to access the witnesses' true identities, noting that "Sterling knows, or may know, some of the witnesses at issue, and depriving him of the ability to build his defense in this regard could impinge on his Confrontation Clause rights." However, the court reversed that part of the district court's order allowing the jury to know the witnesses' true names, finding the witnesses' identities to be clearly sensitive information that would not provide any benefit to the jury's deliberations. The Fourth Circuit also held that any concerns about the undue influence of the security measures could be cured by instructing the jury that "Sterling's guilt cannot be inferred from the use of security measures in the courtroom."

A criminal prosecution involving classified information may cause tension between the government's interest in protecting classified information and the criminal defendant's right to a constitutionally valid trial. In some cases, a defendant may threaten to disclose classified information in an effort to gain leverage. Concerns about this practice, referred to as "graymail," led the 96th Congress to enact the Classified Information Procedures Act (CIPA) to provide uniform procedures for prosecutions involving classified information. Examples of recent cases implicating CIPA have arisen in the context of prosecutions against alleged terrorists, as well as prosecutions involving the unauthorized disclosure of classified information by former intelligence officials. CIPA provides procedures that permit a trial judge to rule on the relevance or admissibility of classified information in a secure setting. The Act requires a defendant to notify the prosecution and the court of any classified information that the defendant may seek to discover or disclose during trial. During the discovery phase, CIPA authorizes courts to issue protective orders limiting disclosure to members of the defense team that have obtained adequate security clearances and to permit the government to use unclassified redactions or summaries of classified information that the defendant would normally be entitled to receive. If classified information is to be introduced at trial, the court may allow substitutes of classified information to be used, so long as they provide the defendant with substantially the same ability to present a defense and do not otherwise violate his constitutional rights. Among the rights that may be implicated by the application of CIPA in a criminal prosecution are the defendant's right to have a public trial, to be confronted with the witnesses against him, and to have the assistance of counsel. Application of CIPA may also be implicated by the obligation of the prosecution to provide the defendant, under Brady v. Maryland, with exculpatory information in its possession and the separate obligation to provide the defendant with government witnesses' prior written statements pursuant to the Jencks Act.

<1. Introduction> In the last decade, the concept of government partnerships with the private sector has frequently appeared in international development literature and U.S. development policy discussions. Goal 8 of the United Nations' Millennium Development Goals is to "develop a global partnership," with an emphasis on working with the private sector to increase global access to information technology and pharmaceuticals. The "transformational diplomacy" initiative in the George W. Bush Administration included "engaging the private sector" among its six areas of focus. The Obama Administration's U.S. Global Development Policy, announced in September 2010, aims to "leverage the private sector, philanthropic and non-governmental organizations, and diaspora communities." U.S. development activities in the last decade reflect this emphasis. The U.S. Agency for International Development (USAID) alone reports participating in 1,600 public-private partnerships (PPPs) with more than 3,000 different partners between 2001 and 2012. Some observers view such partnerships as part of a broad ongoing transformation of how foreign aid is implemented, bringing nontraditional actors and ideas into development practice. Others view PPPs as an experiment that has not proven itself preferable to traditional approaches to development assistance. This report discusses the evolution of private sector involvement in U.S. foreign assistance programs over recent decades, how globalization has driven the modern approach to development partnerships, potential benefits and drawbacks of PPPs, and how partnerships are being used by other bilateral donors and multilateral development agencies. The report then discusses partnership-related issues that may be of interest to Congress as part of the foreign assistance authorization and reform process. <2. Evolution of the Private Sector Role in U.S. Development Assistance> USAID and other U.S. agencies have worked with the private sector for decades, but they have expanded their means of engaging the private sector over time. Starting in the mid-1970s, USAID began using nonprofit nongovernmental organizations (NGOs) as development program implementers more frequently, primarily as an alternative to full government staffing. The shift allowed for greater flexibility, and arguably cost savings, while maintaining full government control of development policy and programs. In the 1980s, the Reagan Administration's foreign aid policies focused on supporting indigenous for-profit private enterprises as a means of improving economic development processes and outcomes. The Private Enterprise Initiative, begun in 1981, focused largely on improving the policy environment for indigenous private enterprise in developing countries, but it also explored ways to use the private sector to implement traditional aid programs. This approach was also reflected in the establishment of several enterprise funds, beginning in 1989, which primarily used USAID funds to invest in small and medium-sized private businesses, initially in Central and Eastern Europe, as a means of spurring private sector development in countries transitioning toward market-based economies. Microenterprise programs, through which USAID supports local financial institutions or organizations providing small loans and support services to small entrepreneurs, first became popular in this period as well. These models of private sector engagement continue to this day. Government aid agencies work with private entities both as implementing partners and drivers of economic growth in which to invest. In the last decade, however, a new model of public-private engagement in development has emerged. Rather than funding private entities to implement USAID-designed programs, or investing in the growth of private enterprise within a developing country (both approaches are ongoing), the new model is designed to take advantage of the growing presence of international corporations, foundations, and other private entities in developing countries through formal relationships marked by common objectives, mutual resource contributions, and shared risk. This is the type of activity, now commonly referred to as a public-private partnership (PPP), addressed in this report. Nevertheless, there is no official definition of PPP in the international development context, and an understanding of the wide range of activities that are referred to as PPPs is important for understanding the debate around PPP efficacy. <2.1. Globalization and Development> The rise of PPPs in development assistance is closely related to significant changes in the flow of funds to developing countries in recent decades. Liberalized trade policies and information technology innovations have led to a surge in global actors. Private financial flows to developing countries including commercial lending, charitable giving, and money transfers between family members are now significantly and consistently higher than official development assistance, a dramatic change from just 10 years ago. Foreign aid from government donors accounted for only 18% of the estimated $703 billion in total financial flows between the Organization for Economic Cooperation and Development (OECD) member countries and developing countries in 2010 ( Figure 1 ). Looking at U.S. financial flows to the developing world in 2010, official flows (development aid from the government) accounted for only about 9%. Private capital flows, remittances, and philanthropy made up the bulk. The quality of private flow data is questionable, and some analysts assert that much of the private flow is not going to the least-developed countries, where official aid is still paramount. Still, the trend is unmistakable. Donor governments are no longer the key foreign players in many developing countries. Aid policies and priorities are affected by evolving trade, investment, and migration trends and policies. In this changing context, PPPs are viewed by many policymakers as an opportunity to leverage private resources toward solving problems that hinder development and business interests alike. <3. U.S. Government Development Partners> Among U.S. agencies involved in international development, USAID took the early lead in developing and implementing a PPP model. Under the Obama Administration, the State Department has become more active in development-related PPPs as well, and, more recently, the Millennium Challenge Corporation has applied the new partnership model in the development of its country compacts. While agencies may vary in their partnership priorities and processes, there is significant overlap. In fact, many large PPPs include multiple U.S. agencies as partners. <3.1. USAID Global Development Alliances/Private Sector Alliances> USAID is the primary U.S. agency promoting international development. The agency has been the U.S. government leader on PPPs for development since establishment of the Global Development Alliance (GDA) Secretariat within USAID in 2001. The Secretariat was tasked with developing partnership models that could become a new standard for USAID programs. It was intended to link growing private financial flows in developing countries to U.S. development assistance programs, enabling both private and public gains by promoting common interests. USAID reports participating in more than 1,600 PPPs since 2001, with more than 3,000 distinct partners. Private partners include corporations, universities, and foundations and other nonprofit organizations. USAID uses PPPs in every development sector. For example, in the Jordan Education Initiative, USAID brought a dozen private sector technology companies, including Cisco and Dell, together with the Jordanian Ministry of Education's program to modernize curriculum content and broadband information technology as a key step to education reform. USAID contributed $11.25 million to the partnership between 2005 and 2007, while the private partner contributions were valued at $25.6 million. In the Sustainable Tree Crops Alliance, USAID brought together public and private stakeholders in the cocoa industry, including Mars, Hershey, Nestl , and other international chocolate processors. The project was designed to improve the income of small tree crop farmers and the environmental sustainability of cocoa production systems in West and Central Africa through technology transfer, marketing, and institutional innovations. USAID contributed $2.18 million to the effort in 2002, while other partners contributed $7.55 million. Table 1 and Table 2 , below, show the objective and partner roles for two fairly typical USAID PPPs. The text box below ("Innovation in Partnership: African Diaspora Marketplace [ADM]"), in contrast, highlights a more innovative partnership model focused on leveraging the knowledge and resources of developing country nationals who reside in the United States. The GDA Secretariat was intended to be a temporary entity that would be phased out when the GDA business model was mainstreamed throughout USAID. However, mainstreaming did not occur as quickly as planned, and in 2005, rather than disappear, the Secretariat evolved into the Office of Global Development Alliances, later into the Private Sector Alliance Division of USAID's Office of Development Partners, and most recently the Global Partnerships Division (GP) of the Office of Innovation and Development Alliances (IDEA). PPPs have arguably become an integral part of program planning and development strategy at many U.S. missions abroad. Efforts to institutionalize the alliance concept have been bolstered in recent years by new foreign service officers, hired through the Development Leadership Initiative, who have been trained and designated as alliance builders before beginning their first overseas assignments. Efforts in the international community to broaden the donor-centric aid model to engage a broader range of development stakeholders have strengthened the mainstreaming effort as well. The GP Division in Washington continues to assist mission staff in developing strategic alliances, serves as a point of contact for private sector entities wishing to engage in partnerships, and focuses on advancing knowledge of best practices in alliance building and evaluation. In recent years, the GP Division (once PSA) has also focused on identifying opportunities to improve alliance efficiency through establishing Global Framework agreements with companies that collaborate with USAID in a specific sector or type of activity in multiple countries. For example, USAID works with Cisco and Hewlett-Packard in more than 60 countries to provide information technology training that creates job opportunities and lays the foundation for a global information technology infrastructure. As of September 2013, USAID had Global Frameworks with Starbucks, Coca-Cola, Intel, Evensen Dodge, Bayer Pharma, the Packard Foundation, Green Mountain Coffee, General Mills, Kraft, the MacArthur Foundation, PepsiCo, the Alliance for Green Revolution in Africa, Project C.U.R.E., Swiss Re, Unilever, DSM, the World Cocoa Foundation, and Microsoft Corporation as well. <3.2. State Department Global Partnership Initiative> State has a long history of working with the private sector, but its current PPP strategy stems from Secretary of State Condoleezza Rice's "transformational diplomacy" initiative in 2006, which included engaging the private sector among its objectives. In accordance with the recommendation of the Advisory Committee on Transformational Diplomacy's working group on partnerships, a Global Partnership Center (GPC) was created at State in 2007 within the Bureau for Resource Management. The stated goal was to "expand the Department's use of partnerships that achieve policy, programmatic and management objectives by leveraging the resources, expertise and creative culture of private sector and non-governmental entities." As with USAID's GDA, the GPC was focused on mainstreaming the use of PPPs as a tool throughout the department, rather than establishing and managing its own partnerships. In January 2009, soon after the Obama Administration took office, the GPC became the Global Partnership Initiative (GPI), housed within the Office of the Secretary of State and led by a Special Representative for Global Partnerships. The change appears to indicate the importance that the Obama Administration places on what then-Secretary of State Clinton called the "new generation of partnerships." The elevation within State was intended to make the division more effective in leading State efforts, in addition to providing more clout in interagency efforts. The transition, however, did not come with any additional resources. While the State Department often supports partnerships that have development objectives, its interests are primarily diplomatic. Common objectives of State Department PPPs are enhancing the United States' reputation and visibility abroad and building relationships between people with common interests that transcend political and cultural divisions. For example, the Global Women's Mentoring Partnership, begun in 2006, places emerging women leaders from all over the world in three-week mentoring programs in the United States with women chosen as Fortune 's Most Powerful Women Leaders. State provides grants to an NGO to manage program logistics and vets candidates through overseas posts, while Fortune provides mentors with appropriate expertise and experience whose companies pay for the international air travel and per diem expenses of the participants. In the 2008 Breast Cancer Global Congress, State partnered with the Avon Foundation to organize a one-day forum in Germany to connect experts and public health representatives from more than 40 countries to share ideas and encourage public-private initiatives related to the treatment of breast cancer. Currently, GPI is focusing on four broad "flagship partnerships," under which a variety of partnership activities fall: Accelerating Markets Partnership, a collaboration between business, government and civil society intended to bring innovation and pooled resources to business challenges to increase economic value along with positive social and environmental impact. The partnership is being implemented first in Brazil, with a focus on the housing and the environment sectors. International Diaspora Engagement Alliance (IDEA), which promotes and supports diaspora-centered initiatives in entrepreneurship, volunteerism, philanthropy, diplomacy, and social innovation, including annual Global Diaspora Forums since 2011 and diaspora business plan competitions in Africa, Latin America, the Caribbean, and the Pacific Islands. Global Alliance for Clean Cookstoves (see text box below). Partnership for a New Beginning (PNB), established in 2010 to bring together American private sector leaders and their counterparts in Muslim communities. State does not provide funds to support PNB partnerships, but describes its role as the convener of the alliance, which includes the Aspen Institute, Coca-Cola, and the Stonebridge Group among its leading partners. Unlike USAID, the State Department often plays the role of convener or facilitator for alliances, rather than a resource partner. It contributes leadership, credibility and a broad ideological framework for partnership activities that are implemented and largely supported by other entities, including other U.S. agencies. <3.3. Other Bilateral Agencies> While USAID and State are the key U.S. players in development PPPs, several other U.S. agencies work with the private sector on international development issues. The Millennium Challenge Corporation (MCC) is in many ways well positioned to utilize PPPs for development, as the agency works in countries that have shown a commitment to open markets and fighting corruption, and should be attractive to private investors. MCC encourages private sector engagement during the formation of country compacts as a means of leveraging additional resources and enhancing sustainability. The agency has a "Private Sector Initiative Toolkit" that gives guidance on four types of private sector engagement, including risk-sharing infrastructure activities with private companies, such as co-financing of a wastewater treatment plant expansion in Jordan. However, most MCC work with the private sector does not reflect the development alliance model promoted at State and USAID, but rather involves the contracted outsourcing of public services, such as the maintenance of a rehabilitated airport in Mali or the provisions of health or sanitation services. The U.S. Trade and Development Agency (USTDA) and the Overseas Private Investment Corporation (OPIC) also use PPPs in their mission to advance both economic development and U.S. commercial interests in developing and middle-income countries. USTDA supports infrastructure development and fair trade by providing technical assistance, feasibility studies, and "reverse" trade missions intended to spur private investment by filling information gaps and improving the business environment. For example, USTDA provided $540,000 to the Georgian International Energy Corporation to fund a study, conducted by a U.S. company, to examine the possibility of recovering methane from coal mines in Georgia. OPIC provides U.S. businesses with financing, guarantees, political risk insurance, and other support to enable investment in emerging markets, which may lead to economic growth and jobs within both the United States and developing countries. For example, OPIC has worked with public and private partners to provide political risk insurance to Apache Corp., a U.S. natural gas producer, to allow it to continue gas and oil development in Egypt after the Arab Spring made such insurance difficult to obtain. While such activities are PPPs, development professionals disagree over whether they are foreign assistance activities, given the strong emphasis on supporting U.S. commercial interests. This type of partnership, however, appears to align well with the Administration's view that development policy must extend beyond aid to promote trade and private investment. Just about every U.S. agency involved in foreign assistance is also involved in development PPPs, often as partners in alliances created or managed by USAID. For example, the Department of Agriculture is a partner in the Sustainable Forest Alliance, contributing its forestry expertise to efforts to combat illegal logging in the Amazon. The Department of Energy provides technical and financial support to the Clean Cities Program, a PPP that promotes alternative fuel vehicles. The Department of Justice has partnered with USAID and local entities in the Criminal Justice Strengthening Alliance in South Africa. <4. Foreign Donor and Multilateral Development Partnerships> In addition to the United States, most other major bilateral aid donors are increasingly working with the private sector as well. Some of these activities are quite similar to USAID alliances, such as a BMZ (German development agency) partnership with Kraft Foods to benefit small-scale cocoa farmers in C te d'Ivoire through market-oriented sustainable production techniques. Others focus on helping their national businesses establish a foothold in developing countries, much like USTDA activities, and to provide funding directly to corporate partners. The Canadian development agency uses PPPs, for instance, to support investment studies and pilot programs, covering up to 75% of the cost of viability studies and startup investments of Canadian firms in developing countries. One example is a CIDA-funded study to explore the viability of a Canadian business to drill hand-pumped water wells and provide related maintenance and repair services in Togo. The United Kingdom's Department for International Development (DFID) uses "challenge funds," through which private businesses apply for grants to help establish new business ventures or improve the development impact of existing ventures, in developing countries. The African Enterprise Challenge Fund, for example, awards competitive grants to private sector companies anywhere in the world to support new and innovative business models in Africa, while the Food Retail Industry Challenge Fund provides grants to partnerships that bring UK grocery retailers together with African food producers to establish "fair trade" supply chains. Multilateral development institutions have also made increasing efforts in the past decade to leverage private sector resources to achieve development goals, in various forms. The United Nations launched the UN Global Compact in 2000, with the goal of aligning international business practices with broad UN priorities, including the Millennium Development Goals. The compact counts more than 6,000 companies from 135 countries as participants, but is more about promoting corporate social responsibility than partnership between specific public and private entities. The work of the World Bank's International Finance Corporation (IFC), which provides finance and advisory services to private sector enterprises in most developing countries, could also be considered a multilateral PPP model. IFC bills itself as a convener of private sector players in development, bringing foundations and charitable organizations together with businesses to address shared development goals. <5. Potential Benefits of Public-Private Partnerships> PPPs have become more common because both public and private partners believe PPPs achieve shared goals more effectively than each partner could by acting alone. Commonly cited advantages of PPPs include the following: Shared Risks and Resources. While development officials are quick to point out that PPPs are not primarily a means of saving taxpayer dollars, sharing the cost and financial risks of development activities is a key attraction of modern partnerships that involve joint resource contributions. Both the government and private entities are sometimes willing to participate as partners in a project they would not be able or willing to support in its entirety. Partnership may also allow for project implementation on a larger scale, and for cost savings based on scale, resulting in each partner achieving a greater development return on its investment (or a diluted cost of failure). Sustainability. A common criticism of traditional development activities is that they never become self-sustaining and fade away when government funding ends. PPPs attempt to avoid this problem by tapping into core business interests and making sustainability profitable. In the SUCCESS Alliance, for example, small Vietnamese cocoa farmers were integrated into Mars's global supply chain, having elevated their cocoa production and processing to international standards with assistance from USAID, Mars, and the World Cocoa Foundation. In theory, market demand should sustain the partnership and the improved farmer incomes. While the sustainability argument seems logical and is supported by anecdotal evidence, there has been no comprehensive study of how PPP sustainability compares to that of non-PPP approaches. Market Access/Networks. Corporations and private entities often have networks of customers, suppliers, supporters, and employees that can broaden the reach of a development program beyond where a development agency could go. By partnering with MTV in several regional alliances, for example, USAID tapped into a vast global audience of young people for its messages against human trafficking and promoting HIV/AIDS prevention in the EXIT alliance. MTV, for its part, saw an opportunity for positive public relations and an association with USAID that could potentially enhance its reputation in developing countries. Technology and Intellectual Property. Effective use of technology, which many experts believe is crucial to economic development, can be a daunting challenge in developing countries. Through partnering with Cisco, Microsoft, and other global technology companies, development agencies are able to overcome technical, legal, and financial barriers to accessing certain technology. The technology companies, in turn, are developing relationships and support infrastructure to position themselves to compete for the next generation of technology consumers, many of whom will live in developing countries. Cutting-Edge Business Practices. While USAID and other federal aid agencies can provide technical expertise in a wide range of development sectors, they often do not have the specialized industry knowledge that a private company has. In Guatemala's Inclusive Market Alliance for Rural Entrepreneurs (IMARE), for example, Walmart supplies crucial market information that augments the impact of technical assistance and access to credit provided through NGO partners by enabling better farm planning and quality control of targeted crops. More than 600 rural small-scale farmers earned higher incomes by selling to the region's largest retailer, while Walmart strengthened its supply chain. In partnering with Sesame Street , USAID gained access to advanced pedagogy and production capacity, while Sesame Street was able to extend its global reach into more developing countries. Reputation Enhancement. Positive public relations are often a significant consideration for corporate entities entering into PPPs. Partnering with a U.S. government entity can lend legitimacy to a private entity, and association with development activities can enhance a corporation's reputation for being socially responsible. The Small Export Vegetable Alliance in Zambia, for example, was inspired in part by private sector partner Agroflora's desire to project a more populist image. The company was concerned that land seizures in neighboring Zimbabwe could spread to Zambia and affect its business if it was not seen as benefitting smallholder Zambian farmers. Participating organizations and corporations may also anticipate that partnerships will improve their relationships with national and community leaders. <6. Potential Concerns About Partnerships> The advantages of partnerships from a business perspective are sometimes viewed as points of concern from the development perspective. While many development experts see PPPs as having the potential to be mutually beneficial, some are also wary of unbalanced partnership relationships and the resource demands of partnership management leading to a number of potentially negative impacts. Among the most often-cited concerns are the following: Management Burdens and Inadequate Evidence of Value Added. Most PPPs require more time and effort to design and implement than traditional contract-based development programs. Considerable effort is required to manage the partner relationships and fulfill the reporting needs. It is difficult to judge whether this effort is justified by development impact because evaluation efforts to date of both PPPs and traditional development projects have not been particularly useful for demonstrating whether or not PPPs have more development value than other approaches to development assistance. Without a standard definition of PPP within and across government development agencies, meaningful evaluation of PPPs as a development tool has been difficult, and critics have asserted that development resources may be better directed toward more proven aid models. Distortion of Development Priorities. Some development officials are concerned that opportunities to access private resources through partnerships can pull mission staff away from established country plan priorities. The availability of private funding, they argue, is hard to ignore, even when a proposed partnership does not fit well within an established mission priority. Given very limited staff resources at many USAID missions, the opportunity cost of following through on PPPs that are not necessarily aligned with stated mission priorities can be high. To guard against this, agencies often seek private sector participation in existing development programs and plans. However, lack of private sector involvement in the initial planning phase is often cited as hindering PPP effectiveness and sustainability. Disadvantage to Least-Developed Countries and Individuals. Some development experts have expressed concern that the type of private capital flows that have spurred modern PPPs are concentrated in the relatively advanced developing countries. They assert that the emphasis on leveraging these flows through PPPs could steer more aid resources to these countries at the expense of the poorest countries, particularly in sub-Saharan Africa, where opportunities for such partnerships may be limited. It has been suggested by analysts, for example, that WHO's participation in GAVI has hindered its commitment to bringing traditional vaccines to the hardest-to-reach populations, as it diverts resources toward supporting new vaccines for better-served communities. The majority of PPPs created by USAID and other U.S. bilateral agencies are funded through mission budgets rather than a central account, reducing the potential for PPPs to influence country and regional funding levels. Still, some argue that the use of PPPs, particularly those involving global corporate partners, can increase development disparities within countries by introducing international standards. The concern that those who are relatively well off and better able to meet international standards will prosper, while those who cannot often the most poor and least educated will fall farther behind, is common to almost all aspects of globalization. Unfair Advantage to Private Partners. PPPs raise potential concerns about taxpayer funds supporting private interests and possibly creating unfair advantages for private participants. However, there are risks as well as potential benefits to partners, and USAID neither gives money to private partners nor guarantees any share of a partnership's product. For example, while Starbucks may benefit from establishing a positive reputation among Rwandan coffee growers through participating in an alliance with USAID to improve coffee production practices in the country and establish growers' cooperatives, the Rwandan cooperatives may still sell their improved products to Dunkin' Donuts if it makes a better offer. Bad Bedfellows. While PPPs can enhance the reputation of all involved, there is the potential for damage to U.S. agencies through association with disreputable private sector entities. USAID tries to avoid such problems by vetting potential corporate partners for social responsibility using a due diligence process, but concerns persist. Some development professionals are uneasy, for example, about USAID partnering with extractive companies in Angola, the Democratic Republic of the Congo, and Ghana because of the corruption and exploitation often associated with these industries. On the other hand, partnerships could incentivize more responsible business practices. One official explains that USAID partners only with companies that agree to support and conform to the Extractive Industries Transparency Initiative and other recognized industry best practices related to transparency, human rights, security, and environmental practices. Threat to American Jobs. Observers have expressed concern that PPPs may in some circumstances support the outsourcing of American jobs to developing countries. This could be particularly true for partnerships that link developing country producers with global supply chains, creating potential competition with American suppliers, or partnerships that promote employment skills and training that may put beneficiaries in competition with American workers. For example, USAID has been criticized by Members for partnering with technology and outsourcing companies in Sri Lanka to provide advanced information technology training to local workers, who are then provided on-the-job training in business process outsourcing and call center support by partner companies. USAID was funding an English language training component of the program in Sri Lanka, which has been suspended, further raising concerns about competition with American workers. Such concerns are not unique to PPPs, however. Foreign assistance programs have always had to strike a balance between improving economic opportunities in developing countries (with the objective of supporting U.S. humanitarian, commercial, and security interests) and ensuring that such assistance does not create a competitive disadvantage for Americans. <7. Issues for Congress> The 113 th Congress may consider U.S. foreign assistance programs from a variety of perspectives. The Administration's Quadrennial Diplomacy and Development Review (QDDR) and Presidential Policy Directive on Global Development initiated reforms related to aid efficiency and effectiveness that are ongoing. The 113 th Congress may play a significant role in this process through appropriations legislation and oversight hearings. Moreover, significant fiscal constraints have many legislators looking at foreign assistance programs as potential sources of savings. Public-private partnerships are one approach to foreign assistance that Congress is likely to consider as part of a broader review of foreign aid policies and activities. As part of that consideration, the following issues may be of particular interest and relevance to lawmakers. <7.1. Cost Savings> PPPs appeal to many observers as a potential means for government to do more with less by sharing the cost burden of development among a broader range of stakeholders. The State Department's Global Partnership Initiative (GPI) was originally proposed as a "force multiplier for appropriated funding," and to "yield efficiencies and cost savings," while USAID's Global Development Alliance (GDA) concept sought to "create a bigger pie" for development assistance. Partnerships to date have been evaluated largely by the amount of private development funds they have leveraged. However, officials most active in partnership building are slow to tout any cost savings from this approach, arguing that the most strategic partnerships are those that do not necessarily leverage the greatest funding but bring technology, networks, or skills that would not otherwise be accessible to official development activities. Furthermore, the staff time needed to negotiate and adequately monitor PPPs can be substantially more than is required for traditional forms of aid implementation, and these costs are not reflected in leverage ratios. Nevertheless, in the face of budget constraints, the 113 th Congress may look to private sector engagement as a means of sustaining development programs while reducing official aid levels. The Administration suggested such an approach in recent budget proposals, requesting reduced funding for the African Development Foundation and the Inter-American Foundation while suggesting that they could maintain current program levels through partnerships with the U.S. government and the private sector. <7.2. International Commitments> PPPs can have both a positive and negative impact on meeting the United States' international development commitments. Increasing use of PPPs can support, in part, the global partnership goals of the Millennium Declaration. When partnerships involve other official development agencies, they can also support donor coordination goals, consistent with commitments in the Paris Declaration on Aid Effectiveness, which the United States signed in 2005. However, an increasing use of PPPs could undermine other international donor commitments. For example, in supporting the Paris Declaration and the follow-on Accra Action Agenda and Busan Partnership, the United States committed to making greater use of recipient country budget and procurement systems and supporting recipient country development programs rather than independent projects that are not incorporated into recipient country budget and policy processes. Some might argue that providing assistance through PPPs could further undermine that effort by emphasizing the common goals of donors and private sector interests rather than the common goals of donor and recipient country governments, and by using private resources that cannot be "on-budget." <7.3. Emphasis on Non-aid Development Strategies> The Obama Administration's global development policy, officially announced in September 2010, acknowledges the roles and responsibilities of the many nonofficial entities that have a stake in international development. Much of its emphasis on PPPs, however, seems to be focused on trade policy and the promotion of foreign direct investment as tools for economic growth and development. This approach is consistent with the policy's emphasis on foreign aid as a single component of a broader U.S. development strategy. Increasing attention to non-aid drivers of development, prompted by both strategic and budgetary pressures, may bring new support to partnership models oriented more toward trade and investment promotion than traditional assistance projects. USAID's Private Capital Group for Africa, a relatively new platform to facilitate greater private investment in Africa, is one example of this move toward broader private sector engagement. Some observers also anticipate the Overseas Private Investment Corporation may take a more prominent role in U.S. development policy in the coming years, reflecting a shifting emphasis in private sector engagement. OPIC reauthorization legislation may be considered in the 113 th Congress, and some development experts have proposed that Congress take this opportunity to expand OPIC's authorization and reform its rules to enable the agency to play a more significant role in mobilizing private investment in developing countries. <7.4. Budget and Procurement Issues> Many development officials involved in partnerships report that the standard foreign assistance procurement rules and the unpredictability of future year budgets are significant obstacles to partnership formation. Procurement regulations and processes, particularly at USAID, have long been considered overly bureaucratic and a reflection of a risk aversion at the agency that some call prudent and others view as driving the agency into obsolescence. The procurement system is sometimes challenging in the context of modern PPPs, resulting in agencies having a hard time being proactive with the private sector. Agency officials report that it is hard to maintain a long-term relationship with private partners because of competition requirements, and slow approval processes make companies feel uncertain about commitment. Procurement reforms are a key component of the ongoing USAID Forward reform agenda, but a progress report indicates that change has been slow with regard to PPPs. While the USAID Forward goals include investing 10% of mission program funding in PPPs by FY2015, the agency was far short of that goal, at 1.7%, in FY2012. The annual appropriations process also makes it hard to plan and commit to multiyear time frames. The lack of predictability increases transaction costs and raises uncertainly to a level where, some officials report, corporate partners do not see government agencies as dependable partners. USAID's original GDA utilized an incentive fund, set aside for PPPs, as a means of making funding more predictable. Funds were provided out of the Development Assistance appropriations account and were intended to encourage partnership building and smooth the process by making funds more readily available. The prevailing view, however, was that the incentive fund distorted mission objectives and kept PPPs out of the mainstream. <7.5. Interagency Leadership> While USAID was long the U.S. government leader on PPPs for development, other agencies have become more active in this field in recent years. The State Department has moved toward a leadership role on PPPs with the GPI, which was established, in part, to coordinate international PPPs for the whole of government. The QDDR addressed but did not resolve the interagency issue, stating that "State and USAID will standardize the partnership process through a uniform partnership template" and "create a central database of all existing partnerships so that U.S. agencies and potential partners know what we are doing, with whom, and where." In recent years, the two agencies appear to have developed a compatible if not uniform approach to PPPs. State has established broad partnership platforms, such as the International Diaspora Engagement Alliance and the Accelerating Markets Partnership, and USAID and other agencies develop partnerships in support of these platforms when there are opportunities consistent with their mission. With respect to a central database, a joint State/USAID data call was reportedly issued in fall 2012 to implement this requirement, but the resulting data are not yet publically available. Congress may seek greater organizational clarity as part of foreign aid reform legislation, or may be asked to provide funding or authorities to implement additional integration measures. <7.6. Limitations on Congressional Oversight> PPPs may pose potential challenges to congressional control and oversight of development activities, as Congress does not have the same control over private funds as it does over appropriated funds. Theoretically, this means that development officials could work around congressional restrictions on agency activities by developing PPPs in which restricted activities are funded and carried out by private partners. Such concerns are largely hypothetical, but they raise the issue of how Congress can best manage public resources involved in PPPs. A further challenge to oversight stems from inconsistent data quality associated with private partner contributions. USAID Inspector General audits in 2005 and 2009, for example, found that data on private partner contributions to USAID alliances did not meet the agency's data quality requirements and may not be reliable for use in decision making within the agency and, presumably, by Congress. While the agency has revised its guidance and reporting process in response to these audits, the ongoing difficulty of applying consistent valuation standards across a diverse array of partnerships has led the Private Sector Alliances office to agree to add a disclaimer of sorts when reporting public-private partnership resource data, noting the nature and limitations of the available information.

The flow of private sector resources to developing countries has increased significantly in recent decades. Seeking opportunity in this changing environment, government development assistance agencies such as the U.S. Agency for International Development and the State Department are working with private sector entities in unprecedented ways to determine when and if such partnerships can lead to improved development results. As explained in the Obama Administration's 2010 Quadrennial Diplomacy and Development Review (QDDR), "private sector partners can add value to our missions through their resources, their capacity to establish presence in places we cannot, through the technologies, networks, and contacts they can tap, and through their specialized expertise or knowledge." Modern public-private partnerships (PPPs), characterized by joint planning, joint contributions, and shared risk, are viewed by many development experts as an opportunity to leverage resources, mobilize industry expertise and networks, and bring fresh ideas to development projects. Partnering with the private sector is also widely believed to increase the likelihood that programs will continue after government aid has ended. From the private sector perspective, partnering with a government agency can bring development expertise and resources, access to government officials, credibility, and scale. Now a decade after the formation of USAID's Global Development Alliance (GDA), PPPs for development have received mixed reviews. PPPs require significant effort to create and manage, and critics argue that inadequate data exist to demonstrate that these efforts are the most effective way to use limited development resources. Others have expressed concern about partnerships diverting resources away from proven development programs or recipients. Still others are concerned that PPPs, particularly those involving corporate partners and focusing on trade and economic growth, may lead to outsourcing of U.S. jobs. Partnership proponents have varying views as well. Some feel that the goal of mainstreaming the PPP model as a tool for development has been achieved, while others contend that the potential for using PPPs in development has only begun to be realized and that expanded partnerships are the future of development assistance. To date, the movement toward this modern concept of development partnership has been driven by successive administrations with limited congressional involvement. However, recent reviews of U.S. foreign assistance policy, together with increasing fiscal constraints, may spur congressional action on foreign assistance reauthorization or reform in the 113th Congress. As part of this effort, Congress may consider several issues that affect or are affected by the use of PPPs, including budget and procurement policies, interagency leadership, international commitments, and the role of aid within broader development policy. This report discusses the evolution of private sector involvement in U.S. foreign assistance programs over recent decades, how globalization has driven the modern approach to development partnerships, potential benefits and drawbacks of PPPs, and how partnerships are being used by other bilateral donors and multilateral development agencies. The report then discusses partnership-related issues that may be of interest to Congress as part of the foreign assistance authorization and reform process.

<1. Overview> Medicaid is jointly financed by the federal and state governments, but each state designs andadministers its own version of the program under broad federal guidelines. The complexity ofMedicaid can present an enormous challenge in meeting the needs of Hurricane Katrina's victims,especially when evacuees cross state lines. State variation in eligibility, covered services, and thereimbursement and delivery of services is the rule rather than the exception. Furthermore, althoughMedicaid is targeted at individuals with low income, not all of the poor are eligible, and not all thosecovered are poor. While some of the federal rules governing Medicaid are flexible enough to allow states toact without federal intervention in the wake of Hurricane Katrina, certain issues raised by the disastermay be addressed only through administrative or legislative action by the federal government. Onthe administrative front, the Centers for Medicare and Medicaid Services (CMS) has developed avoluntary Medicaid waiver option to address some of the hurricane-related eligibility and benefitissues raised in this report. On the legislative front, congressional action may be required if enhanced federalreimbursement is to be provided to states for Medicaid costs incurred as a result of HurricaneKatrina. Congress may also consider the desirability of uniform treatment of hurricane victimsacross states (rather than relying on participation in the waiver program developed by CMS). Anumber of bills that would provide Hurricane Katrina Medicaid and SCHIP relief have beenintroduced. This report begins with a discussion of Medicaid's rules on eligibility, benefits, and financingin the context of current questions and issues raised by Hurricane Katrina, many of which could arisein the wake of other emergency situations (e.g., Hurricane Rita). It then provides information onrecent actions taken by states, discusses federal Medicaid waiver authority, and describes currentfederal legislation dealing with Medicaid and hurricane relief efforts. <2. Medicaid Eligibility and Access> <2.1. Background> In general, to qualify for Medicaid coverage, an individual must meet both categorical andfinancial eligibility requirements. Categorical eligibility requirements relate to the age orcharacteristics of an individual. Categories of individuals that may qualify for Medicaid generallyinclude aged persons (65 and over), certain persons with disabilities, children and their parents, andpregnant women. In addition, within federal guidelines, states set functional requirements forindividuals seeking Medicaid-covered long-term care services. Financial requirements govern the amount of income and assets that categorically eligibleindividuals may have and still qualify for Medicaid, as well as how these amounts are calculated(e.g., whether a portion of earned income or the value of a car may be disregarded). The specificincome and asset limitations that apply to a particular group are determined through a combinationof federal requirements and state options. Consequently, different standards apply to differentgroups, and the standards themselves may vary considerably among states. Individuals who do not meet categorical eligibility requirements (e.g., non-elderly adultswho are not disabled and do not have children) generally cannot qualify for Medicaid coverage evenif they are poor. However, as discussed later in this report, Section 1115 waivers (which allow theSecretary of Health and Human Services (HHS) to waive certain statutory Medicaid requirementsfor purposes of conducting research and demonstration projects) provide exceptions to theseeligibility rules for states that have obtained an approved waiver. <2.2. Issues Raised by Hurricane Katrina> People who are currently eligible for their state's Medicaid program may face difficultyaccessing health care services if they have lost their Medicaid cards and other identification or havebeen evacuated from their home state. In addition to creating problems for those who are currentMedicaid enrollees, the large losses of Hurricane Katrina's victims may also swell the numbers ofpeople who are financially eligible for Medicaid, either in their home state or in the state to which they have been evacuated. Residency. Current federal Medicaid rulesgoverning residency help in understanding which program is the right one for evacuees to appeal toif they believe they are Medicaid eligible. State Medicaid programs are required to provide coverageto all state residents who are otherwise eligible for Medicaid. An individual is generally considereda resident of a state if he or she is living in it with the intention of remaining there permanently orindefinitely. Eligibility may not be denied because an individual has not resided in the state for aspecified period or because the individual is temporarily absent from the state. A state is alsoprohibited from denying coverage to an individual who satisfies residency rules but who did notestablish residence in the state before entering a medical institution. For currently enrolled Medicaid recipients who have been displaced from their home state,the home state is required under certain circumstances to pay for covered services (i.e., coveredunder the home state's Medicaid program) furnished in another state to the same extent that it wouldpay for services furnished within its boundaries and may opt to pay for out-of-state services underother circumstances (see the Payment and Financing section of this report for additionalinformation). However, the Medicaid recipient must find an out-of-state provider willing to acceptMedicaid payment from the home state (as well as enroll or otherwise enter into an agreement withthe home state's Medicaid program as a condition of receiving that payment), and not all providersmay be willing to do so. Regardless of whether they are enrolled in Medicaid in their home state, displaced individualsmight wish to be considered residents of the state to which they have evacuated, either to obtainMedicaid coverage (in the case of those who were not previously eligible) or to facilitate access tocare (in the case of those who were eligible for Medicaid in their home state but are having difficultyfinding a provider that will accept their out-of-state coverage). If an individual meets the residencyrequirements described above and is otherwise eligible for Medicaid in the state to which they haveevacuated, coverage cannot be denied. However, it should be noted that the eligibility and benefitrules of an individual's host state may be different than the rules of his or her home state. Income and Asset Documentation. In general,federal law stipulates few documentation requirements for Medicaid applicants. State policies onthis issue vary based on the eligibility group, but a considerable amount of documentation may berequired to determine whether an individual meets financial eligibility requirements forMedicaid. (1) Althoughstates have flexibility to collect income and asset information through self-declaration alone, theyalso have the ability to require supporting documentation. Federal law does require states to have an Income and Eligibility Verification System (IEVS),but states are not required to verify income and assets through the IEVS for every Medicaid recipientand may conduct these verifications after enrollment. Under these systems, state Medicaid agenciesuse information from a number of federal and state sources to verify financial eligibility, includingstate wage information maintained by the State Wage Income Collection Agency (SWICA) andinformation on net earnings from self employment, wages, and retirement benefits maintained by theSocial Security Administration (SSA). Look-Back Period for Financial Eligibility. Forevacuees who may have lost their homes and other assets and are now without jobs, willrequirements related to the period over which income is examined for the purpose of determiningMedicaid eligibility prevent Medicaid funds from being used to meet their needs? Here again,federal laws and regulations stipulate few rules for the look-back period used to determine anindividual's financial eligibility for Medicaid, leaving states with a great deal of flexibility. (2) For many eligibility groups,federal regulations require that states use income counting methods that are no more restrictive thanmethod used under the most closely related cash welfare program. (3) Such methods can be lessrestrictive at states' option. For certain other groups, such as the medically needy (generally peoplewho become eligible for Medicaid in part because they spend considerable amounts of their incomeon medical care), the budget period can be no longer than six months. Again, states have theflexibility to shorten such budget accounting periods. People Who Do Not Meet Current EligibilityRequirements. As previously noted, Medicaid eligibility is limited by two primarytypes of current law restrictions: financial and categorical. Individuals qualify for Medicaid byhaving income and assets that fall below certain thresholds and by falling into particular groups orcategories of individuals. In general those categories include the elderly, people with disabilities,dependent children, parents of dependent children, and pregnant women. Could exceptions to thesecategorical restrictions be made for people impacted by the Katrina disaster? Many states have usedSection 1115 Medicaid waivers (discussed later in this report) to allow categorical eligibilityrequirements to be waived. Many states have also exercised options that allow them to liberalizeeligibility without the use of a waiver, such as the option to disregard certain amounts of income orassets for particular groups. <3. Medicaid Benefits> <3.1. Background> Medicaid's basic benefit rules require all states to provide certain mandatory services listedin federal statute. Examples of services that are mandatory for most groups of Medicaid recipientsinclude (1) inpatient and outpatient hospital services, (2) federally qualified health center (FQHC)services, (3) lab and X-ray services, (4) physician services, (5) certain nurse practitioner services,(6) pregnancy-related services (including postpartum care), (7) early and periodic screening,diagnosis, and treatment (EPSDT) for children under age 21, (8) nursing facility care for persons age21 and over, and (9) home health care for persons entitled to nursing facility care. The statute also lists additional services that are considered optional -- that is, available torecipients if states choose to include them in their state Medicaid plans. Some of these optionalbenefits are specific items, such as eyeglasses and prosthetic devices. Other benefits are defined asclasses of medical providers whose array of services are considered to be Medicaid covered benefits(e.g., psychologists, nursing facility care for persons under age 21, intermediate care facility servicesfor individuals with mental retardation (ICFs/MR)). Still others include a wide range of types ofmedical care and services (e.g., physical therapy, prescribed drugs, personal care services, privateduty nursing, hospice, clinic services, and rehabilitation). In addition to the above general rules regarding mandatory and optional benefits, Medicaidstatute specifies special benefits or special rules regarding certain benefits for targeted groups ofindividuals. For example, for children under the age of 21, EPSDT guarantees access to all federallycoverable services that are necessary to correct or ameliorate identified defects, physical and mentalillnesses, and other conditions. States are required to provide otherwise optional services to aMedicaid child, even if that service is not listed in the state Medicaid plan. Thus, children in anystate can receive eyeglasses through Medicaid, for example, while adults living in the same state maynot have any, or limited, access to this optional benefit. Medicaid is also an important financing mechanism for long-term care (LTC). LTC servicesrefer to a wide range of supportive and health services generally provided on an ongoing basis forpersons who have limitations in functioning because of a disability or chronic condition. Medicaid-covered nursing facility (NF) and ICF/MR services are generally categorized as"institutional" services because individuals reside in and receive health care services in a specifictype of certified facility. Other Medicaid-covered LTC services (e.g., personal care, home healthcare) are categorized as "home and community-based" care because individuals generally receivethese services in the community (e.g., in their homes or apartments). States also have the option of requesting permission from the federal government to provideother home and community-based services for individuals who would otherwise need the level ofcare in an institution. These other services may be offered as a supplement to, or instead of, thoseoptional services available through the state plan. This option is referred to as a Home andCommunity-Based Services (HCBS) waiver, authorized under Section 1915(c) of the Social SecurityAct. Unlike services offered as part of the state Medicaid plan, the HCBS waiver allows states tolimit the number of individuals served and to offer the services on a less-than-statewide basis. Thesewaivers include a broad range of services such as case management services, homemaker/homehealth aide services, personal care services, adult day health services, habilitation services, respitecare, home modifications, and home-delivered meals. <3.2. Issues Raised by Hurricane Katrina> Variation in Benefit Coverage Across States. Because each state designs and administers its own Medicaid program under broad federal rules,coverage of benefits varies from state to state. Among the five states initially declared to have publichealth emergencies due to Hurricane Katrina (Alabama, Florida, Louisiana, Mississippi, and Texas),certain optional services (4) are covered in all of these states (e.g., hospice care, ICF/MR, prescribed drugs, prosthetic devices,and transportation). Other optional services are not covered by all of these states (e.g., physicaltherapy, emergency hospital services in non-certified hospitals, (5) care for the elderly ininstitutions for mental disease (IMD), eyeglasses, and basic dental care). In addition to choosing the menu of optional services they will provide, states define thespecific parameters (e.g., amount, duration and scope) of each mandatory and optional servicecovered under the state Medicaid plan within broad federal guidelines. Thus, even for mandatorybenefits, there will be variations in the breadth of coverage from state to state. There has been discussion about the potentially substantial mental health needs of survivorsof Hurricane Katrina in both home and host states. (6) A wide range of inpatient and outpatient mental health servicesmay be provided through several mandatory and optional benefits under Medicaid. However, evenamong states that cover a specific benefit (e.g., psychologist services, services in mental healthclinics, other mental health rehabilitation and stabilization services), there may be interstatevariations in the amount, duration and scope of such covered benefits. In the wake of Hurricane Katrina, questions have been raised about which state's benefitpackage will apply to individuals who have been displaced from their home state. For example, ifa 16-year-old Medicaid recipient from Louisiana relocates to Texas because of Hurricane Katrinaand needs inpatient psychiatric services, will he be able to obtain this care given that the TexasMedicaid program does not cover this benefit while Louisiana's Medicaid program does? (7) The answer to this question is currently unclear. As discussed in the Payment and Financingsection of this report, if a Medicaid recipient is evacuated to another state, the home state is obligatedunder certain circumstances to pay for covered services (i.e., covered by the home state) that areprovided out-of-state. However, the Medicaid recipient must find a provider who is willing to acceptthe home state's Medicaid coverage, which may be difficult. As discussed earlier in the MedicaidEligibility and Access section of this report, there is also a residency question for people who havebeen displaced. If a Medicaid recipient or any other individual has no intention of returning to theirhome state, will they now be considered a resident of their host state -- which may offer a differentbenefit package than their home state -- for Medicaid purposes? Access to Long-Term Care Services. Individualseligible for Medicaid-covered LTC services generally have significant physical or mentalimpairments that often require 24-hour supervision and assistance with activities of daily living (e.g.,eating and drinking, using the toilet, getting in and out of bed). Medicaid covers long-term careservices in both institutional (e.g., nursing homes and ICFs/MR) and home and community-basedsettings (e.g., home care, adult day care, transportation, personal attendant care) for certainindividuals. Because LTC recipients are highly dependent upon paid direct care staff (also referredto as paraprofessionals), such as certified nursing assistants in nursing homes and home health aidesproviding a range of services to beneficiaries in their homes, access to such care will be critical inthe locations to which these individuals are evacuated. Unfortunately, many states are experiencing difficulties in attracting and retaining a sufficientsupply of paraprofessionals to meet the growing demand for long-term care services in all settings,even in the absence of a disaster such as Hurricane Katrina. Furthermore, many Medicaidbeneficiaries with long-term care needs obtain assistance from unpaid caregivers, such as spouses,relatives, or neighbors. Such assistance often enables these individuals to remain at home or in acommunity setting, helping to reduce reliance on Medicaid-covered LTC institutions. The death ordisplacement of paid and unpaid caregivers may lead more evacuees to go without needed assistanceor to seek services from Medicaid-covered institutions in both home and host states, further strainingstaff-to-resident ratios in institutions. Another factor to consider is the impact on access to home and community-based servicesposed by the movement of HCBS waiver recipients across states. It remains unclear whether personsenrolled in HCBS waivers in their home states will be able to enroll in similar waiver programs intheir host states. First, enrollment in waiver programs is dependent upon a person having access tohousing in the community. It is unclear whether community-based housing will be available toevacuees with long-term care needs. Second, many states already have waiting lists for waiverenrollment slots. As a result, host states might request federal approval to lift their enrollment capsto cover evacuees and may need to renegotiate cost neutrality agreements with the Secretary. (8) Third, each HCBS waivercovers a different set of services and is targeted toward a distinct population. As a result, personseligible for waiver services in their home state may find that they are either ineligible for waiverservices in their host state or that the services offered do not meet their needs. If no appropriatecommunity-based alternatives are available, will these evacuees then be placed in host stateinstitutions? Cost-Sharing. Finally, while cost-sharing is notwidely applied under Medicaid, state policies may also be an issue for Hurricane Katrina survivorswho remain in their home states as well as those that relocate to other states. This issue isparticularly relevant to some of the working people with disabilities who pay substantial premiumsfor Medicaid coverage. Will home states continue to require cost-sharing for in-state evacuees? Will host states require out-of-state evacuees to comply with participation and point-of-servicecost-sharing requirements applicable to in-state Medicaid recipients? Or will the home statecost-sharing requirements, if any, apply instead? <4. Payment and Financing> <4.1. Background> The Medicaid program is jointly financed by the federal government and the states. Statesincur Medicaid expenditures by reimbursing providers for the covered care and services they provideto Medicaid recipients and by administering their Medicaid programs (e.g., conducting eligibilitydeterminations, processing claims, enrolling providers) in compliance with federal requirements. Each quarter, states submit accounting statements detailing their Medicaid expenditures to thefederal government and are reimbursed at the applicable federal rate. The federal medical assistance percentage (FMAP) is the rate at which states are reimbursedfor most Medicaid service expenditures. The FMAP is based on a formula that provides higherreimbursement to states with lower per capita incomes relative to the national average (and viceversa); it has a statutory minimum of 50% and maximum of 83%. The federal reimbursement ratefor administrative expenditures does not vary by state and is generally 50%, but certainadministrative functions receive enhanced (usually 75%) reimbursement. <4.2. Issues Raised by Hurricane Katrina> Increased Costs Resulting from IncreasedEnrollment. States affected by Hurricane Katrina -- including both those that havetaken in large numbers of individuals displaced by it and those whose own population may bestruggling financially in the aftermath -- are concerned about the possibility of a surge in Medicaidprogram enrollment, and some advocate that enhanced federal reimbursement should be madeavailable for Medicaid costs associated with serving hurricane victims. A legislative change maybe required to provide such enhanced reimbursement, because the Secretary of HHS does not havethe authority to waive provisions of federal Medicaid law that govern payments to states via theFMAP and other federal Medicaid reimbursement rates (e.g., those that apply to administrativefunctions). (9) As described above, the FMAP is used to reimburse states for most of their Medicaid serviceexpenditures. Current statutory exceptions to the FMAP include family planning services andsupplies (reimbursed at 90%), services that are received through an Indian Health Service (IHS)facility (reimbursed at 100%), and services provided to targeted low-income children enrolled inMedicaid who qualify through State Children's Health Insurance Program (SCHIP) provisions(reimbursed at an enhanced FMAP that varies by state and may range from 65% to 85%, subject tothe availability of funds from a state's federal SCHIP allotment). In addition to experiencing an increase in expenditures for medical care, states may also seean increase in administrative costs associated with performing eligibility determinations forhurricane victims. In the past, temporary increases in federal reimbursement (separate from thepermanent enhancements available for specified administrative functions, such as the 100%reimbursement provided for operating an immigration status verification system) have beenauthorized by Congress to assist states with administrative costs. For example, a $500 millionfederal fund was made available beginning in 1997 (and continuing until exhausted) to provide stateswith enhanced federal reimbursement for administrative expenditures attributable to eligibilitydeterminations that would not have been made were it not for the implementation of the TemporaryAssistance for Needy Families (TANF) program. (10) Payments for Out-of-State Care. Under federallaw, regulations promulgated by the Secretary of HHS dictate the extent to which states must furnishMedicaid assistance to state residents who are absent from the state. (11) Under these regulations,a state must pay for services furnished in another state to the same extent that it would pay forservices furnished within its boundaries if the services are furnished to a recipient who is a residentof the state and any of the following conditions is met: medical services are needed because of a medical emergency; medical services are needed and the recipient's health would be endangered ifhe were required to travel to his state of residence; the state determines, on the basis of medical advice, that the needed medicalservices, or necessary supplementary resources, are more readily available in the other state;or it is general practice for recipients in a particular locality to use medicalresources in another state. The regulations also require states to establish procedures to facilitate the furnishing ofmedical services to individuals who are present in one state but eligible for Medicaid in another. Incases where a Medicaid recipient seeks out-of-state care not related to a medical emergency, thehome state may typically require prior authorization of the care. The home state may also requirethe out-of-state provider to enroll or otherwise enter into an agreement with its Medicaid programas a condition of receiving payment. In the case of bordering states where recipients commonly crossstate lines to seek care, states often have agreements in place to facilitate the provision and paymentof Medicaid services. For Medicaid recipients who were displaced from their home state by Hurricane Katrina,nothing under federal law would prevent the home state from paying for all covered services (i.e.,covered under the home state's Medicaid program) that are provided to recipients while they are inanother state. At minimum, the home state must pay if any of the conditions listed above are met. However, the Medicaid recipient must find an out-of-state provider willing to accept Medicaidpayment from the home state, and not all providers may be willing to do so. (12) In addition, since anindividual may be considered a resident of the state to which they have evacuated, he or she may besubject to the eligibility rules of that state's Medicaid program (see the Medicaid Eligibility andAccess section of this report for more information on residency). <5. State and Federal Responses> States operate their Medicaid programs in the context of federal rules. While some of theserules are flexible enough to allow states to act without federal intervention in the wake of HurricaneKatrina, certain issues raised by the disaster may be addressed only through administrative orlegislative action by the federal government. For example, although states have a great deal of flexibility in setting eligibility and benefitrules, they are generally required to apply these rules equally to all applicants and recipients to ensurethat they meet federal Medicaid requirements governing statewideness and comparability of benefits. If a state wants to modify these rules substantially (e.g., by allowing coverage of childless adults whoordinarily could not qualify for Medicaid) or apply special rules to a select group of individuals (e.g.,allowing Medicaid coverage for all hurricane victims who meet categorical eligibility requirementsby disregarding their income), federal permission in the form of a waiver granted by the Secretaryof HHS would generally be required. Although states are not obligated to participate in the Section 1115 waiver arrangement beingoffered by the federal government in response to Hurricane Katrina (described later in this report),several have opted to do so. As discussed earlier, congressional action may be required if enhancedreimbursement is to be provided to states for Medicaid costs incurred as a result of HurricaneKatrina. Congress may also wish to consider the desirability of uniform treatment of hurricanevictims across states. <5.1. Recent State Actions> A number of states have expressed a desire for explicit federal guidance on Medicaid issuesraised by Hurricane Katrina. (13) Although the situation is evolving at the federal level bothadministratively and legislatively, examples of state actions reported thus far include thefollowing: (14) In the wake of the storm, Louisiana began providing temporary Medicaid cardsto Medicaid recipients who lost their cards in the hurricane and allowing recipients who have lefttheir homes because of Hurricane Katrina to access Medicaid services -- without any priorauthorization requirements -- in or out of state from any medical provider that is willing to acceptLouisiana Medicaid as payment. An emergency procedure was put in place to expedite providerenrollment for purposes of receiving Medicaid payment, and the state was making Medicaid staffmembers available at the Family Assistance Centers being set up by the Federal EmergencyManagement Agency (FEMA) and at many shelters across the state to help those affected byHurricane Katrina fill out forms to get health coverage. Because of the severe statewide impact ofHurricane Katrina, all of Louisiana Medicaid's staff is being called upon to sign up those who havebeen devastated by the hurricane and need health coverage, and all people who currently havecoverage through the state's SCHIP or Medicaid program will have their renewal dates extended bysix months. (15) Louisiana also requested permission from CMS to cancel as yet unpaid premiums for individualsenrolled in a buy-in program for working persons with disabilities through December 2005. Inresponse, CMS has granted a waiver of these premium payments for 120 days. (16) Currently, the state hasa "Hurricane Katrina Medicaid Program" to help people affected by the storm by offering themtemporary no-cost health coverage. Although the state indicates that this program is not anexpansion of Medicaid, the following are differences between Hurricane Katrina Medicaid andregular Medicaid in Louisiana: coverage is temporary, coverage will not be renewed, self-declarationof disability is accepted, self-declaration of income is accepted, and only people from affected areascan apply. (17) The Mississippi Division of Medicaid is encouraging its medical providers andpharmacies to provide essential services for Medicaid recipients who have migrated from Louisianaas well as other parts of Mississippi. An emergency enrollment form that allows for temporary(120-day) provider enrollment in the state's Medicaid program is available. Providers may call atoll-free number to verify an individual's eligibility for Mississippi Medicaid. (18) As described later in thisreport, the state recently obtained a Hurricane Katrina Section 1115 waiver that provides up to fivemonths of temporary coverage for certain evacuees from emergency areas. In Alabama, the Governor signed a proclamation expediting the process ofobtaining prescription drug refills for storm victims and announcing that people could go to anypharmacy and receive assistance with their medications (there is no mention of how these serviceswould be financed). (19) The state is allowing out-of-state providers not enrolled in its Medicaid program the ability to verifyeligibility for Alabama Medicaid recipients via its Automated Voice Response System (AVRS), anda special expedited enrollment process has been developed for out-of-state providers furnishingmedical services to Alabama Medicaid recipients. (20) As described later in this report, the state recently obtained aHurricane Katrina Section 1115 waiver that provides up to five months of temporary coverage forcertain evacuees from emergency areas. Following the hurricane, the Texas Health and Human Services Commissionprovided Texas pharmacies and providers with information on how to assist Louisiana, Mississippiand Alabama residents who are on Medicaid and need to fill prescriptions or obtain other servicesin Texas. In addition, the Texas Department of State Health Services was assessing long andshort-term medical care needs and other special arrangements for evacuees who are hospital patients,medically fragile, injured, ill or have other special needs. (21) As described later in this report, the state recently obtained aHurricane Katrina Section 1115 waiver that provides up to five months of temporary coverage forcertain evacuees from emergency areas. <5.2. Federal Waiver Authority> Section 1115 Waiver Authority. Section 1115of the Social Security Act provides the Secretary of HHS with broad authority to conduct researchand demonstration projects under several programs authorized in the Social Security Act.Specifically, Section 1115 authorizes the Secretary to waive certain statutory requirements forconducting research and demonstration projects that further the goals of Titles XIX (Medicaid) andXXI (SCHIP). Under Section 1115, the Secretary may waive any Medicaid requirements containedin Section 1902 (including but not limited to what is known as "freedom of choice" of provider,"comparability," and "statewideness"). (22) States must submit proposals outlining terms and conditionsfor proposed waivers to CMS for approval before implementing these programs. Whether large orsmall reforms, Section 1115 waiver programs have resulted in significant changes for Medicaidrecipients nationwide, and serve as a precedent for federal and state officials who wish to maketemporary changes to the Medicaid program in response to the unique circumstances resulting fromthe devastation of a natural or other disaster. In recent years, there has been increased interest among states and the federal governmentin the Section 1115 waiver authority as a means to restructure Medicaid coverage, control costs, andincrease state flexibility. Under current law, states may obtain waivers that allow them to provideservices to individuals not traditionally eligible for Medicaid, cover non-Medicaid services, limitbenefit packages for certain groups, adapt their programs to the special needs of particulargeographic areas or groups of recipients, or accomplish a policy goal such as to temporarily provideMedicaid assistance in the aftermath of a disaster, among other purposes. Following the September 11, 2001 terrorist attacks, for example, New York requested andreceived approval for a Section 1115 waiver known as "Disaster Relief Medicaid" (DRM). TheDRM program allowed Medicaid applicants who were residents of New York City to receive fourmonths of coverage if they met the eligibility requirements of the Medicaid or Family Health Plusprogram, and they applied for DRM between September 11, 2001, and January 31, 2002 (for moredetail on this temporary waiver program see discussion below). While Section 1115 is explicit about provisions in Medicaid law that may be waived inconducting research and demonstration projects, a number of other provisions in Medicaid law andregulations specify limitations or restrictions on how a state may operate a waiver program. Forexample, one provision restricts states from establishing waivers that fail to provide all mandatoryservices to the mandatory poverty-related groups of pregnant women and children; another provisionspecifies restrictions on cost-sharing imposed under Section 1115 waivers. Other features of theSection 1115 waiver authority that may be relevant in using this authority to respond to disastersinclude: Federal Reimbursement for Section 1115 Demonstrations. Approved Section1115 waivers are deemed to be part of a state's Medicaid (or SCHIP) state plan for purposes offederal reimbursement. Project costs associated with waiver programs are subject to that state'sFMAP. (23) Changes tothese financing arrangements, even under a Section 1115 waiver, would require congressionalaction. Financing and Budget Neutrality. Unlike regular Medicaid, CMS waiverguidance specifies that costs associated with waiver programs must be budget neutral to the federalgovernment over the life of the waiver program. To meet the budget neutrality test, estimatedspending under the waiver cannot exceed the estimated cost of the state's existing Medicaid programunder current law program requirements. An exception to this guidance on budget neutrality wasmade by the Secretary for the Section 1115 waiver granted to New York after September 11, 2001. CMS approved an allotment neutrality test (described below) for New York's Disaster ReliefMedicaid Section 1115 waiver program. By contrast, the Secretary eliminated all tests of budget and allotment neutrality in the recent approvals of Section 1115 emergency Medicaid waivers. Financing and Allotment Neutrality. Under the SCHIP program, a differentbudget neutrality standard applies. States must meet an "allotment neutrality test" where combinedfederal expenditures for the state's regular SCHIP program and for the state's SCHIP demonstrationprogram are capped at the state's individual SCHIP allotment. This policy limits federal spendingto the capped allotment levels. Any additional financial resources for SCHIP would requirecongressional action. Relationship of Medicaid/SCHIP Demonstration Waivers to Other Statutes. Section 1115 waiver projects may interact with other program rules outside of the Social SecurityAct; for example, employer-sponsored health insurance as described by the Employee RetirementIncome Security Act (ERISA), or alien eligibility as contained in immigration law. In cases likethese, the Secretary does not have the authority to waive provisions in these other statutes. (24) Program Guidance. The Secretary can develop policies that influence thecontent of demonstration projects and prescribe approval criteria in three ways: (1) by promulgatingprogram rules and regulations; (25) (2) through the publication of program guidance (e.g., the waiverprogram must meet a budget neutrality test); (26) and (3) waiver policy may also be implicitly shaped by theprograms that have been approved (e.g., CMS approval of New York's "Disaster Relief Medicaid"). Legislative action may be required if Congress chooses to further shape the Secretary's authority overthe content of the demonstration programs, dictate specific Section 1115 waiver approval criteria,or otherwise limit the Secretary's waiver authority. Precedent for Emergency-Related Section 1115 Waivers: NewYork's Disaster Relief Medicaid Program. Federal and state officials have lookedto New York's Section 1115 Disaster Relief Medicaid program as precedent for the Secretary of HHSto use the authority under Section 1115 of the Social Security Act to respond to emergencysituations. Details on eligibility criteria, benefit packages, provider agreements, financingarrangements, and other issues outlined in the terms and conditions of New York's temporary waiverprogram provide an example of how this state used the flexibility under Section 1115 to addressspecific health care needs in the wake of an emergency situation. Following the terrorist attacks on September 11, 2001, New York requested and receivedapproval for a Section 1115 waiver known as "Disaster Relief Medicaid." The DRM programallowed most Medicaid applicants who were residents of New York City to receive four months ofcoverage if they met the eligibility requirements of the Medicaid or Family Health Plus (FHP)program, and they applied for DRM between September 11, 2001, and January 31, 2002. The FHPprogram is a separate Section 1115 waiver that had been approved by CMS, and was scheduled tobe implemented in October 2001. FHP significantly expanded Medicaid eligibility to certain groups;for example, the income standard for childless adults went from about 50% to 100% of the federalpoverty level. (27) Medicaid applicants who did not receive coverage under the DRM program included thosewho were pregnant, had a disability, or required institutional services (e.g., nursing facility). Theseindividuals were processed through the traditional Medicaid application process. (28) This separate process forcertain groups is not described in a February 2003 lawsuit which states that the DRM program wasthe only Medicaid program available to New York City Medicaid applicants between September2001 and January 2002. (29) The DRM program also extended eligibility for current Medicaid beneficiaries residing inNew York City and Westchester County who were scheduled to have their Medicaid eligibilityannual re-certification. These individuals were permitted to receive coverage for one year withoutthe annual re-certification normally required by Medicaid law. (30) The waiver also included temporary eligibility for children under SCHIP if they had appliedor were enrolled with health plans that had operations in New York City that were disrupted by theWorld Trade Center attacks. New SCHIP applicants received four months of SCHIP eligibility, andindividuals who were already in a period of presumptive eligibility that was scheduled to endSeptember 30, 2001, received an additional two months of eligibility. Similar to the Medicaidprovisions above, SCHIP enrollees in New York City who were scheduled to have an annualre-certification were allowed to continue with SCHIP coverage for one year. The Secretary of HHS announced tentative approval of the DRM program in a September19, 2001 press release. Approval of the temporary modifications to New York's SCHIP programwere provided via e-mail and through discussions with senior staff at CMS. On September 16, 2002,CMS articulated the agreement with New York in an award letter and terms and conditions. CMSawarded final approval for the DRM Section 1115 waiver on December 31, 2002. CMS decided notto apply its usual Medicaid cost neutrality requirements (described earlier) to the waiver because ofthe unusual circumstances of September 11, 2001. However, the SCHIP allotment neutralityrequirements did apply. (31) The September 11 attacks significantly hampered the state Medicaid agency's ability toprocess Medicaid eligibility records in New York City. The presumptive eligibility processestablished by the DRM program was intended to facilitate enrollment of new applicants intoMedicaid. Applicants for the DRM program were required to fill out a one-page application for theprogram, prove who they were, and attest to their income and resources. Individuals did not haveto be direct victims of the World Trade Center attacks to receive services. Individuals who qualified for the DRM program received a temporary Medicaid authorizationform that allowed them to access Medicaid services. Services provided under the DRM programincluded all fee-for-service benefits provided to non-institutionalized Medicaid beneficiaries. In addition to the four months of additional coverage, it also allowed individuals severaladditional months of eligibility to provide sufficient time for an individual to complete a standardMedicaid application form. (32) The waiver ended in January 2003. If a person was denied Medicaid coverage at the end of the DRM period, under the New Yorkwaiver DRM recipients were not entitled to continuation of DRM benefits while their request for afair hearing was pending. A suit was brought by DRM recipients alleging that the lack of continuingMedicaid benefits constituted a violation of the Due Process Clause of the United StatesConstitution. The U.S. District Court for the Eastern District of New York issued a preliminaryinjunction, affirmed by the U.S. Court of Appeals for the 2nd Circuit, ordering the New York StateMedicaid Agency to continue DRM benefits to all recipients who received a Notice of Decisionterminating their benefits until a fair hearing decision was reached. While the court did not decidethis case on its merits, it is an indication that while the Secretary has the authority to waiveprovisions in Section 1902 for a Section 1115 waiver project, the Secretary's authority may belimited by constitutional considerations. An estimated 342,000 beneficiaries enrolled in the DRM program, and funding for the DRMwaiver was estimated at $670 million over the waiver period. (33) Generally, New Yorkreceives federal reimbursement for 50% of its Medicaid service expenditures. New York requestedthat FEMA cover the non-federal share of Medicaid expenditures for the DRM program through theagency's public assistance funds; however, FEMA denied that request. The request is currently underappeal in FEMA. (34) Section 1135 Waiver Authority. The Section1135 waiver authority is a second mechanism currently available to allow the Secretary of HHS tomake immediate program changes in response to an emergency situation; however, the authority islimited to geographic areas directly impacted by the emergency. Created under the Public HealthSecurity and Bioterrorism Preparedness and Response Act ( P.L. 107-188 ), Section 1135 of the SocialSecurity Act authorizes the Secretary to temporarily waive federal conditions of participation andother certification requirements for any entity that furnishes health care items or services toMedicare, Medicaid, or SCHIP recipients in an emergency area (defined as a geographical area inwhich there exists an emergency or major disaster declared by the President and a public healthemergency declared by the Secretary of HHS). During such an emergency, it authorizes theSecretary to waive: participation, state licensing (as long as equivalent licensure from another stateis held and there is no exclusion from practicing in that state or any state in the emergency area), andpre-approval requirements for physicians and other practitioners; sanctions for failing to meet requirements for emergency transfers betweenhospitals; sanctions for physician self-referral; and limitations on payments for health care and services furnished to individualsenrolled in Medicare Advantage (MA) plans when services are provided outside theplan. In addition, Section 1135 requires the Secretary to provide Congress with certification andwritten notice at least two days prior to exercising this waiver authority. It provides for the waiverauthority to continue for 60 days, and permits the Secretary to extend the waiver period. Finally, thelaw requires the Secretary, within one year after the end of the emergency, to provide Congress withan evaluation of this approach and recommendations for improvements under this waiver authority. <5.3. Current Waiver Activity Related to Hurricane Katrina> The Secretary of HHS has exercised both the Section 1115 waiver authority and the Section1135 waiver authority to make needed changes to health care programs so they are better able toaccommodate the emergency health care needs of Hurricane Katrina survivors. Below is a briefdescription of the information that is currently available regarding each of these waiver actions. Section 1115 Waivers. On September 9, 2005,CMS announced emergency policies that it had adopted to address the health care needs of HurricaneKatrina survivors. (35) Specifically, CMS noted that President Bush had announced that "special evacuee status" would begranted to individuals impacted by Hurricane Katrina and that evacuees would be allowed to applyfor several federal programs, including Medicaid and SCHIP, without having to verify their incomeor employment status. CMS also noted that an application template was being developed to assiststates in obtaining emergency Medicaid and SCHIP Section 1115 waivers to provide temporaryeligibility for evacuees. On September 15, 2005, Texas became the first of 17 states to obtain approval for a Section1115 waiver based on the emergency application template developed by CMS (these waivers arereferred to as being part of a multi-state demonstration project). To date, similar waivers have alsobeen approved for Alabama, Arkansas, California, the District of Columbia, Florida, Georgia, Idaho,Indiana, Louisiana, Maryland, Mississippi, Nevada, Ohio, Puerto Rico, South Carolina, andTennessee. (36) All of the waivers granted thus far create a temporary eligibility period, not to exceed fivemonths, (37) during whichcertain Hurricane Katrina evacuees will be granted access to Medicaid and SCHIP state plan (38) services in the host state(i.e., the state that has been granted an emergency Section 1115 waiver) based on simplifiedeligibility criteria for various groups (children and their parents, pregnant women, individuals withdisabilities, etc.). Under the Alabama, District of Columbia, Idaho, Louisiana, Nevada, Puerto Rico,and Texas waivers, evacuees are exempt from Medicaid and SCHIP cost-sharing requirements. Medicaid and SCHIP cost sharing requirements will be imposed under the remaining waiverprograms in each of Arkansas, California, Florida, Indiana, Georgia, Maryland, Ohio, SouthCarolina, Tennessee, and Mississippi. (39) In addition to creating temporary eligibility for evacuees under the host state's Medicaid orSCHIP state plan, waivers for eight out of the 17 states (Alabama, Arkansas, Georgia, Louisiana,Mississippi, South Carolina, Tennessee, and Texas) also create an uncompensated care pool. Inseven of the eight states whose waivers create an uncompensated care pool (Alabama, Georgia,Louisiana, Mississippi, South Carolina, Tennessee, and Texas), the pool may be used (throughJanuary 31, 2006) to augment Medicaid and SCHIP state plan services for evacuees (e.g., provideservices not covered under the state plan) and pay for HCBS waiver services not otherwise coveredin the host state. (40) Inall eight of the states whose waivers create an uncompensated care pool, funds from the pool maybe used to reimburse providers that incur uncompensated care costs for uninsured evacuees who donot qualify for Medicaid or SCHIP in the host state. States with an uncompensated care pool mustconsider alternative methods for providing coverage to uninsured evacuees (including throughpremium assistance for private insurance and other insurance pools) and report to CMS on thefeasibility of adopting such alternative methods. In general, the Section 1115 waivers define an evacuee as an individual who: (1) is a residentof an emergency area (defined as a geographic area or region in which the President has declared adisaster following Hurricane Katrina, specifically targeting counties and parishes designated byFEMA as requiring individual assistance); (2) has been displaced from his or her home by theemergency; (3) is not considered a non-qualified alien; (4) meets the definition of the new temporaryeligibility population. The new temporary eligibility population includes: Children under age 19 with income up to and including 200%FPL; Pregnant women from Louisiana and Mississippi with income up to andincluding 185% FPL; Pregnant women from Alabama with income up to and including 133%FPL; Individuals with disabilities with income up to and including 300% of theSupplemental Security Income (SSI) benefit rate; Low-income Medicare recipients with income up to and including 100%FPL; Low-income individuals in need of long-term care with income up to andincluding 300% SSI; and Low-income parents of children under age 19 with family income up to andincluding 100% FPL. For the purposes of determining waiver program eligibility, evacuees may self-attest todisplacement, income, and immigration status, but individuals must cooperate in demonstratingevacuee and eligibility status. The waiver documents note that the standard Medicaid and SCHIP funding process will beused during the waiver period. However, states will not be required to meet Medicaid budget orSCHIP allotment neutrality tests under the waivers. HHS justified dropping the neutralityrequirements because, CMS officials argue, individuals participating in the waiver are presumed tobe eligible for Medicaid or SCHIP in their respective home states, and therefore costs to the federalgovernment would have otherwise been incurred and allowable. It is unclear how this argumentapplies in the case of states whose waivers establish an uncompensated care pool that may be usedto pay for costs associated with uninsured evacuees who otherwise do not qualify for Medicaid orSCHIP. (41) For Section 1115 demonstration waivers, budget neutrality has meant that demonstrationprojects do not increase federal spending over what would have been spent under current lawprogram requirements. (42) For most Section 1115 waivers, the federal and stategovernments negotiate a budget neutrality spending cap, beyond which the federal government hasno fiscal responsibility. Because the budget neutrality requirement is a construct of waiver guidancethat has been added administratively and is not a statutory requirement, the Secretary may decide thatit will not apply to a particular waiver. Financing Under the Emergency Medicaid Waivers. On September 16, 2005, the Director of CMS and Medicaid state officials in each of Louisiana,Mississippi, and Alabama signed a "memorandum of understanding" (MOU) whereby home statesagreed to pay the non-federal share of costs for medically necessary treatment provided to evacueeswhile they are residing in a host state. (43) Subsequently, at least two states with Hurricane Katrina Section1115 waivers have indicated that they expect to receive 100% federal funding for services providedthrough the waivers. (44) While the waiver documents from CMS do not indicate how this would be accomplished,during an October 25, 2005, the Senate Committee on Finance Hearing to Conduct a Markup toAchieve the Committee's Budget Reconciliation Instructions to Reduce the Growth of Outlays asContained in H.Con.Res. 95 , a CMS official stated that waiver expenditures for theuncompensated care pools will be reimbursed with 100% federal funds from the National DisasterMedical System (NDMS) program, (45) and that the NDMS program had $100 million to spend on thisand other qualifying activities. The CMS official also stated that costs associated with all otheremergency Medicaid waiver services would be the responsibility of the home state. In addition, the budget reconciliation conference report [i.e., S. 1932 ( H.Rept.109-362 )] contains funds for Hurricane Katrina Medicaid and SCHIP relief. If enacted, theconference agreement would appropriate $2 billion (in addition to any funds made available for theNational Disaster Medical System under the Department of Homeland Security for health care costsrelated to Hurricane Katrina) for use by the Secretary of HHS to pay eligible states (those who haveprovided care to affected individuals or evacuees under a Section 1115 project) for certain costsassociated with their disaster relief Medicaid and SCHIP waiver programs. (For more details on thisand other legislative action on this issue, see the section titled Current Federal Legislation thatappears later in this report.) As discussed earlier, the Secretary of HHS does not have the authority to waive provisionsof federal Medicaid law governing the FMAP and other federal Medicaid reimbursement rates (e.g.,those that apply to administrative functions) under Section 1903 of the Social Security Act, and eachstate is responsible for paying the non-federal share of any Medicaid costs it incurs. (46) If NDMS funds -- and,if enacted, funds made available through the budget reconciliation conference agreement areinsufficient to cover the costs associated with state claims submitted under the uncompensated carepools -- it is unclear whether additional steps may be taken by the Secretary to allow the home statesto finance their state shares of expenditures for evacuees in other ways. Section 1135 Waivers. The Secretary of HHSinvoked the Section 1135 waiver authority on each of September 1, September 4, and September 7,2005, to waive certain requirements and program regulations under Titles XVIII, XIX, and XXI ofthe Social Security Act to accommodate the emergency health care needs of recipients and medicalproviders in the Hurricane Katrina-impacted states. Table 1 shows states that are covered under theSection 1135 waivers authorized by the Secretary of HHS as a result of meeting the followingrequirements: (1) the President has declared them to be emergency or major disaster areas pursuantto the Robert T. Stafford Disaster Relief and Emergency Assistance Act; and (2) the Secretary ofHHS has declared them to have public health emergencies pursuant to Section 319 of the PublicHealth Service Act. (47) Table 1. States Covered Under Section 1135 Waivers Authorizedin Response to Hurricane Katrina Source: U.S. Department of Health and Human Services, Waiver Under Section 1135 of the SocialSecurity Act (Sept. 1, 2005); Waiver Under Section 1135 of the Social Security Act (Sept. 4, 2005),available at http://www.hhs.gov/katrina/ssawaiver.html ; Waiver Under Section 1135 of the SocialSecurity Act (Sept. 7, 2005), available at http://www.hhs.gov/emergency/determination2.html . In each of the above listed states, the following program operating rules will be loosenedunder the Section 1135 waiver authority to speed the provision of health care services for individualsenrolled in the Medicare, Medicaid and SCHIP programs, and to ensure that health care providersmay be reimbursed for items and services rendered to program recipients: (48) Certain conditions of participation, certification requirements, programparticipation or similar requirements, or pre-approval requirements for individual health careproviders or types of health care providers, including as applicable, a hospital or other provider ofservices, a physician or other health care practitioner or professional, a health care facility, or asupplier of health care items or services. The requirement that physicians and other health care professionals holdlicenses in the state in which they provide services, if they have a license from another state (and arenot affirmatively barred from practice in that state or any state in the emergencyarea). Sanctions under Section 1867 of the act (the Emergency Medical Treatmentand Labor Act, or EMTALA) for the redirection of an individual to another location to receive amedical screening examination pursuant to a state emergency preparedness plan or transfer of anindividual who has not been stabilized if the redirection or transfer arises out of hurricane relatedemergency circumstances. Limitations on payments under Section 1851(I) of the act to permit MedicareAdvantage enrollees to use out-of-network providers in an emergencysituation. Sanctions and penalties arising from noncompliance with the followingprovisions of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) privacyregulations: (a) the requirements to obtain a patient's agreement to speak with family members orfriends or to honor a patient's request to opt out of the facility directory (as set forth in 45 CFR164.510); (b) the requirement to distribute a notice of privacy practices (as set forth in 45 CFR164.520); or (c) the patient's right to request privacy restrictions or confidential communications (asset forth in 45 CFR 164.522). CMS offered some additional information on the operating procedures being relaxed in a factsheet released on September 6, (49) but it is still unclear what role the Section 1135 waiver authorityplays in the context of a program like Medicaid whose day-to-day operations are controlled by thestates -- especially with regard to payment for services. For example, although CMS has stated thatcrisis services provided to Medicare and Medicaid patients who have been transferred to facilitiesnot certified to participate in the programs will be paid, the agency does not specify how they willbe paid and whether states, who normally pay providers directly for services rendered to Medicaidbeneficiaries and then seek federal reimbursement, must pay providers in this situation. Applicability of the Secretary's Waiver Authority to Other DisasterSituations. In general, the disaster relief areas and time periods defined in theSecretary's September 2005 waiver actions are aimed at providing targeted relief to individuals andstates affected by Hurricane Katrina. As a result, the relief may not apply to individuals and statesaffected by other emergency situations (e.g., Hurricane Rita). However, in response to a crisissituation, the Secretary may relax provider rules under the Section 1135 waiver authority in any stateor geographic area that meets certain requirements (as specified above). Likewise, under the Section 1115 waiver authority, CMS has encouraged Katrina-affectedstates to pursue waiver programs under their new emergency Section 1115 demonstrationinitiative. (50) Waiverprograms approved under this initiative (as described above) could allow states to offer Medicaidand SCHIP coverage to evacuees from geographic areas in which a disaster or emergency has beendeclared in response to Hurricane Katrina. (51) While this CMS waiver initiative was specifically targeted atHurricane Katrina-impacted states, the emergency waiver template may serve as a model for futurechanges to the Medicaid and SCHIP programs in the wake of a national disaster. <5.4. Current Federal Legislation> A number of bills have been introduced in 109 th Congress that would affect Medicaidcoverage for survivors of Hurricane Katrina (although the bills may address a variety of issues, thediscussion below is limited to Medicaid-related provisions). (52) In general, the disasterrelief areas and time periods specified in the bills are aimed at providing targeted relief to: (1)individuals and states (or areas within states) directly affected by Hurricane Katrina, and (2) statesthat have taken in individuals displaced by the storm. As a result, the relief may not apply toindividuals and states affected by other emergency situations (e.g., Hurricane Rita). House Proposals. H.R. 3671 (Green) Status: Referred to House Committee on Energy and Commerce. This proposal would authorize the Secretary of HHS to provide 100% of the federal medicalassistance percentage (FMAP) for displaced Medicaid recipients receiving medical assistance outsidetheir state of residence due to a declared public health emergency. H.R. 3698 (Dingell) Status: Referred to House Committees on Energy and Commerce; Ways and Means. This proposal would allow states to receive 100% federal funding for the Medicaidexpenditures for individuals who are Katrina survivors (as described by the proposal) and for anyindividual who is in a directly impacted state (i.e., Alabama, Louisiana, and Mississippi). States mayalso receive 100% federal funding for administrative costs related to covering Katrina survivors. States that choose to cover Katrina survivors would not be allowed to establish income or asset testsor state residency or other categorical requirements. States must also use a simplified applicationprocess that would allow individuals to attest that they qualify as a Katrina survivor (individualswould be penalized for knowingly falsely attesting to their status as a survivor). This provisionwould remain in effect during the disaster relief period from August 29, 2005, through September30, 2006. In addition, the proposal would hold all states harmless for any scheduled reduction in astate's FMAP rate for FY2006. If a state's FMAP rate for FY2006 is less than it was for FY2005,the FY2005 FMAP rate shall apply. The proposal would also affect the scheduled changes to Medicaid related to the Medicareprescription drug benefit, effective January 1, 2006. First, the proposal would suspend until January2007, the requirement for certain states to pay the federal government a portion of what the Medicaidprogram would have spent on prescription drugs for those dually eligible for Medicaid and Medicare. This provision would only apply to states directly impacted by Hurricane Katrina and those statesthat have received a "significant influx" of Katrina survivors. The provision would also changefederal law to allow state Medicaid programs to pay for prescription drugs for a Part D eligibleindividual who is also a Katrina survivor. These changes related to the Medicare prescription drugbenefit can be ended if the Secretary determines (after consulting with the state) that individuals canbe effectively transferred to Medicare for their prescription drug coverage without discontinuing anindividual's drug coverage. H.R. 3708 (Johnson) Status: Referred to House Committees on Energy and Commerce; Transportation andInfrastructure. This proposal would require HHS to dedicate 10% of any Hurricane Katrina disaster relieffunds for mental health services to victims and first responders. These funds would also be availableto cover the state share of Medicaid or SCHIP costs for victims of, or first responders to, HurricaneKatrina. H.R. 3735 (Davis) Status: Referred to House Committee on Energy and Commerce. This proposal would prevent a reduction in a state's FMAP rate for FY2006. No state shallreceive a lower FMAP for FY2006 than the greater of the FY2005 FMAP rate, or the computationof the FMAP formula without the retroactive application of re-benchmarked per capita income. H.R. 3845 (Gingrey-Alexander-Boustany-Taylor) Status: Referred to House Committees on Energy and Commerce; Budget. This proposal would establish a 90% FMAP rate under Medicaid and SCHIP for FY2006 forMedicaid and SCHIP services provided to individuals in Louisiana or Mississippi, and to Katrinaevacuees (as defined by the bill) regardless of their place of residence. H.R. 3952 (Gingrey) Status: Referred to House Committees on Energy and Commerce; Ways and Means; Budget;Government Reform; and Transportation and Infrastructure. This proposal is similar to S. 1716 in that it would establish Disaster ReliefMedicaid (DRM) coverage, provide additional federal Medicaid funding for covering services forKatrina survivors and residents of major disaster parishes and counties, require the Secretary tosubmit a plan for transitioning drug coverage for Medicare/Medicaid dual eligibles in affected areasfrom Medicaid to Medicare Part D, and expand the Section 1135 waiver authority. However, the proposal differs from S. 1716 in several areas. Specifically theproposal would: Require Katrina survivors to be eligible for Medicaid based on the criteria usedin their state of residence during the week of August 28, 2005 ( S. 1716 establishes anincome standard of the either 100% of FPL (200% of FPL for certain groups), or the incomeeligibility that would apply under the state a Katrina survivor currently resides in, whichever ishigher); Provide 90% federal funding for Medicaid services and related administrativecosts for DRM-eligible Katrina survivors during the DRM coverage period ( S. 1716 would provide 100% federal funding); Provide 90% federal Medicaid funding covering services for residents of majordisaster parishes and counties during the period from August 28, 2005 through December 31, 2006,( S. 1716 would provide 100% federal funding); Continue Medicaid eligibility redeterminations between August 28, 2005 andDecember 31, 2006, ( S. 1716 would establish a moratorium onredeterminations); Exclude treatment of alcohol and substance abuse that is directly related to thecircumstances of Hurricane Katrina from the extended mental health and care coordinationbenefit; For Katrina survivors, temporarily waive Medicaid's prohibition on coveringservices in an institution for mental disease (IMD) for adults between ages 21 and 64 beginning onAugust 28, 2005 and ending on December 31, 2006. H.R. 3958 (Melancon) Status: Referred to House Committees on Appropriations; Agriculture; Transportation andInfrastructure; Budget; Financial Services; Energy and Commerce; Judiciary; Armed Services;Education and the Workforce; Resources; and Small Business. This proposal is similar to S. 1716 in that it would establish Disaster ReliefMedicaid (DRM) coverage, provide 100% federal Medicaid funding for DRM-eligible Katrinasurvivors, hold all states harmless for FMAP decreases in FY2006, require the Secretary to submita plan for transitioning drug coverage for Medicare/Medicaid dual eligibles in affected areas fromMedicaid to Medicare Part D, and expand the Section 1135 waiver authority. However, most provisions in this proposal would only apply to Louisiana (provisions of S. 1716 include certain counties in Mississippi and Alabama). DRM coverage is forKatrina survivors from Louisiana. The additional federal Medicaid funding for major disaster areasand the moratorium on Medicaid eligibility redeterminations would only apply to Louisiana. Another difference between this proposal and S. 1716 is that the Disaster ReliefFund would have an appropriation of $400 million and would be available only to pay for privatehealth insurance premiums. In a separate provision, during the DRM coverage period, (53) expenditures of the stateof Louisiana for reimbursing hospitals, physicians, federally qualified health centers, and rural clinicsfor uncompensated care provided to Katrina survivors would be treated as medical assistance underLouisiana's Medicaid state plan, with an FMAP of 80%. H.R. 4197 (Watt) Status: Referred to House Committees on Ways and Means, Judiciary, Financial Services,Energy and Commerce, Transportation and Infrastructure, Education and the Workforce, SmallBusiness, Government Reform, and Budget. This proposal would provide Disaster Relief Medicaid (DRM) coverage similar to thatdescribed in S. 1716 -- except that the DRM coverage period would last 12 months,with a discretionary 12-month extension by the President. Senate Proposals. S. 1637 (Reid) Status: Referred to Senate Committee on Finance. Similar to H.R. 3698 , except that the disaster relief period is from August 29,2005, through February 28, 2006 (though the President must extend through September 30, 2006,unless a determination is made that all Katrina survivors have sufficient access to health care). S.A. 1652 to H.R. 2862 (Lincoln) Status: Amendment withdrawn. Similar to S. 1637 . S.A. 1672 to H.R. 2862 (Durbin) Status: Amendment submitted, but no action taken. This proposal allows certain health professionals to provide Medicaid services in Florida,Alabama, Louisiana, Mississippi and Texas without regard to state licensing and certification lawsfor 90 days following enactment of the provision. S.A. 1721 to H.R. 2862 (Durbin) Status: Agreed to in Senate as part of H.R. 2862 . This proposal would allow eligible health professionals (as defined by the bill) that have beenevacuated from Louisiana and Mississippi to provide health-related services under Medicare,Medicaid or SCHIP and under Indian Health Service programs, without regard to state licensing andcertification laws for 90-days following the date specified by a state's licensing board. S. 1688 (Hutchison) Status: Placed on Senate legislative calendar. This proposal would allow any state to receive 100% federal funding for Medicaid andSCHIP expenditures for individuals (children in the case of SCHIP) who are Katrina survivors (asdescribed by the proposal) during the disaster period in the area of the survivor's residence (or formerresidence). The disaster period for a state is determined by the date an area(s) in the state were declareda major disaster area in accordance with the Robert T. Stafford Disaster Relief and EmergencyAssistance Act because of Hurricane Katrina. The disaster period ends on the earlier of: (1) the latestdate an area of that state is designated as a major disaster area; or (2) six months following thedeclaration of the disaster area. The President may extend the disaster period for a state for up to anadditional six months. States that choose to cover Katrina survivors would not be allowed to establish income orasset tests or state residency or other categorical requirements. States must also use a simplifiedapplication process that would allow individuals to attest that they qualify as a Katrina survivor(individuals would be penalized for knowingly falsely attesting to their status as a survivor). Katrina survivors would be eligible for the same range and scope of services as those whoare categorically needy under the Medicaid program, or as a targeted low-income child under theSCHIP program. In addition, the state must pay for medical services (including mental healthservices) that are outside the scope of the state's Medicaid coverage if the item or service is medicallynecessary for the survivor. S. 1716 (Grassley-Baucus) Status: Placed on Senate legislative calendar. This proposal would require states to provide Disaster Relief Medicaid (DRM) coverage forindividuals who are Katrina survivors (as defined by the bill) and meet specific income guidelines. To qualify, a Katrina survivor's family income cannot exceed the higher of either 100% of the federalpoverty level (FPL) (200% FPL in the case of pregnant women, children, and recipients of SocialSecurity Disability Insurance (SSDI) benefits); or the income eligibility standard under the state'sMedicaid state plan. The state would be required to use the least restrictive income counting rulesapplied in that state and must disregard unemployment compensation from income. States wouldnot be allowed to establish asset tests or state residency or other categorical requirements. Statesmust use a simplified application process that would allow individuals to attest that they qualify asa Katrina survivor (individuals would be penalized for knowingly falsely attesting to their status asa survivor). The DRM coverage period would be from August 28, 2005 until five months after the dateof enactment of the bill, subject to a discretionary five-month extension by the President. Duringthe DRM coverage period, the state would be allowed to provide extended mental health and carecoordination benefits to DRM-eligible Katrina survivors. The state would also be allowed to providehome and community-based waiver services to individuals who self-attest that they requireimmediate services available under the waiver. The Secretary of HHS would lift waiver restrictions(as specified in the bill) that limit the availability of such services. States would receive 100% federal funding for Medicaid service expenditures andadministrative costs associated with DRM-eligible Katrina survivors during the DRM coverageperiod. For items and services furnished during the period that begins on August 28, 2005, and endson December 31, 2006, a 100% FMAP would be available for providing medical assistance undera Medicaid state plan to any individual, including a Katrina survivor, residing in a parish or countyfor which the President has declared a major disaster pursuant to the Stafford Act as a result ofHurricane Katrina and determined that individual or public assistance is warranted. The bill wouldalso hold all states harmless for any scheduled reduction in their FMAP for FY2006. If a state'sFY2006 FMAP is less than it was for FY2005, the FY2005 FMAP shall apply. The bill would also establish a Disaster Relief Fund (with an appropriation of $800 millionfor FY2005, to remain available until expended) administered by the Secretary of HHS. TheDisaster Relief fund would: (1) make payments directly to certain Medicaid providers to offset costsincurred as a result of Hurricane Katrina, (2) make payments to state insurance commissioners forthe purpose of making health insurance premium payments to insurers on behalf of certainindividuals and employers. The bill would also require the Secretary of HHS to submit to Congress no later than October7, 2005 a written plan on the transition of individuals who are dually eligible for Medicaid andMedicare from Medicaid prescription drug coverage to coverage under the new Medicare Part Dprescription drug benefit. Finally, the bill would amend Section 1135 to extend waiver authority to geographic areasthat the Secretary of HHS determines have a significant number of evacuees from an emergency area. The amendment would be effective as if enacted on August 28, 2005. S. 1765 (Landrieu-Vitter) Status: Referred to Senate Committee on Finance. This proposal is similar to S. 1716 in that it would establish Disaster ReliefMedicaid (DRM) coverage, provide 100% federal Medicaid funding for DRM-eligible Katrinasurvivors, hold all states harmless for FMAP decreases in FY2006, require the Secretary to submita plan for transitioning drug coverage for Medicare/Medicaid dual eligibles in affected areas fromMedicaid to Medicare Part D, and expand the Section 1135 waiver authority. This proposal differs from S. 1716 in that during the period that begins onAugust 28, 2005, and ends on December 31, 2006, a 100% FMAP would be available for providingmedical assistance under a Medicaid state plan to any individual (including a Katrina survivor)residing only in a parish in Louisiana for which the President has declared a major disaster pursuantto the Stafford Act as a result of Hurricane Katrina and determined that individual or publicassistance is warranted (a similar provision in S. 1716 would include counties inMississippi and Alabama). Another difference between this proposal and S. 1716 is that the Disaster ReliefFund would have an appropriation of $400 million and would be available only to pay for privatehealth insurance premiums. In a separate provision, during the DRM coverage period, (54) expenditures of the stateof Louisiana for reimbursing hospitals, physicians, federally qualified health centers, and rural clinicsfor uncompensated care provided to Katrina survivors would be treated as medical assistance underLouisiana's Medicaid state plan, with an FMAP of 80%. S. 1766 (Vitter-Landrieu) Status: Referred to Senate Committee on Finance. Same as S. 1765 . Budget Reconciliation. In the FY2006 budgetresolution adopted by the House and Senate on April 28, 2005 ( H.Con.Res. 95 ),reconciliation instructions directed the two committees with jurisdiction over Medicaid to reducemandatory FY2006-FY2010 outlays by $10 billion (Senate Finance) and $14.734 billion (HouseEnergy and Commerce). While the budget resolution did not instruct the two committees on howto achieve these savings targets, Medicaid is one of the larger mandatory spending programs thatfalls under their jurisdictions. Senate. On October 25, 2005, the Senate FinanceCommittee approved a reconciliation proposal that the Senate Budget Committee incorporated into S. 1932 , which subsequently passed the Senate on November 3. Under one provisionof S. 1932, for items and services furnished during the period August 28, 2005 throughMay 15, 2006, states would receive 100% FMAP reimbursement for Medicaid and SCHIP assistanceprovided to individuals who resided during the week preceding Hurricane Katrina in one of theparishes or counties of Louisiana, Mississippi, and Alabama specified in the bill. (55) Costs directly attributableto related administrative activities would also be reimbursed at 100%. Another provision of S.1932 would allow Louisiana, Mississippi, and Alabama to elect to not have the Medicaidsubtitle of the bill (e.g., changes dealing with prescription drugs) apply during any period for whicha disaster declared as a result of Hurricane Katrina remains in effect. House. On October 28, 2005, the House Energy andCommerce Committee approved its own reconciliation proposal. The House Budget Committeeincorporated the proposal into H.R. 4241 , which subsequently passed the House as anamendment to S. 1932 on November 18. Under the House bill, for items and servicesfurnished between August 28, 2005 and May 15, 2006, states would receive 100% FMAPreimbursement for Medicaid and SCHIP assistance provided to (1) any individual residing in a parishof Louisiana, a county of Mississippi, or a major disaster county of Alabama and (2) individuals whoresided during the week preceding Hurricane Katrina in a parish or county for which a major disasterhas been declared as a result of Katrina -- and for which the President has determined, as ofSeptember 14, 2005, warrants individual assistance under the Stafford Act. (56) Costs directly attributableto related administrative activities would also be reimbursed at 100%. In addition, for any year after 2006 for any states that the Secretary of HHS determines hasa significant number of individuals who were evacuated to and live in the state as a result ofHurricane Katrina as of October 1, 2005, the Secretary would disregard such evacuees and theirincome for purposes of calculating state FMAPs for Medicaid and SCHIP. Another provision of theHouse bill would allow the Medicaid subtitle of the bill to not apply during the 11-month periodbeginning September 1, 2005, to individuals entitled to Medicaid assistance by reason of theirresidence in a parish of Louisiana or a county of Mississippi or Alabama for which a major disasterhas been declared as a result of Hurricane Katrina -- and for which the President has determined,before September 14, 2005, warrants individual and public assistance under the Stafford Act. Conference. A conference report on S. 1932 ( H.Rept. 109-362 ) containing Hurricane Katrina Medicaid and SCHIP relief was filed onDecember 19. The House agreed to the report by a vote of 212-206 that day. On December 21, theSenate removed extraneous matter from the legislation pursuant to a point of order raised under the"Byrd rule," and then, by a vote of 51-50 (with Vice President Cheney breaking a tie vote), returnedthe amended measure to the House for further action. The conference agreement would appropriate $2 billion (in addition to any funds madeavailable for the National Disaster Medical System under the Department of Homeland Security forhealth care costs related to Hurricane Katrina) for use by the Secretary of HHS to pay eligible states(those that have provided care to affected individuals or evacuees under a Section 1115 project) forthe following purposes: the non-federal share of expenditures for health care provided to affectedindividuals (those who reside in a major disaster area declared as a result of Hurricane Katrina andcontinue to reside in the same state) and evacuees (affected individuals who have been displaced toanother state) under approved multi-state Section 1115 demonstrationprojects; reasonable administrative costs related to such projects; the non-federal share of expenditures for medical assistance provided toindividuals under existing Medicaid and SCHIP state plans; and other purposes, if approved by the Secretary, to restore access to health carein affected communities. The non-federal share paid to eligible states would not be regarded as federal funds forpurposes of Medicaid matching requirements. No payment obligations would be incurred underapproved multi-state Section 1115 projects for the following costs: (1) health care provided asMedicaid or SCHIP medical assistance incurred after June 30, 2006, and (2) uncompensated careor services and supplies beyond those included as Medicaid or SCHIP medical assistance incurredafter January 31, 2006.

Medicaid is jointly financed by the federal and state governments, but each state designs andadministers its own version of the program under broad federal guidelines. The complexity ofMedicaid can present an enormous challenge in meeting the needs of Hurricane Katrina's victims,especially when evacuees cross state lines. State variation in eligibility, covered services, and thereimbursement and delivery of services is the rule rather than the exception. Furthermore, althoughMedicaid is targeted at individuals with low income, not all of the poor are eligible, and not all thosecovered are poor. As a federal-state program that helps to finance health care services for people with limitedresources, Medicaid is an obvious avenue of quick response for support of victims in the aftermathof a disaster. The program's federal budgetary status as mandatory spending means that federalfunding is available to support coverage for all people who meet the program's eligibility criteria,without the need for a supplemental appropriation. However, the ability of Medicaid to respond to a disaster -- in terms of the numbers and typesof people who can rely on it for health care support -- may depend on a number of factors, includingcongressional action to modify statutory provisions (e.g., the level of federal Medicaidreimbursement offered to states), the Secretary of Health and Human Services' ability to waivecertain program requirements administratively (e.g., regarding eligibility and benefits), and actionsof the states (each of whom operates its own unique Medicaid program within federal guidelines). This report, which will be updated as events warrant, discusses the following: Medicaid's rules on eligibility, benefits, and financing in the context of currentquestions and issues raised by Hurricane Katrina. Recent state actions in response to Medicaid issues raised by thehurricane. Federal Medicaid waiver authority, including information on current activityin this area and the New York Disaster Relief Medicaid waiver granted in response to the September11 terrorist attacks. Current federal legislation related to Medicaid and Hurricane Katrina reliefefforts.

Trade Adjustment Assistance for Workers (TAA) provides federal assistance to workers who involuntarily lose their jobs due to foreign competition. The primary benefits for TAA-eligible workers are funding for training and reemployment services as well as income support while a worker is enrolled in training. Workers may also be eligible for other benefits, including a tax credit equal to a portion of qualified health insurance premiums. Workers age 50 and over may be eligible for Reemployment Trade Adjustment Assistance, a wage supplement program. After a brief discussion of the program's purpose and most recent reauthorization, this report describes TAA as reauthorized by the Trade Adjustment Assistance Reauthorization Act of 2015 (TAARA, Title IV of P.L. 114-27 ). <1. Program Rationale and Purpose> Reduced barriers to international trade are widely acknowledged to offer benefits to consumers in the form of increased choices and lower prices. Expanded trade may also offer expansionary opportunities to firms that produce goods or services that see increased exports. Reduced barriers to trade may, however, have concentrated negative effects on domestic industries and workers that face increased competition. TAA is designed to provide readjustment assistance to workers who suffer dislocation (job loss) due to foreign competition or offshoring. Generally, TAA provides a more robust set of benefits and services than would be available to a worker who lost his or her job for reasons other than foreign competition. TAA is designed to assist workers who have been adversely affected by reduced trade barriers and increased trade. Its availability to workers who are adversely affected by declines in international trade may be limited. TAA was created in 1962 and, historically, has been reauthorized alongside expansionary trade policies. A detailed legislative history of the program is in the Appendix . <2. Trade Adjustment Assistance Reauthorization Act of 2015> In June 2015, TAA was reauthorized by TAARA. The eligibility and benefit provisions of TAARA are authorized to continue through June 30, 2021. TAARA was part of a bill that extended other trade-related policies. TAARA was also passed in conjunction with a separate bill that reauthorized the Trade Promotion Authority (TPA, Title I of P.L. 114-26 ). TPA (also known as "fast track") grants the President authority to negotiate trade agreements, which are then subject to an "up or down" vote in Congress. Since the reauthorization of TPA in 2015, Congress has not voted on any presidentially negotiated trade agreements. <2.1. Applicability of TAARA Provisions> This report focuses on the eligibility and benefit provisions of TAA as enacted by TAARA. These provisions apply to all workers certified for TAA after the law's enactment. The law also had retroactivity provisions and, in some cases, workers who were parts of groups certified prior to the 2015 reauthorization may be covered under the TAARA provisions. In other cases, however, a worker who was certified under pre-2015 provisions may continue to receive benefits under the prior provisions. As such, while the version of the program described in this report will apply to all new program participants certified through June 30, 2021, it may not apply to some participants who are covered by a TAA petition that was certified prior to the enactment of TAARA. In these cases, states may operate multiple TAA programs to concurrently serve workers certified under the TAARA provisions and workers certified under other provisions. <3. TAA Administration and Financing> TAA is jointly administered by the federal government and the states. It is funded by the federal government. The respective roles of federal and state governments in administering and financing the TAA program were in place prior to TAARA and were not substantively changed by the reauthorization law. <3.1. Administration> TAA is jointly administered by the U.S. Department of Labor (DOL) and cooperating state agencies. DOL makes group eligibility determinations, allots appropriated funds to cooperating state agencies, and oversees grantees. Individual benefits are provided through state workforce systems and state unemployment insurance systems. Workers may physically receive benefits and services through local American Job Centers (also known as One-Stop Career Centers). States are responsible for collecting participation and outcome data and reporting these data to DOL. The Health Coverage Tax Credit, which is available to qualified TAA-certified workers who purchase qualified health insurance, is administered by the Internal Revenue Service (IRS). It is administered separately from the TAA program's other benefits and services. <3.2. Financing> TAA is funded by mandatory appropriations. Typically, Congress appropriates a single sum that supports all TAA activities. DOL then allocates these funds to various program activities. Under TAARA, funding for training and reemployment services is capped at $450 million per year. These funds are allotted to the states via a grant allocation formula that considers past and anticipated program usage. States may expend training and reemployment service funds in the year of allotment or in either of the next two fiscal years. Training subsidies are states' primary expenditures out of their reemployment services funding. TAARA specifies that states must allocate at least 5% of their reemployment services funding to case management and no more than 10% to administrative costs. Funds for the Trade Readjustment Allowance income support and Reemployment Trade Adjustment Assistance wage insurance program are not capped. Appropriations for these benefits are based on congressional estimates. Funding for these benefits that is not spent in the year of allotment is returned to the Treasury. TAA is a direct spending (also referred to as "mandatory") program and subject to sequestration under the Budget Control Act of 2011, as amended. For FY2018, the Office of Management and Budget (OMB) determined that the reduction for nonexempt, nondefense spending would be 6.6%. Sequester levels in subsequent years will be determined by OMB. <3.2.1. FY2018 Appropriation> In FY2018, Congress appropriated $790 million for the TAA for Workers programs. Of this amount, $450 million was for training and reemployment services and the remaining $340 million was for income support and wage insurance. The entire $790 million appropriation was subject to 6.6% sequestration ($52.14 million). DOL opted to apply the entirety of the sequestration to the training and reemployment services funding, reducing the funding for training and reemployment services from $450 million to $397.86 million and leaving the $340 million for income support and wage insurance unchanged. <4. Eligibility and Application Process> Obtaining TAA benefits is a two-stage process. First, a group of workers or their representative (e.g., firm, union, or state) must petition DOL to establish that their job loss was attributable to foreign trade and met statutory criteria. Once a group has been certified by DOL, individual workers covered by the group's petition apply for state-administered benefits at local American Job Centers (AJCs; also known as One-Stop Career Centers). TAA is available to workers in the 50 states, the District of Columbia, and Puerto Rico. <4.1. TAA Group Eligibility Criteria> To be eligible for TAA group certification, a group of workers from a firm (or a subdivision of a firm) must have become totally or partially separated from their employment or have been threatened with becoming totally or partially separated. Private sector workers who produce goods ("articles" in the law) or services are eligible for TAA. The petitioning workers must establish that foreign trade contributed importantly to their separation. The role of foreign trade can be established in one of several ways: An increase in competitive imports . The sales or production of the petitioning firm have decreased absolutely and imports of articles or services like or directly competitive with those produced by the petitioning firm have increased. A shift in production to a foreign country . The workers' firm has moved production of the articles or services that the petitioning workers produced to a foreign country or the firm has acquired, from a foreign provider, articles or services that are directly competitive with those produced by the workers. Adversely affected secondary workers . The petitioning firm is a supplier or a downstream producer to a TAA-certified firm and either (1) the sales or production for the TAA-certified firm accounted for at least 20% of the sales or production of the petitioning firm or (2) a loss of business with a TAA-certified firm contributed importantly to the workers' job losses. USITC workers . Workers separated from firms that have been publicly identified by the United States International Trade Commission (USITC) as injured by a market disruption or other qualified action. The TAA eligibility criteria are designed to target workers who lose their jobs due to increased international trade and increased imports. The structure of the eligibility criteria mean that the program may not be available to workers who are adversely affected by reductions in international trade or declines in exports. <4.2. TAA Group Petition and Certification Process> To establish TAA eligibility, a group of workers (or their representative, such as a union, firm, or state) must complete a two-page petition and submit it, along with any supporting documentation, to DOL. An additional copy of the TAA petition must also be filed with the governor of the state in which the affected firm is located. After receiving the petition, DOL investigates to determine if the petition meets any of the criteria outlined in the previous subsection of this report. Determinations of TAA petitions are published in the Federal Register and on the DOL website. If a petition is certified, DOL will also determine an impact date on which trade-related layoffs began or threatened to begin. This date can be as early as one year prior to the petition. A certified petition will cover all workers laid off by the firm (or applicable subdivision of the firm) between the impact date and two years after the certification of the petition. For example, if a petition is certified on November 1, 2015, and the impact date is found to be March 1, 2015, all members of the certified group laid off between March 1, 2015, and November 1, 2017, would be eligible for TAA benefits. If a petition is denied, the group may request administrative reconsideration by DOL. Reconsideration requests must be mailed within 30 days of the publication of the initial denial in the Federal Register . Workers who are denied certification may seek judicial review of DOL's initial petition denial or denial following administrative reconsideration. Appeals for judicial review must be filed with the U.S. Court of International Trade within 60 days of Federal Register publication of the initial denial or the administrative reconsideration denial. <4.3. TAA Individual Eligibility> After DOL certifies a group of workers as eligible, the individual workers covered by the certification then apply to their local AJCs for individual benefits. To be eligible for Trade Readjustment Allowance payments, a worker must meet all of the following conditions: (1) separation from the firm on or after the impact date specified in the certification but within two years of DOL certification, (2) employment with the affected firm in at least 26 of the 52 weeks preceding layoff, (3) entitlement to state unemployment compensation (UC) benefits, and (4) no disqualification for extended unemployment benefits. Additionally, workers must be enrolled in an approved training program or have received a waiver from training. Group-certified workers who are denied individual benefits can appeal the decision. The determination notice that individual workers receive after filing their applications for each benefit explains their appeal rights and time limits for filing appeals. <5. Benefits for Certified Workers> TAA benefits for individual workers include training and reemployment services and income support for workers who have exhausted their UC benefits and are enrolled in training. Workers age 50 and over may participate in the Reemployment Trade Adjustment Assistance (RTAA) wage insurance program. Certified workers may also be eligible for a tax credit for a portion of the premium costs for qualified health insurance. <5.1. Training and Reemployment Services> TAA-certified workers may receive several types of benefits and services to aid them in preparing for and obtaining new employment. The largest reemployment benefit from a budgetary standpoint is training assistance. Workers may also receive case management services and reimbursements for qualified job search and relocation expenses. TAARA caps annual funding for training and reemployment services at $450 million per year. Training and reemployment services funds are granted to state workforce agencies via formula. <5.1.1. Training Assistance> Eligible workers request training assistance through their local AJCs. Statute specifies that training for a worker shall be approved if all of the following conditions are met: there is no suitable employment available for an adversely affected worker, the worker would benefit from appropriate training, there is a reasonable expectation of employment following completion of such training, training approved by the Secretary is reasonably available to the worker from either governmental agencies or private sources, the worker is qualified to undertake and complete such training, and such training is suitable for the worker and available at a reasonable cost. Once approved, training can be paid on the worker's behalf directly to the service provider or through a voucher system. The range of approved training includes a variety of governmental and private programs. There is no federal limit on the amount of training funding an individual can receive, though some states have a cap. A concise summation of TAA training programs is difficult due to the range of acceptable activities and the decentralized nature of approval and training. Data from DOL, however, offer some insight into the nature and duration of TAA-sponsored training programs. In FY2015, approximately 88% of TAA training participants received what DOL describes as occupational skills training: training in a specific occupation, typically provided in a classroom setting. The remainder of training was classified as remedial, prerequisite, on-the-job, or other customized training. Among program participants who exited the TAA program in FY2015 and participated in training, 70% completed their program of training. Among the training participants who completed their training programs in FY2015, the average duration of enrollment in the program was 512 days and the average training cost was $13,062. TAA does not require training programs to lead to a degree or other credential. In its FY2015 annual report, DOL reported that 89% of workers who completed training earned an industry-recognized credential, or a secondary school diploma or equivalent. <5.1.1.1. Interaction of TAA Training Funding and Other Forms of Assistance> TAA funding may be the only source of funding for a worker's training costs. Statute addresses scenarios in which other resources are used in the pursuit of TAA-funded training. In determining if the cost of a training program is reasonable, an administering state agency may consider public and private non-TAA funding available to the worker. For example, a worker may voluntarily offer to pay for a portion of a program with personal funds so that an agency may approve a program for which the costs would not otherwise be reasonable. An administering state agency may not require a TAA-certified worker to contribute personal funds or apply for other assistance as a condition of approving a TAA training program. A key exception of the policy of administering state agencies considering non-TAA aid is that the Higher Education Act specifies that certain types of federal student aid (including Pell Grants) "shall not be taken into account in determining the need or eligibility of any person for benefits or assistance, or the amount of such benefits or assistance, under any Federal, State, or local program financed in whole or in part with Federal funds." As such, a TAA-certified worker's training benefit could not be reduced on the basis of that worker's access to a Pell Grant. Guidance from DOL notes that this policy "allows a worker to use student financial assistance for living expenses instead of tuition and thus provides the worker income support during long-term training." <5.1.2. Case Management and Employment Services> TAARA specifies that, through the administering state agencies and AJC system, DOL shall provide a series of case management and employment services to all TAA-certified workers. These services include a comprehensive assessment of a worker's skills and needs, assistance in developing an individual employment objective and identifying the training and services necessary to achieve that goal, and guidance on training and other services for which a worker may be eligible. Under TAARA, states are required to use at least 5% of their reemployment services allotments for case management and employment services. <5.1.3. Job Search and Relocation Allowances> States may use their reemployment services funding to provide job search and relocation allowances. These allowances target workers who are unable to obtain suitable employment within their commuting areas. Certified workers can receive an allowance equal to 90% of each of their job search and relocation expenses, up to a maximum of $1,250 for each benefit. A Job Search Allowance may be available to subsidize transportation and subsistence costs related to job search activities outside an eligible worker's local commuting area. Subsistence payments may not exceed 50% of the federal per diem rate and travel payments may not exceed the prevailing mileage rate authorized under federal travel regulations. A Relocation Allowance may be available to workers who have secured permanent employment outside their local commuting area. The benefit covers 90% of the reasonable and necessary expenses of moving the workers, their families, and their household items. Relocating workers may also be eligible for a lump sum payment of up to three times their weekly wage, though the total relocation benefit may not exceed $1,250. <5.2. Trade Readjustment Allowance> Trade Readjustment Allowance (TRA) is a weekly income support payment to certified workers who have exhausted their UC benefits and who are enrolled in training. To be eligible for TRA, a worker must be enrolled in training within 26 weeks of separation from the worker's job or within 26 weeks of TAA certification, whichever is later. In limited circumstances, a worker may obtain a training waiver. TRA is funded by the federal government and administered by the states through their unemployment insurance systems. TRA is an individual entitlement and not subject to an annual funding cap. Appropriation levels are based on estimated usage and unused funds are returned to the Treasury at the end of the fiscal year. Individual TRA benefit levels are equal to a worker's final UC benefit. UC benefit levels are based on earnings during a base period of employment (typically, the first four of the last five completed calendar quarters). UC benefits typically replace a portion of a worker's wages up to a statewide maximum. Since states each administer their own UC programs, there is some variation in benefit levels. In July 2015, the highest maximum weekly UC benefit for a worker with no dependents was $698 in Massachusetts and the lowest maximum weekly benefit was $240 in Arizona. There are three stages of TRA Basic TRA. The weekly basic TRA payment begins the week after a worker's UC eligibility expires. To receive the basic TRA benefit, workers must be enrolled or participating in TAA-approved training, have completed such training, or have obtained a waiver from the training requirement. The total amount of basic TRA benefits available to a worker is equal to 52 times the weekly TRA benefit minus the total amount of UC benefits. For example, assuming a constant benefit level, a worker who received 20 weeks of UC benefits would be eligible for 32 weeks of basic TRA. Additional TRA. After basic TRA has been exhausted, workers who are enrolled in a TAA-approved training program are eligible for an additional 65 weeks of income support, for a total of 117 weeks of benefits. Additional TRA is limited to workers who are enrolled in a training program; workers who have received a training waiver are not eligible for additional TRA. TAA participants may only collect additional TRA as long as they remain enrolled in a qualified training program. In cases where a worker's training program is shorter than the maximum TRA duration, the worker is not entitled to the maximum number of TRA weeks. Completion TRA. In cases where a worker has collected 117 weeks of combined TRA and UC and is still enrolled in a training program that leads to a degree or industry-recognized credential, the worker may collect TRA for up to 13 additional weeks (130 weeks total) if the worker will complete the training program during that time. <5.3. Reemployment Trade Adjustment Assistance> RTAA is an entitlement that provides a wage supplement for workers age 50 and over who are certified for TAA benefits and obtain reemployment at a lower wage. The program provides a cash payment to an eligible worker equal to 50% of the difference between the worker's wage at the trade-affected job and the worker's wage at his or her new job. The maximum benefit is $10,000 over a two-year period. Workers may not receive TRA and RTAA benefits simultaneously. To be eligible for RTAA, a worker must either (1) be reemployed on a full-time basis, as defined by the law of the state in which the worker is employed or (2) be reemployed at least 20 hours a week and be enrolled in a TAA-sponsored training program. Workers who receive RTAA payments while enrolled in training and working less than full time may be subject to a reduced benefit. <5.4. Health Coverage Tax Credit46> Workers who are receiving TRA, UC in lieu of TRA, or RTAA benefits may also be eligible for a tax credit that covers a portion of eligible health insurance premiums. The Health Coverage Tax Credit (HCTC) is equal to 72.5% of qualified health insurance premiums. TAARA includes provisions specifying that a worker must elect between the HCTC and premium credits under the Patient Protection and Affordable Care Act ( P.L. 111-148 , amended). Unlike other provisions of TAARA, which are in effect through June 30, 2021, the HCTC is authorized through December 31, 2019. <6. Collection and Publication of Program Data> The Trade Act requires DOL to collect and publish specified data on TAA participation, benefits, outcomes, and spending. Data to be collected and reported include (but are not limited to) the following: Data on petitions filed, certified, and denied . These data include the number of petitions filed, certified, and denied, as well as the average processing time for such petitions. Certified petitions must be disaggregated on the basis of eligibility. Data on benefits received . These data include the number of workers receiving TRA and other benefits as well as the average duration for which workers received benefits. Data on training . These data include the number of workers who participated in training, the average duration of such training, and the average per-worker cost of training. Data on outcomes . These data include the percentage of workers who are in unsubsidized employment during the second calendar quarter after exit, the earnings of such workers, the percentage of workers who are in unsubsidized employment in the fourth quarter after exit, and the percentage of workers who received a recognized postsecondary credential. Data on rapid response activities . These data include whether or not a state provided rapid response services to each firm that petitioned for benefits. Data on spending . These data include state and national payments for TRA benefits, training, administration, and job search and relocation allowances. The data required by the Trade Act are collected by the state agencies that administer the TAA program. These data are submitted to DOL, which publishes the data and other relevant information in annual reports. Since 2014, DOL has also published quarterly data and analysis on its website. In addition to participation data, DOL maintains a database of individual firms' TAA petitions. Users can access firm-level information, including the firm's full petition and DOL's assessment and determination of the petition. <6.1. Appendix. Brief Program History53> Early History The first TAA programs were enacted in 1962 but little used until the Trade Act of 1974 eased eligibility requirements. Program use expanded through the 1970s and the number of certified workers increased from about 59,000 in FY1975 to nearly 600,000 in FY1980. In light of rapidly increasing program costs, the Omnibus Budget Reconciliation Act of 1981 ( P.L. 97-35 ) cut spending by reducing benefits and emphasizing training and other reemployment services. TAA participation levels fluctuated throughout the 1980s, but were mostly well below the levels of the 1970s. In 1988, the program was reauthorized through FY1993 by the Omnibus Trade and Competitiveness Act of 1988 ( P.L. 100-418 ). Among other changes, the 1988 reauthorization expanded eligibility for TRA but also placed a new emphasis on training by making it a program requirement. 1990s and NAFTA The Omnibus Reconciliation Act of 1993 ( P.L. 103-66 ) reauthorized TAA through 1998 with reductions in training funding. The North American Free Trade Agreement (NAFTA) Implementation Act of 1993 ( P.L. 103-182 ) established a new component of TAA that offered dedicated benefits to workers whose job loss was attributable to trade with Mexico and Canada. Trade Act of 2002 The next major reauthorization of TAA was part of the Trade Act of 2002 ( P.L. 107-210 ). This law combined TAA, TPA, and other trade-related issues into a single piece of legislation. Among other changes, the 2002 TAA reauthorization merged the NAFTA-TAA program into the general TAA program and created the Health Coverage Tax Credit for TAA workers. The Trade Act of 2002 reauthorized TAA through FY2007. Several short-term extensions continued the program until it was reauthorized in February 2009. American Recovery and Reinvestment Act In February 2009, TAA was reauthorized and expanded by the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ). Unlike other reauthorizations, which tended to be aligned with expansionary trade policy or budget reconciliations, this reauthorization was aligned with other domestic initiatives to spur economic activity during a time of above-average unemployment. The ARRA reauthorization of TAA expanded the program in several ways. Among other provisions, it increased funding for training, increased the maximum number of weeks that a worker could receive TRA, and extended eligibility to service sector and public sector workers who had been displaced by trade. The ARRA provisions of TAA were scheduled to expire after December 31, 2010. A short-term extension continued the program through February 12, 2011. After that date, TAA reverted to the more limited eligibility and benefit provisions that were in place prior to ARRA. 2011 Reauthorization: Trade Adjustment Assistance Extension Act In October 2011, the Trade Adjustment Assistance Extension Act (TAAEA; Title II of P.L. 112-40 ) was enacted. This reauthorization was aligned with the separate passage of three implementing bills of free trade agreements with Colombia, Panama, and South Korea. TAAEA reinstated some, but not all, of the expansions that had been enacted under ARRA. Most notably, it re-expanded eligibility to service sector (but not public sector) workers and increased training funding to near-ARRA levels. TAAEA also curtailed benefits by reducing the eligible reasons for training waivers from six to three. Sunset and Termination Provisions of 2011 Reauthorization The eligibility and benefit provisions initially enacted by TAAEA were scheduled to remain in place until December 31, 2013. Beginning January 1, 2014, the TAA program reverted to a more limited set of eligibility and benefit provisions ("Reversion 2014 provisions"). Among other changes, the Reversion 2014 provisions ended eligibility for service workers and reduced the cap on training funding to the 2002 levels. The Reversion 2014 provisions were scheduled to remain in place for one year before authorization expired after December 31, 2014, and the program was scheduled to begin to be phased out. The program did not, however, expire as scheduled at the end of 2014. Instead, the Consolidated and Further Continuing Appropriations Act, 2015 ( P.L. 113-235 ) provided funding for full operation of the program under the Reversion 2014 provisions through FY2015. 2015 Reauthorization: Trade Adjustment Assistance Reauthorization Act TAA continued to operate under the Reversion 2014 provisions until the enactment of the Trade Adjustment Assistance Reauthorization Act of 2015 (TAARA; Title IV of P.L. 114-27 ). This reauthorization was aligned with the separate extension of the Trade Promotion Authority (TPA, also known as "fast track"). Any agreements negotiated under TPA are subject to an "up or down" vote in Congress. TAARA reinstated many of the eligibility and benefit provisions that were enacted by TAAEA in 2011. TAARA reinstated eligibility for service workers and increased training funding to a level between those of TAAEA and the Reversion 2014 provisions. Sunset and Termination Provisions of 2015 Reauthorization TAARA contains sunset provisions similar to those in TAAEA that took effect in 2014. Beginning July 1, 2021, the TAA program is scheduled to revert to a more limited set of eligibility and benefit provisions that are similar to the Reversion 2014 provisions. These provisions are scheduled to remain in place for one year until authorization is set to expire after June 30, 2022, and then the program is scheduled to begin to be phased out.

Trade Adjustment Assistance for Workers (TAA) provides federal assistance to workers who have involuntarily lost their jobs due to foreign competition. It was last reauthorized by the Trade Adjustment Assistance Reauthorization Act of 2015 (TAARA; Title IV of P.L. 114-27). This report discusses the TAA program as enacted by TAARA. To be eligible for TAA, a group of workers must establish that they were separated from their employment either because their jobs moved outside the United States or because of an increase in directly competitive imports. Workers at firms that are suppliers to or downstream producers of TAA-certified firms may also be eligible for TAA benefits. Private sector workers who produce goods or services are eligible for TAA benefits. To establish eligibility for TAA benefits, a group of trade-affected workers (or their representative) must petition the Department of Labor (DOL) and a DOL investigation must verify the role of increased foreign trade in the workers' job losses. Once a petition is certified by DOL, covered workers may apply for individual benefits. Individual benefits are funded by the federal government and administered by state agencies through their workforce systems and unemployment insurance systems. Benefits available to individual workers include the following: Training and reemployment services are designed to assist workers in preparing for and obtaining new employment. Training subsidies are the largest reemployment services expenditure and support workers in developing skills for a new occupation. Workers may also receive case management services and job search assistance. In some cases, workers who pursue employment outside their local commuting area may be eligible for job search or relocation allowances. Trade Readjustment Allowance (TRA) is a weekly income support payment for TAA-certified workers who have exhausted their unemployment compensation (UC) and who are enrolled in an eligible training program. Weekly TRA payments are equal to the worker's final weekly UC benefit. Workers may collect UC and TRA for a combined maximum of 130 weeks, the final 13 of which are only available if necessary for the worker to complete a qualified training program. Reemployment Trade Adjustment Assistance (RTAA) is a wage insurance program available to certified workers age 50 and over who obtain reemployment at a lower wage. The wage insurance program provides a cash payment equal to 50% of the difference between the worker's new wage and previous wage, up to a two-year maximum of $10,000. The Health Coverage Tax Credit is a credit equal to 72.5% of qualified health insurance premiums. Eligibility is aligned with TRA. Unlike other TAA benefits, it is administered through the tax code. TAA is a mandatory program that is supported through annual appropriations. Appropriations for the program in FY2018 were $790 million.

<1. Introduction> The United States has an abundance of natural resources. For much of the nation's history, energy availability was not a concern as commerce and industry needs could be met by domestic supplies. However, industrialization and population growth, and the continuing development of a consumer-oriented society, led to growing dependence on foreign sources of energy during the 20 th century to supplement the demands of a growing economy. Recognition of the implications of dependence on foreign sources of energy, coupled with concerns over the volatility of prices driven by fluctuations in supply spurred by world events, prompted federal efforts to increase U.S. energy independence and reduce domestic consumption. A major result has been the establishment of a number of programs focused on energy efficiency and conservation of domestic resources and on research programs that target the development of renewable sources of energy. Many of these programs have roots going back almost 40 years and have been redesigned many times over that period. Many of the current programs have been reauthorized and redesigned periodically to meet changing economic conditions and national interests. The programs apply broadly to sectors ranging from industry to academia, and from state and local governments to rural communities. Each program has been designed to meet current needs as well as future anticipated challenges. Since 2005, Congress has enacted several major energy laws: the Energy Policy Act of 2005 (EPACT 2005; P.L. 109-58 ); the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140 ); the Energy Improvement and Extension Act (EIEA), enacted as Division B of the Emergency Economic Stabilization Act (EESA; P.L. 110-343 ); and the American Recovery and Reinvestment Act (ARRA; P.L. 111-5 ). Each of those laws established, expanded, or modified energy efficiency and renewable energy research, development, demonstration, and deployment (RDD&D) programs. The Department of Energy (DOE) operates the greatest number of efficiency and renewable energy incentive programs. The Department of the Treasury and the Department of Agriculture (USDA) operate several programs. A few programs can also be found among the Departments of the Interior (DOI), Labor (DOL), Housing and Urban Development (HUD), and Veterans Affairs (VA), and the Small Business Administration (SBA). This report outlines current federal programs and provisions providing grants, loans, loan guarantees, and other direct or indirect incentives for energy efficiency, energy conservation, and renewable energy RDD&D. The programs are grouped by administering agency with references to applicable federal agency websites. Incentives are summarized and indexed in the appendixes. Most program descriptions were compiled from authorizing statutes, the U.S. Code, and Administration budget request documents. Other program descriptions and some funding information were compiled from The Database of State Incentives for Renewables and Efficiency (DSIRE), the Assistance Listings (formerly the Catalog of Federal Domestic Assistance or CFDA) housed on the beta.SAM.gov website , and the Energy Star website. Most budgetary figures were compiled from executive agency budget justifications and congressional committee reports. For more information on agriculture-related grant programs, please see CRS Report R43416, Energy Provisions in the 2014 Farm Bill (P.L. 113-79): Status and Funding , by [author name scrubbed]. For more information on programs supporting the development and deployment of alternatives to conventional fuels and engines in transportation, please also see CRS Report R42566, Alternative Fuel and Advanced Vehicle Technology Incentives: A Summary of Federal Programs , by [author name scrubbed] et al. <2. I. Department of Energy Office of Energy Efficiency and Renewable Energy> <2.1. Renewable Energy> <2.1.1. Biomass> <2.1.1.1. 1. Bioenergy Technologies Program (formerly the Biomass and Biorefinery Systems R&D Program)> <2.1.1.2. 2. Regional Biomass Energy Grant Programs> <2.1.1.3. 3. Geothermal Technologies Program (GTP)> <2.1.2. Hydrogen and Fuel Cells> <2.1.2.1. 4. Hydrogen & Fuel Cell Technologies Program> <2.1.3. Solar> <2.1.3.1. 5. Solar Energy Technologies Program (SETP)> <2.1.4. Water Power> <2.1.4.1. 6. Water Power Program (formerly Wind and Hydropower Technologies Program)> <2.1.5. Wind Energy Program> <2.1.5.1. 7. Wind Energy Program (formerly Wind and Hydropower Technologies Program)> <2.2. Energy Efficiency> <2.2.1. Buildings> <2.2.1.1. 8. Building Technologies Program> <2.2.1.2. 9. Weatherization Assistance Program (WAP)> <2.2.2. Industrial> <2.2.2.1. 10. Advanced Manufacturing Office (AMO, formerly the Industrial Technologies Program - ITP)> <2.2.2.2. 11. Inventions and Innovations Program> <2.2.3. Vehicles> <2.2.3.1. 12. Vehicle Technologies Program> <2.3. Other Energy Efficiency and Renewable Energy Programs> <2.3.1. 13. Conservation Research and Development Grants> <2.3.2. 14. Energy Efficiency and Renewable Energy Information Dissemination, Outreach, Training, and Technical Analysis/Assistance Grant Program> <2.3.3. 15. Renewable Energy Production Incentive (REPI)> <2.3.4. 16. Renewable Energy Research and Development Program> <2.3.5. 17. State Energy Program (SEP)> <2.3.6. 18. Tribal Energy Program (TEP)> <2.4. Other DOE Offices/Cross-Cutting Programs> <2.4.1. 19. Advanced Research Projects Energy Financial Assistance Program (ARPA-E)> <2.4.2. 20. Electricity Delivery and Energy Reliability, Research, Development and Analysis Grant Program (Office of Electricity Delivery and Energy Reliability - OE)> <2.4.3. 21. Federal Energy Management Program (FEMP)> <2.4.4. 22. Financial Assistance Program (Office of Science)> <2.4.5. 23. Loan Guarantee Program (Office of the Chief Financial Officer)> <2.4.6. 24. Small Business Innovation Research Program (SBIR)/Small Business Technology Transfer Program (STTR)> <3. II. U.S Department of the Treasury> Please note that tax credits for biofuels and vehicles are covered in detail another CRS Report R42566, Alternative Fuel and Advanced Vehicle Technology Incentives: A Summary of Federal Programs , by [author name scrubbed] et al. <3.1. Homeowner> <3.1.1. 1. Residential Energy Conservation Subsidy Exclusion (Corporate and Personal)> <3.1.2. 2. Residential Energy Efficiency Tax Credit> <3.1.3. 3. Residential Renewable Energy Tax Credit> <3.2. Business and Industry> <3.2.1. 4. Business Energy Investment Tax Credit (ITC)> <3.2.2. 5. Energy Efficient Commercial Buildings Tax Deduction> <3.2.3. 6. Energy-Efficient New Homes Tax Credit for Home Builders> <3.2.4. 7. Renewable Electricity Production Tax Credit> <3.3. State, Local, and Tribal Governments> Cross-Cutting <3.3.1. 8. Modified Accelerated Cost-Recovery System (MACRS)> <4. III. Department of Agriculture> <4.1. 1. Assistance to High Energy Cost Rural Communities Program> <4.2. 2. Bioenergy Program for Advanced Biofuels> <4.3. 3. Biomass Crop Assistance Program (BCAP)> <4.4. 4. Biorefinery, Renewable Chemical, and Biobased Product Manufacturing Assistance Program. (formerly the Biorefinery Assistance Program)> <4.5. 5. Community Wood Energy Program> <4.6. 6. Repowering Assistance Program (RAP)> <4.7. 7. Rural Energy For America Program (REAP) Grants and Loans> <4.8. 8. Sustainable Agriculture Research and Education Program (SARE)> <5. IV. Department of the Interior> <5.1. 1. Energy and Mineral Development Program (EMDP): Minerals and Mining on Indian Lands> <5.2. 2. Tribal Energy Development Capacity Grant Program> <6. V. Small Business Administration> <6.1. 1. 7(a) Loan Guarantees> <6.2. 2. 504 Loan Guarantees> <7. VI. U.S. Department of Housing and Urban Development> <7.1. 1. Energy Efficient Mortgages (EEMs)> <7.2. 2. FHA PowerSaver Loan Program> <8. VII. Department of Health and Human Services> <8.1. 1. Low Income Home Energy Assistance Program (LIHEAP)> <9. VIII. Department of Veterans Affairs> <9.1. 1. Energy Efficient Mortgages (EEMs)> <10. IX. Fannie Mae> <10.1. 1. Fannie Mae Green Initiative-Loan Program> Appendix A. Summary of Federal Renewable Energy and Energy Efficiency Incentives/Index of Programs Appendix B. Index of Programs by Applicant Eligibility and Technology Type Appendix C. Expired Federal Energy Efficiency and Renewable Energy Incentive Programs 1. Assisted Housing Stability and Energy and Green Retrofit Investments Program (Recovery Act Funded) 2. Clean Renewable Energy Bonds (CREBs) 3. Energy Efficiency and Conservation Block Grants Program (EECBG) 4. Energy Efficiency and Renewable Energy Technology Deployment, Demonstration, and Commercialization Grant Program 5. Energy Efficient Appliance Rebate Program (EEARP) 6. Energy Efficient Appliance Tax Credit for Manufacturers 7. New Era Rural Technology Competitive Grants Program 8. Program of Competitive Grants for Worker Training and Placement in High Growth and Emerging Industry Sectors 9. Qualified Energy Conservation Bonds 10 . Qualifying Advanced Energy Manufacturing Investment Tax Credit 11. Renewable Energy Grants (1603 Program) Appendix D. Appendix D. Summary of Expired Federal Renewable Energy and Energy Efficiency Incentives/Index of Programs

Energy is crucial to the operation of a modern industrial and services economy. Concerns about the availability and cost of energy and about environmental impacts of fossil energy use have led to the establishment of a wide variety of federal incentives for renewable energy and energy efficiency. These incentives are aimed at the implementation of renewable energy and energy efficiency measures and the development and commercialization of renewable energy and energy efficiency technologies. Many of the existing energy efficiency and renewable energy programs have authorizations tracing back to the 1970s. Many of the programs have been reauthorized and redesigned repeatedly to meet changing economic factors. The programs apply broadly to sectors ranging from industry to academia, and from state and local governments to rural communities. Since 2005, Congress has enacted several major energy laws: the Energy Policy Act of 2005 (EPACT 2005; P.L. 109-58); the Energy Independence and Security Act of 2007 (EISA; P.L. 110-140); the Energy Improvement and Extension Act (EIEA), enacted as Division B of the Emergency Economic Stabilization Act (EESA; P.L. 110-343); and the American Recovery and Reinvestment Act (ARRA; P.L. 111-5). Each of those laws established, expanded, or modified energy efficiency and renewable energy research, development, demonstration, and deployment (RDD&D) programs. The Department of Energy (DOE) operates the greatest number of efficiency and renewable energy incentive programs. The Department of the Treasury and the Department of Agriculture (USDA) operate several programs. A few programs can also be found among the Departments of the Interior (DOI), Labor (DOL), Housing and Urban Development (HUD), and Veterans Affairs (VA), and the Small Business Administration (SBA). This report describes federal programs that provide grants, loans, loan guarantees, and other direct or indirect incentives for energy efficiency, energy conservation, and renewable energy. For each program, the report provides the administering agency, authorizing statute(s), annual funding, and the program expiration date. The appendixes provide summary information in a tabular format and also list recently expired programs.

<1. Introduction> Electric utility generating facilities are a major source of air pollution. The combustion of fossil fuels (petroleum, natural gas, and coal), which accounts for about two-thirds of U.S. electricity generation, results in the emission of a stream of gases. These gases include several pollutants that directly pose risks to human health and welfare, including particulate matter (PM), sulfur dioxide (SO 2 ), nitrogen oxides (NOx), and mercury (Hg). Particulate matter, SO 2 , and NOx are currently regulated under the Clean Air Act (CAA), and the Environmental Protection Agency (EPA) has promulgated rules to regulate mercury beginning in 2010. Other gases may pose indirect risks, notably carbon dioxide (CO 2 ), which contributes to global warming. Table 1 provides estimates of SO 2 , NOx, and CO 2 emissions from electric generating facilities. Annual emissions of Hg from utility facilities are more uncertain; current estimates indicate about 48 tons. Utilities are subject to an array of environmental regulations, which affect in different ways both the cost of operating existing generating facilities and the cost of constructing new ones. The evolution of air pollution controls over time and as a result of growing scientific understanding of health and environmental impacts has led to a multilayered and interlocking patchwork of controls. Moreover, additional controls are in the process of development, particularly with respect to NOx as a precursor to ozone, to both NOx and SO 2 as contributors to PM 2.5 , and to Hg as a toxic air pollutant. Also, under the United Nations Framework Convention on Climate Change (UNFCCC), the United States agreed to voluntary limits on CO 2 emissions. The current Bush Administration has rejected the Kyoto Protocol, which would impose mandatory limits, in favor of a voluntary reduction program. In contrast to the Administration's position, in June 2005, the Senate passed a Sense of the Senate calling for mandatory controls on greenhouse gases that would be designed not to impose significant harm on the economy. For many years, the complexity of the air quality control regime has caused some observers to call for a simplified approach. Now, with the potential both for additional control programs on SO 2 and NOx and for new controls directed at Hg and CO 2 intersecting with the technological and policy changes affecting the electric utility industry, such calls for simplification have become more numerous and insistent. One focus of this effort is the "multi-pollutant" or "four-pollutant" approach. This approach involves a mix of regulatory and economic mechanisms that would apply to utility emissions of up to four pollutants in various proposals SO 2 , NOx, Hg, and CO 2 . The objective would be to balance the environmental goal of effective controls across the pollutants covered with the industry goal of a stable regulatory regime for a period of years. <2. The Bush Administration's Proposals> In February 2002, the Bush Administration announced two air quality proposals to address the control of emissions of SO 2 , NOx, Hg, and CO 2 . The first proposal, called "Clear Skies," would amend the Clean Air Act to place emission caps on electric utility emissions of SO 2 , NOx, and Hg. Implemented through a tradeable allowance program, the emissions caps would be imposed in two phases: 2010 (2008 in the case of NOx) and 2018. As part of a complete rewrite of Title IV of the Clean Air Act, the Administration's proposal was introduced in the 108 th Congress as H.R. 999 and S. 485 . Revised versions of Clear Skies legislation were introduced in the 109 th Congress as H.R. 227 and S. 131 . The proposal has not been reintroduced in the 110 th Congress. The second Administration proposal initiates a new voluntary greenhouse gas reduction program, similar to ones introduced by the earlier George H. W. Bush and Clinton Administrations. Developed in response to the U.S. ratification of the 1992 UNFCCC, these previous plans projected U.S. compliance, or near compliance, with the UNFCCC goal of stabilizing greenhouse gas emissions at their 1990 levels by the year 2000 through voluntary measures. The Bush Administration proposal does not make that claim, projecting only a 100 million metric ton reduction in emissions from what would occur otherwise in the year 2012. Total emissions would continue to rise. Instead, the plan focuses on improving the carbon efficiency of the economy, reducing 2002 emissions of 183 metric tons per million dollars of GDP to 151 metric tons per million dollars of GDP in 2012. It proposes several voluntary initiatives, along with increased spending and tax incentives, to achieve this goal. The Administration notes that the new initiatives would achieve about one-quarter of the objective, while three-quarters of the projected reduction is seen as occurring through existing efforts. <3. Proposed Legislation and Legislative Action in the 110th Congress> In the 110 th Congress, five bills have been introduced that would impose multi-pollutant controls on utilities. They are all four-pollutant proposals that include carbon dioxide. S. 1168 , introduced by Senator Alexander, and S. 1177 , introduced by Senator Carper, are revised versions of S. 2724 , introduced in the 109 th Congress. S. 1201 , introduced by Senator Sanders, and S. 1554 , introduced by Senator Collins, are similar but revised versions of S. 150 , introduced in the 109 th Congress. In contrast, H.R. 3989 , introduced by Representative McHugh, represents a new proposal. All of these bills involve some form of emission caps, beginning in 2009-2012 time frame. S. 1168 , S. 1177 , and S. 1201 include a second phase beginning in 2013-2015; H.R. 3989 includes a multi-phase program for CO 2 only. They would employ a tradeable credit program to implement the SO 2 , NOx, and CO 2 caps while all but H.R. 3989 permit plant-wide averaging in complying with the Hg requirements. The provisions concerning SO 2 , NOx, and Hg in the five bills are generally more stringent than the comparable provisions of S. 131 of the 109 th Congress. It is difficult to compare the CO 2 caps contained in these bills with the Administration's proposal concerning CO 2 both because the Administration's proposal is voluntary rather than mandatory and because it is broader (covering all greenhouse gas emissions rather than just utility CO 2 emissions). The five bills are summarized in the Appendix . Each of these bills generally builds on the SO 2 allowance trading scheme contained in Title IV of the 1990 Clean Air Act Amendments (CAAA). Under this program, utilities are given a specific allocation of permitted emissions (allowances) and may choose to use those allowances at their own facilities, or, if they do not use their full quota, to bank them for future use or to sell them to other utilities needing additional allowances. <3.1. Allowance Allocations for SO2, NOx, and CO2> All five bills introduced in the 110 th Congress provide for a tradeable allowance scheme to implement their emission caps on SO 2 , NOx, and CO 2 . However, allowance allocation schemes in the bills differ, with S. 1201 and S. 1554 containing detailed provisions for allocating SO 2 , NOx, and CO 2 allowances to various economic sectors and interests. In most cases, these interests (or their trustees in the case of households and dislocated workers and communities) would auction off (or otherwise sell) their allowances to the affected utilities and use the collected funds for their own purposes. In addition, S. 1201 requires the increasing use of auctions, mandating 100% of the annual allowance allocation be auctioned within 15 years of enactment. In contrast, S. 1168 bases its allowance formulas on fuel usage adjusted by factors specified in the bill, along with a requirement that 25% of the allowances be auctioned. S. 1177 specifies CO 2 and NOx limitations based on electricity output, and SO 2 limitations based on the current Title IV program. The bill sets a schedule for increasing the percentage of the annual allowance allocation that is to be auctioned with 100% required in 2036 and thereafter. Finally, H.R. 3989 auctions 100% of its CO 2 allowances while providing discretion to EPA to allocate SO 2 and NOx allowances. <3.2. Hg Controls> On mercury, all five bills focus on achieving a 90% reduction by 2011 ( S. 1554 and H.R. 3989 ), 2013 ( S. 1201 ) or 2015 ( S. 1168 and S. 1177 ). In contrast, the emissions goal of S. 131 of the 109 th Congress would have allowed about three times more emissions and three to five more years for compliance. In addition, all but H.R. 3989 restrict Hg credit trading to plant-wide averaging of emissions, in contrast with the cap-and-trade program of S. 131 . H.R. 3989 is even more stringent, imposing the emissions rate limitation on a unit-by-unit basis. <3.3. CO2 Reduction Requirements> The bills currently introduced in the 110 th Congress specify CO 2 reductions. In contrast, the Administration's CO 2 proposal relies on various voluntary programs and incentives to encourage reductions in greenhouse gases from diverse sources, including CO 2 emissions from electric generation. These voluntary reductions should not be taken as a given, as neither the George H. W. Bush Administration's nor the Clinton Administration's voluntary programs achieved their stated goals. Thus, in one sense, comparing a mandatory reduction program such as that proposed by S. 1168 , S. 1177 , S. 1201 , and S. 1554 with the Administration's voluntary program is comparing apples to oranges. The first is legally binding, the second has been criticized as merely an exhortation. The CO 2 reduction requirements of S. 1168 , S. 1201 , and S. 1554 are similar, except that S. 1201 and S. 1554 requires affected sources also offset CO 2 emissions from small electric generating units. In contrast, S. 1177 imposes a cap that starts out slightly higher than the other two bills and declines on a slower schedule. Finally, H.R. 3989 has the most detailed reduction scheme with substantial reductions from coal-fired facilities scheduled through 2050. All but H.R. 3989 have provisions to create offsets and facilitate sequestration efforts. Among its titles, S. 1168 has extensive provisions providing for greenhouse gas offsets from landfill methane (CH 4 ), sulfur hexafluoride (SF 6 ) projects, afforestation or reforestation, energy efficiency, agricultural practices (manure management), and biomass. The provisions in S. 1177 include allowance allocations for incremental nuclear capacity, clean coal technology, and renewable energy, along with programs to encourage sequestration. Likewise, S. 1554 includes allowance allocations to encourage renewable energy, energy efficiency, and sequestration. Finally, S. 1201 requires the EPA to develop standards for providing allowances for geologic and biological sequestration. <3.4. Related Regulatory Provisions> In addition to emissions caps, S. 131 of the 109 th Congress would have substantially modified or eliminated several provisions in the Clean Air Act with respect to electric generating facilities. The bill would have eliminated New Source Performance Standards (NSPS) (Section 111) and replaced them with statutory standards for SO 2 , NOx, particulate matter, and Hg for new sources. Modified sources could have also opted to comply with these new statutory standards and be exempted from the applicable Best Available Control Technology (BACT) determinations under Prevention of Significant Deterioration (PSD) provisions (CAA, Part C) or Lowest Achievable Emissions Rate (LAER) determinations under non-attainment provisions (CAA, Part D). Compliance with these provisions would have exempted such facilities from New Source Review (NSR), PSD-BACT requirements, visibility Best Available Retrofit Technology (BART) requirements, Maximum Achievable Control Technology (MACT) requirements for Hg, and non-attainment LAER and offset requirements. The exemption would not have applied to PSD-BACT requirements if facilities were within 50 km of a PSD Class 1 area. Existing sources could have also received these exemptions if they agreed to meet a particulate matter standard specified in the bill along with good combustion practices to minimize carbon monoxide emissions within three years of enactment. In addition, S. 131 would have provided these exemptions for industrial sources that choose to opt into the Clear Skies program. S. 131 also would have included an exemption for steam electric generating facilities from Hg regulation under Section 112 of the CAA (including the residual risk provisions), and relief from enforcement of any Section 126 petition (with respect to reducing interstate transportation of pollution) before December 31, 2014. The five bills in the 110 th Congress generally omit the regulatory changes of S. 131 , while introducing new provisions. All five bills would revise the current New Source Review (NSR) program to require affected electric generating units 40 years or older (30 years old in the case of H.R. 3989 ) to meet more stringent SO 2 and NOx performance standard by either 2015 ( S. 1201 ), 2016 ( S. 1554 ), 2020 ( S. 1168 and S. 1177 ), or five years after enactment ( H.R. 3989 ). All except S. 1554 and H.R. 3989 contain provisions establishing a new performance standard for CO 2 . S. 1168 and S. 1177 would also eliminate the annual NOx and SO 2 caps contained in the recently promulgated Clean Air Interstate Rule (CAIR). In addition to the above, S. 1201 and S. 1554 would create several new regulatory programs and standards, including an Efficiency Performance Standard, and a Renewable Portfolio Standard. These programs would be implemented through a credit trading program. <3.4.1. Appendix. Comparison of Multi-Pollutant Control Proposals>

With the prospect of new layers of complexity being added to air pollution controls, and with electricity restructuring putting a premium on economic efficiency, interest is being expressed in finding mechanisms to achieve health and environmental goals in simpler, more cost-effective ways. The electric utility industry is a major source of air pollution, particularly sulfur dioxide (SO2), nitrogen oxides (NOx), and mercury (Hg), as well as unregulated greenhouse gases, particularly carbon dioxide (CO2). At issue is whether a new approach to environmental protection could achieve the nation's air quality goals more cost-effectively than the current system. One approach being proposed is a "multi-pollutant" strategy—a framework based on a consistent set of emissions caps, implemented through emissions trading. Just how the proposed approach would fit with the current (and proposed) diverse regulatory regimes remains to be worked out; they might be replaced to the greatest extent feasible, or they might be overlaid by the framework of emissions caps. In February 2002, the Bush Administration announced two air quality initiatives. The first, "Clear Skies," would amend the Clean Air Act to place emission caps on electric utility emissions of SO2, NOx, and Hg. Implemented through a tradeable allowance program, the emissions caps would generally be imposed in two phases: 2008 and 2018. "Clear Skies" was re-introduced in the 109th Congress as S. 131. The second initiative begins a voluntary greenhouse gas reduction program. This plan, rather than capping CO2 emissions, focuses on improving the carbon efficiency of the economy, reducing 2002 emissions of 183 metric tons per million dollars of GDP to 151 metric tons per million dollars of GDP in 2012. In the 110th Congress, five bills have been introduced that would impose multi-pollutant controls on utilities. They are all four-pollutant proposals that include carbon dioxide. S. 1168 and S. 1177 are revised versions of S. 2724, introduced in the 109th Congress. S. 1201 and S. 1554 are expanded and revised versions of S. 150, introduced in the 109th Congress, while H.R. 3989 is a new proposal. All of these bills involve some form of emission caps, beginning in the 2009-2012 time frame, with all but S. 1554 including a second phase in 2013-2015 (CO2 only for H.R. 3989). They would employ a tradeable credit program to implement the SO2, NOx, and CO2 caps; all but H.R. 3989 permit plant-wide averaging in complying with the Hg requirements. The provisions concerning SO2, NOx, and Hg in the 110th Congress bills are generally more stringent than the comparable provisions of S. 131 of the 109th Congress. It is difficult to compare the CO2 caps contained in these bills with the Administration's proposal concerning CO2—both because the Administration's proposal is voluntary rather than mandatory and because it is broader (covering all greenhouse gas emissions rather than just utility CO2 emissions).

Economic conditions in China are of considerable concern to U.S. policymakers, given the potential impact of China's economy on the global and U.S. economy. The recent large inflow of financial capital into China, commonly referred to as "hot money," has led some economists to warn that such flows may have a destabilizing effect on China's economy. In an op-ed column in the Financial Times , two China experts wrote of hot money's "ensuing money creation is fueling rising inflation, systemic overinvestment, and an overextended banking system." There are also indications that "hot money" flows have played a role in the recent rise and fall of China's stock and real estate markets. Other economists have expressed concerns that efforts by the Chinese government to control "hot money" inflows could have significant negative consequences for the U.S. and global economy in the form of slower growth, greater inflation, or both. <1. Defining "Hot Money"> There is no formal definition of "hot money," but the term is most commonly used in financial markets to refer to the flow of funds (or capital) from one country to another in order to earn a short-term profit on interest rate differences and/or anticipated exchange rate shifts. These speculative capital flows are called "hot money" because they can move very quickly in and out of markets, potentially leading to market instability. Many economists maintain that the rapid outflow of "hot money" first from Thailand and then from other Southeast Asian economies was a significant contributing factor to the onset and severity of the East Asian Financial Crisis of 1997. <2. Estimates of China's "Hot Money" Flows> Because "hot money" flows quickly and is poorly monitored, there is no well-defined, direct method for estimating the amount of "hot money" flowing into a country during a period of time. In addition, once an estimate is made, the amount of "hot money" may suddenly rise or fall, depending on the economic conditions driving the flow of funds. One common way of approximating the flow of "hot money" is to subtract a nation's trade surplus (or deficit) and its net flow of foreign direct investment (FDI) from the change in the nation's foreign reserves. For the first half of 2008, China's foreign reserves increased by $280.6 billion. Over the same time period, China's accumulated trade surplus was $99.0 billion and its FDI inflow was $52.0 billion. Using the method described above, China received an inflow of $129.6 billion in "hot money" during the first half of 2008. According to the former director of China's National Bureau of Statistics, Li Deshui, China's research institutes estimate that about $500 billion in "hot money" has accumulated in China. However, Zhang Ming, an economist at the Chinese Academy of Social Sciences, reportedly estimated that $1.75 trillion in "hot money" could have accumulated over the last five years. Some Chinese experts reportedly predict that the amount of "hot money" in China will rise to $650 billion by the end of 2008. Some western analysts think the Chinese figures underestimate the amount of "hot money" in China because they do not take into account changes in China's monetary policies, such as the raising of reserve requirements and the creation of China's sovereign wealth fund, the China Investment Corporation. Taking into account these other factors, U.S. financial analyst Brad Setser estimates that China received over $400 billion in "hot money" flows between April 2007 and March 2008. <3. Causes of China's Inflow of Hot Money> While there may be some uncertainty about the precise amount of "hot money" flowing into China, there appears to be a general agreement as to why speculators are moving their capital into China. Analysts point to two key factors: (1) the relative interest rates in China and the United States; and (2) expectations of the future appreciation in the value of China's currency, the renminbi (RMB). Over the last year, interest rates in China and the United States have been moving in opposite directions. The U.S. Federal Reserve lowered the federal funds rate nine times over the last year from a high of 5.25% in June 2007 to its current low of 2.00%. Over the same time period, the People's Bank of China raised its benchmark one-year interest rate on deposits from 2.52% to 4.14%. The reversal in the relative interest rates of the two nations has created an incentive for investors to move their deposits from the United States to China in order to earn a higher rate of return. In addition to the attraction of the interest rate difference, speculators are moving "hot money" into China because of the general expectation that the RMB will continue appreciate in value against the U.S. dollar and other currencies. On July 21, 2005, China announced it was dropping its fixed exchange rate policy for a "managed float" policy that would allow the value of the RMB to fluctuate within a specified range on a daily basis. Since then, through July 15, 2008, the RMB has appreciated in value by 21.6%. Most analysts expect the Chinese government to continue the RMB's appreciation. The combined effects of the interest rate differences and the expected appreciation of the RMB provide a strong incentive for "hot money" flows into China. Li Yang, a financial researcher at China's Academy for Social Sciences calculated that "hot money" speculators can obtain profit rates of over 10% per year with little investment risk. In theory, despite its recent capital market liberalizations, China still maintains some restrictions over foreign exchange and international capital flows, providing it with various instruments to prevent the inflow of the unwanted "hot money." However, sources report that speculators are using various methods to circumvent Chinese laws and regulations. According to a Deutsche Bank survey of 200 companies and 60 "high income" individuals, over half of the "hot money" coming into China is being done in the form of over-reported or false foreign direct investment (FDI). An additional 11% of the "hot money" is generated by underreporting the value of imports, and another 10% comes from the overvaluing exports. The Deutsche Bank study also reported that 5% of the "hot money" enters China via "underground money exchangers" ( dixia qianzhuang ). Employee compensation (wages sent to China by overseas workers and remuneration paid by Chinese enterprises to overseas staff working in China) and current transfers (emigrant remittances, gifts, and donations) may be another major source of hot money. According to some analysts, U.S. economic policies (and the slow U.S. economy) may be exacerbating China's "hot money" problem, creating a "Catch-22" situation for Beijing. Years of large federal deficits and comparatively low U.S. interest rates have contributed to the weakening of the U.S. dollar against many currencies (including the RMB) and the outflow of "hot money" from the United States. One Chinese official indicated that he thought the U.S. subprime crisis was also fueling "hot money" flows. <4. Impact of "Hot Money" on China's Economy> The main concern in China over the influx of "hot money" has been that it may add to China's inflationary pressures. In July 2008, the government reported that the consumer price index had risen by 7.9% over the first half of 2008 over the same period in 2007 (due largely to food prices), which was much higher than the government's target ceiling of 4.8%, and the producer price index rose by 7.6%. High inflation is a serious issue for the government because of concerns that rapid inflation could produce protests and political instability. At the same time, the government needs rapid growth to help employ the 27 million new job seekers each year. Under Chinese law, most foreign exchange entering the country must be converted into RMB. The large flow of "hot money" is causing a sharp rise in China's money supply, resulting in inflation. The Chinese government has attempted to "sterilize" the foreign exchange by selling bonds to "soak up" the RMB put into circulation, but this has resulted in higher interest rates that attract even more "hot money." China has attempted to nullify the inflationary impact of "hot money" by other means, such as the imposition of lending quotas on banks, increasing the ratio of reserves commercial banks are required to maintain (it was raised to 17.5% in June 2008 compared to 9.0% in January 2007), raising interest rates, instituting government controls to limit investment in overheated sectors (such as real estate and the steel industry), and imposing price controls on certain products (mainly food and energy). A big concern by some Chinese analysts is that "hot money" may be creating bubbles in its stock and real estate markets, although recent evidence suggests that the "hot money" is being largely deposited into bank accounts. <5. China's Options for Dealing with "Hot Money" Flows> If the Chinese government determines it is necessary to take action, it has a number of options on how to slow down the flow of "hot money." However, each option has potentially negative side effects. <5.1. Appreciate or Depreciate the RMB> An increase in the value of the RMB would arguably be an effective option for controlling inflationary pressures caused by "hot money." A sharp appreciation in the RMB vis- -vis the dollar either by a sharp revaluation or quickening the pace of appreciation under its "managed float" regime would eliminate one of the two main incentives driving the speculators. The move would probably lower the price of imports (including raw materials) and possibly slow the growth in foreign exchange reserves. Other analysts have suggested that China depreciate the RMB, a move that would undermine the speculators, but could prompt Congress to pass currency legislation (including sanctions) against China. Some Chinese officials contend that although a stronger RMB might reduce inflationary pressures, it would also likely raise the price of China's exports and diminish China's attractiveness as a destination for FDI, leading to widespread layoffs, factory closings, and slower economic growth. While export growth over the first six months of 2008 has been strong (up 22% over the same period in 2007), there is concern that rising costs in China and economic weakness in the United States could greatly slow China's export growth and reduce the domestic value of its foreign exchange reserves. <5.2. Regulate the Flow of Capital> Another option for slowing the inflow of "hot money" is to tighten restrictions on the flow of foreign capital into China, a trend contrary to recent U.S. efforts to persuade China to liberalize its financial markets. During his first speech as Vice Premier on May 9, 2008, Wang Qishan spoke of "reinforcing supervision over cross-country capital flow." There have also been reports that China is tightening its supervision of bank accounts held by non-residents to curb the influx of "hot money." In addition, China could attempt to further promote the outflow of capital to reduce the inflationary impact of "hot money," using some of its foreign exchange reserves. However, many policymakers, including those in the United States, are concerned over the potential impact of wide-scale (and potentially government directed) Chinese investment in "strategic" economic sectors (such as oil and gas, high technology, etc.). <6. Implications for Sino-U.S. Relations> Some U.S. analysts contend that the large levels of "hot money" pouring into China will force China to accelerate the appreciation of the RMB relative to the U.S. dollar and make the government enact other reforms to make the currency more flexible. This, they maintain, could in the short run help boost U.S. exports to China and reduce imports from China, thus improving the U.S. bilateral trade balance with China. Others warn that appreciating the RMB would also make U.S. imports from China more expensive, which could add to inflationary pressures in the United States. In addition, China might reduce its purchases of U.S. Treasury securities (used to help fund the federal deficit), which could push up U.S. interest rates. Another concern is that Chinese efforts to fight hot money/inflation could lead to a slowdown in China's economic growth. This could have numerous implications for the U.S. and global economies. Over the past few years, China has been one of the fastest growing economies, which has made it a major market for U.S. exports. In 2007, China surpassed Japan to become the 3 rd largest U.S. export market, and thus a Chinese slowdown could reduce its demand for U.S. goods and services. Additionally, inflationary problems or an economic slowdown could cause Chinese officials to delay economic reforms, particularly to its financial system and currency policy. The issues concerning the potential dangers of "hot money" flows to China reinforces the U.S. argument (and has been acknowledged by the Chinese government as a long term goal), that China needs to do more to implement policies to encourage domestic demand and lessen its dependence on exporting and fixed investment for its economic growth. Some U.S. analysts contend that adopting a free floating exchange rate is the best way to stop hot money inflows and to provide the government with the monetary tools it needs to control inflation. However, Chinese officials contend that such a move at this time would shock the economy, especially the export sector, and thus would be too risky (although they contend that a fully convertible currency is a long range goal). The "hot money" issue is a further indicator of the growing economic integration between the United States and China.

China has experienced a sharp rise in the inflow of so-called "hot money," foreign capital entering the country supposedly seeking short-term profits, especially in 2008. Chinese estimates of the amount of "hot money" in China vary from $500 billion to $1.75 trillion. The influx of "hot money" is contributing to China's already existing problems with inflation. Efforts to reduce the inflationary effects of "hot money" may accelerate the inflow, while actions to reduce the inflow of "hot money" may threaten China's economic growth, as well as have negative consequences for the U.S. and global economy. This report will be updated as circumstances warrant.

<1. The Nature of Senate Procedures> Every legislative body must decide how to balance the parliamentary rights and powers of majorities against those of minorities, determining what matters should require simple or extraordinary majority votes and how much control a simple majority should be able to exercise over which issues are debated and when decisions are made. In comparison with the House of Representatives, the Senate operates under a body of rules that offers effective leverage and important strategic advantages to individual Senators and, therefore, to numerical minorities in the Senate. These opportunities may be seized by the minority party, but they also are available to philosophical or individual minorities, without regard to party. In part because of its smaller size, the Senate has been less concerned than the House with constructing its rules to promote efficiency and orderliness in the consideration of legislation on the floor. Instead, Senate rules historically have embodied the belief that wise policy is not determined simply by counting votes, but that it emerges from a process of free debate in which individual Senators enjoy great latitude and during which the intensity of minority interests can be weighed and accommodated. As a result, the Senate's rules define a legislative process that emphasizes the importance of compromise and that strains for consensus whenever possible. To this end, minorities are able to raise issues of their choosing and prevent precipitant action by voting majorities. In fact, the Senate's rules offer so many opportunities and so much protection to individual Senators and minority groups of Senators that a strict adherence to its rules would make it difficult for the Senate to function, especially in view of its contemporary time and workload pressures. For this reason, the Senate frequently sets aside its rules, either by unanimous consent or by custom and practice. The legislative process on the Senate floor, therefore, reflects a compromise between principle and pragmatism. The rules provide individual Senators and numerical minorities with impressive means to influence the Senate's agenda and decisions. Yet Senators rarely choose to take full advantage of these devices and opportunities. There are at least two reasons. First, Senators recognize that the rules they invoke today may be used against them tomorrow with equally powerful effect. The Senate is a continuing body in a human sense as well as a parliamentary sense. Senators who choose to be obstructive may succeed in reaching their immediate objectives, but only at the longer run cost of jeopardizing achievement of their own positive legislative goals. Second, Senators exercise self-restraint so that the Senate as an institution can operate with reasonable order and efficiency. Senators must work together in relative harmony if the Senate is to respond to policy demands and meet its constitutional responsibilities. And ultimately, the ability of Senators to achieve their individual goals is inextricably tied to the standing of the institution in which they serve. Thus, individual Senators and groups of Senators can take advantage of significant parliamentary opportunities to delay or prevent actions they oppose, but Senators always recognize that in doing so they are balancing short-term benefits against longer-term potential costs, both personal and institutional. <2. Opportunities to Delay> The single most powerful weapon available to individuals and minorities in the Senate is the ability to delay. This power derives from the Senate's rules governing debate, and may be used not only to prevent action but also to extract substantive policy concessions from the majority, whether it is partisan or bipartisan. Paragraph 1 of Rule XIX states that no Senator may speak more than twice on the same question on the same day, except by unanimous consent. The "question" may be a pending measure, amendment, or debatable motion; every Senator may make two speeches on the same day on each such question, including a series of amendments and motions that may be offered during floor consideration of the same bill or resolution. (For purposes of this rule, a Senator completes a speech when he yields or loses the floor after having been recognized in his own right.) The two-speech rule is enforced only under the most contentious circumstances because doing so could interfere with effective debate and impede the natural flow of discussion on the floor. Furthermore, it usually is not difficult to circumvent the rule: a Senator who already has made two speeches often can create additional opportunities to speak simply by proposing a new amendment or debatable motion. More importantly, Rule XIX imposes no limit on the length of each speech or on the number of speeches that all Senators may make on any debatable question. If the Senate wishes to end debate on that question whether it is a bill, an amendment, or something else it can agree to a motion to table it (formally, to lay it on the table). But the effect of this motion is essentially negative; when the Senate tables an amendment, for example, it is equivalent to rejecting the amendment. Unanimous consent is required for the Senate to resume consideration of something that it has tabled. The only other way to use the Senate's rules to end a debate is to invoke cloture. But this decision requires an extraordinary majority vote. Rule XXII provides that three-fifths of the entire Senate must vote to invoke cloture under most circumstances; on a proposal to amend Senate rules, the required majority is two-thirds of the Senators present and voting. Furthermore, invoking cloture does not assure an immediate or even prompt vote on the question that is being debated. After the Senate votes to invoke cloture on a question, there still can be roughly 30 hours of further consideration before the Senate votes on it. This time can be consumed not only by engaging in debate, but also by offering amendments, insisting on quorum calls, and obtaining rollcall votes. As a result, five working days or more can elapse between the time cloture is proposed on an amendment, for example, and the time when the vote on that amendment ultimately must take place. The right to debate offers ample means to delay in the Senate. And a strategy of delay, even the threat of delay, can be used with telling effect to influence whether a measure will be considered or what happens to it while it is being considered. <3. Influencing the Decision to Consider> Confronted with a measure they oppose, a group of Senators may attempt to prevent the bill or resolution from reaching the floor for consideration. The right of extended debate applies in committee as well as on the floor, with one crucial difference: the Senate's cloture rule may not be invoked in committee. Each Senate committee decides for itself whether or not to create its own rule by which it can limit or end debate. Thus, the opportunities for a filibuster in committee may be even greater than on the floor. Furthermore, Senate Rule XXVI requires that "[n]o measure or matter or recommendation shall be reported from any committee unless a majority of the committee were physically present." So a sizeable minority of a committee's membership may be able to prevent a measure from being reported simply by refusing to attend a committee meeting for that purpose. The effectiveness of these tactics depends on such factors as the number of Senators opposing the measure or matter, its importance to the majority, the determination of its supporters and opponents, and the number of other measures competing for the committee's time and attention. On relatively minor measures, extended opposition in committee may be sufficient to convince the committee's leadership that the measure should be set aside, at least temporarily. On measures of greater import, the majority may be prepared to endure delay, but it also may be willing to make concessions to the minority in order to expedite action. And proponents of a measure have an additional recourse that is discussed later in this report; they can introduce another bill on the same subject and, taking advantage of Rule XIV, have it placed directly on the Senate's legislative calendar, thereby bypassing committee consideration altogether. Assuming a measure has been reported from committee, Senators may employ other strategies to delay or prevent its consideration on the floor. For example, Rule XVII requires that, under most circumstances, the committee report accompanying a bill must be available for one legislative day and for two calendar days (excluding Sundays and legal holidays) before it is eligible for floor consideration. Any Senator can invoke this rule to the inconvenience of the committee chairs and party leaders who are charged with ensuring that there is a steady and timely flow of legislation from committees to the floor. And as deadlines draw near, insisting on strict compliance with the layover rules can have even greater effect. Toward the very end of a session or Congress, when there is much to do in a short period of time, a Senator may be able to prevent a measure from reaching the floor at all simply by demanding strict adherence to these requirements. Once a measure is eligible for floor action, the Senate must agree to consider it, which it usually does either by agreeing to a unanimous consent request or by adopting a debatable motion to proceed to its consideration (often simply called a "motion to proceed"). Whenever possible, the majority leader, who is primarily responsible for arranging and managing the floor schedule, prefers to take up measures by unanimous consent, but any Senator may object to such a request. In that case, the leader (or a committee chairman or other Senator acting with the leader's concurrence) can move that the Senate proceed to consideration of the bill at issue, but Senators are free to debate that motion at great length. So, in most cases, a measure is subject to the possibility of two filibusters, first on the motion to proceed to its consideration and then on the measure itself. Prolonging debate on the motion to proceed is hampered by the fact that it is not amendable, but a sizeable or loquacious minority still may compel the Senate to invoke cloture as the only way to bring the motion to an eventual vote. In light of the time pressures that the Senate often faces, even the threat of extended opposition to the motion can be enough to convince the leadership that it should turn the Senate's attention to another measure instead. There is one opportunity under Senate rules for making a non-debatable motion to consider a measure. It occurs at the beginning of a new legislative day, when the Senate convenes after an adjournment. Each new legislative day is to begin with a Morning Hour that actually can last for two hours. During the second hour, or after morning business has been concluded during the first hour, a Senator can make a non-debatable motion that the Senate proceed to the consideration of any measure on the calendar. If the Senate agrees to this motion, the measure is considered until the Morning Hour ends, at which time the unfinished business from the previous legislative day is laid before the Senate automatically, and the measure called up during the Morning Hour is returned to the calendar. If there is no unfinished business, however, the Senate can continue to consider the measure taken up during the Morning Hour. More often than not, the Senate recesses from day to day, in large part to avoid the potentially complicated and time-consuming Morning Hour procedures. And when the Senate reconvenes after a recess, there is no Morning Hour. Consequently, the majority leader does not often make a non-debatable motion to proceed, though it remains available for him or his designee to use if and when the need and opportunity arise. Even if extended debate on the motion to proceed can be avoided in this way, however, the prospect of a filibuster on the measure itself encourages the leader to seek whatever accommodations are possible and necessary for him to be able to secure a unanimous consent agreement instead. The practice by which a Senator can put a "hold" on a bill is an extension of the right to make a formal objection on the floor to any unanimous consent request for the Senate to consider that bill. In effect, a hold is a notice that the Senator will object to any unanimous consent request that the majority leader or anyone else makes for considering the measure. It also is a request that no one even propose such a unanimous consent agreement so that the Senator does not have to be on the floor to object to it in person. And by implication, a hold carries with it a threat to filibuster any motion to proceed to consideration of the bill in question. Whenever possible, the leadership of both parties will respect holds that are placed on measures by Senators of their party, and encourage negotiations in each case that will lead to the hold being removed. However, holds are an informal device; if necessary, the majority leader may announce that he will seek consideration of a measure, notwithstanding one or more holds, in order to expedite the flow of important Senate business. <4. Influencing the Process of Consideration> Once a measure is before the Senate for consideration, significant opportunities for delay remain. Most important, debate on the bill as well as on each amendment and debatable motion is limited only by the two-speech rule and the possibility of cloture. The Senate cannot vote on final passage of the bill so long as any Senator is speaking or seeks recognition to speak. The same is true of the debate and vote on each amendment to the bill, except that any Senator who has the floor can make a non-debatable motion to table (that is, to kill) the amendment. Each provision in the bill is subject to amendment and Senators can continue to propose debatable amendments to it until that provision has been fully amended. More generally, Senators can propose amendments to any portion of the bill that has not already been changed by amendment. Furthermore, most amendments also are subject to being amended. In fact, under some circumstances, Senators can offer as many as seven amendments or more before the Senate votes on any of them, and each of these amendments is a separate debatable question. In addition, there are some debatable motions, such as motions to recommit the bill to committee, that Senators also can make while the bill is on the floor. Additional time can be consumed by votes on or in connection with each amendment. First the Senate disposes of the amendment, either by voting for or against it or by voting to table it. Then the Senate has one opportunity to reconsider that decision. Immediately after the vote on the amendment, therefore, one Senator typically moves to reconsider that vote and another moves to table the motion to reconsider. The Senate also must vote on this motion to reconsider or, more likely, on the motion to table it. And 11 Senators usually can demand that any vote be taken by a roll call, a process that can be expected to consume at least 15 minutes. So the Senate may be required to devote 30 minutes or more to the votes necessary to dispose of each amendment and each motion. There are other potent sources of delay during the process of consideration. When a Senator believes that some element of the Senate's procedures is being violated, he or she may make a point of order to that effect. After the presiding officer rules on the point of order, any Senator who disagrees with the ruling may appeal the ruling of the chair, and that appeal is a debatable question. Under some circumstances, the presiding officer does not rule on a point of order, instead submitting it to the Senate for it to decide, in which case the point of order itself is debatable. Although the Senate may dispose of a point of order or an appeal by tabling it, there can be two rollcall votes in connection with each tabling motion, and there are almost unlimited opportunities for Senators to make points of order, with or without good cause. Senators also can delay the proceedings by suggesting the absence of a quorum. The Constitution requires that a quorum, or simple majority, of Senators be present when the Senate transacts business on the floor, but it is quite unusual for that many Senators to be present unless a rollcall vote is taking place. Any Senator who has the floor may suggest the absence of a quorum, to which the presiding officer usually must respond by directing the clerk to call the roll. If a majority of Senators fail to respond to the quorum call, which can consume as much time as a rollcall vote, the Senate can only adjourn or await the arrival of enough additional Senators to make a quorum. Once Senators have come to the floor to register their presence, some of them are likely to return to the meetings they had been attending, allowing the process to be repeated all over again. Invoking cloture limits the effectiveness of such dilatory tactics by imposing a ceiling of 30 hours on the total amount of additional time that may be consumed in considering the matter on which the Senate has invoked cloture. But because cloture requires the votes of at least 60 Senators, a united minority party almost always can prevent it from being invoked. And even if the votes needed for cloture can be secured, the 30 hours available for post-cloture consideration is a large amount of the Senate's time for the majority leader to commit to any one matter (in addition to the time the Senate already devoted to it before the successful cloture vote). So tactics such as these can be successful in prompting a bill's supporters to offer policy concessions in order to expedite its final passage. The proponents of a measure may be prepared to sacrifice certain provisions of their bill in order to ensure that the Senate will be able to act on the remaining provisions without delay. Senators also have been known to employ such tactics during consideration of one bill in order to secure policy or procedural concessions concerning some unrelated bill or other matter that has not yet come to the floor. For example, Senators may withhold their consent to an agreement affecting consideration of one bill until they are assured that another bill in which they are interested will be taken up shortly thereafter. With these possibilities in mind, the majority leader or a bill's majority floor manager often seeks to arrange unanimous consent agreements to minimize the possibilities for delay and obstruction. In the recent past, it was fairly common for the Senate to reach such an agreement on a bill before the bill was actually taken up on the floor. The agreement typically would impose a limit on the total time that Senators could spend debating each amendment and every other debatable question that possibly could arise during the Senate's consideration of the bill. Even under this kind of unanimous consent agreement, however, there is no limit imposed on the number of amendments that any or all Senators may offer. Thus, Senators could extend the process of consideration almost indefinitely by offering one amendment after another, unless the Senate also agreed by unanimous consent to set a time at which it would vote on final passage of the bill. Complex unanimous consent agreements, also known as time agreements, in this form have become less common in recent years, perhaps reflecting different approaches taken by different majority leaders to managing the Senate floor, but almost certainly reflecting the autonomy that contemporary Senators may exercise. The more common practice, therefore, has become for the majority leader or the majority floor manager to seek unanimous consent agreements limiting debate on individual amendments to a bill and perhaps fixing the sequence in which the Senate will act on a series of amendments. In the case of a particularly important or controversial bill that the Senate already has been considering for some time, there ultimately may be a unanimous consent agreement that limits the additional amendments that Senators can offer to those listed in the agreement and that imposes individual time limits for debating some or all of them, and that perhaps also sets a date and time for the final vote on passing the bill. The Senate's majority leader and Senators acting as majority floor managers generally prefer to expedite floor action on a bill by arranging unanimous consent agreements when possible and resorting to cloture only when necessary. Senators can use negotiations over a unanimous consent agreement to achieve policy concessions in the bill that they could not achieve by majority vote on the floor. If unanimous consent cannot be reached, the bill's opponents retain their right to unlimited debate unless and until its supporters can secure the 60 votes needed to invoke cloture. <5. Other Opportunities> Either before or during the time the Senate is considering a measure, it may be delayed by motions, demands, or objections made to seemingly unrelated matters. For example, the motions to adjourn and recess enjoy the highest priority. Also, throughout the course of each day's meeting, unanimous consent requests are made for a variety of discrete, and usually routine, purposes. Any Senator may object to any such request, and without any need to provide a reason. Although these proceedings may not relate directly to the measure at issue, they can be used to delay the Senate in its attempts to reach the measure or to delay its consideration. Senators who object to a bill can use these tactics to emphasize the strength of their opposition and to convince the Senate that considering the measure, or debating its consideration, would be a long and painful process that should be avoided if at all possible. Beyond the potent power to delay the Senate's proceedings through debate or these other tactics, a Senator or a group of Senators can try to promote their legislative goals by taking advantage of other parliamentary rights and opportunities that are provided by the Senate's formal procedures and customary practices. <5.1. Recognition> One such opportunity, although of limited value in practice, derives from the Senate rule governing recognition. Rule XIX states that the presiding officer "shall recognize the Senator who shall first address him." By long practice, however, the presiding officer always accords priority in recognition to the majority and minority leaders and, to a lesser extent, to the majority and minority floor managers of the measure that the Senate is considering. If none of these Senators is seeking recognition, any other Senator may be recognized for any purpose to speak at length, of course, or to make a motion: to move, for example, that the Senate adjourn or that it proceed to the consideration of another bill or resolution. But in practice, the motion to adjourn and the motion to proceed generally are reserved to the majority leader or his designee. Another Senator may make such a motion, but he is likely to prevail only temporarily, if at all, unless the motion reflects the plans developed by the majority leader who, in conjunction with the minority leader, is delegated much of the responsibility for scheduling Senate floor activity. <5.2. Resolutions Coming Over, Under the Rule> There are two other devices by which Senators can attempt to bring a measure directly to the floor for consideration even if it is not supported by the committee of jurisdiction or by the majority party leadership. The first applies to Senate resolutions and rarely is used successfully. The second applies to bills and joint resolutions and has been invoked more often but with no assurance of ultimate success. A Senator proposing a simple Senate resolution may ask unanimous consent for its immediate consideration. If another Senator objects, the resolution "goes over, under the rule," the rule in question being the provision of Rule XIV stating that a Senate resolution "shall lie over one day for consideration, if not referred, unless by unanimous consent the Senate shall otherwise direct." The first resolution on the calendar that has satisfied this requirement is laid before the Senate for consideration as the last item of morning business on the next legislative day. That resolution then may be considered until the end of the Morning Hour, although it also may be displaced by a non-debatable motion to consider another measure that also is on the calendar. Although this procedure carries no guarantee that the Senate actually will vote on a resolution, it does afford an opportunity for a Senator to try to bring it before the Senate for debate, rather than allowing the resolution to be referred to a committee that is expected to let it die by inaction. However, this procedure is available only for considering Senate resolutions, not bills, and its utility is limited further by the tendency of the Senate to recess from day to day in order to avoid Morning Hour proceedings, including morning business and resolutions that have gone "over, under the rule." <5.3. Objection to Committee Referral> There is no comparable procedure for bring most bills and joint resolutions directly to the floor without either a unanimous consent agreement or a vote on a motion for its consideration. However, Rule XIV does permit any Senator to place a Senate or House-passed bill or joint resolution directly on the calendar without first being referred to and then reported from committee. Under Rule XIV, bills may be referred to committee only after having been read twice by title. In most cases, the two readings are dispensed with when the bill is introduced, and it is routinely referred to committee without the Senate taking any formal notice of it, or action on it, on the floor. Instead, however, a Senator may introduce a measure and ask unanimous consent for its immediate consideration. The bill then is read for the first time and, if a Senator objects to its immediate consideration, it is held at the desk to await its second reading when the Senate convenes on the next legislative day. After that second reading, the sponsor of the measure or any other Senator may object to "further proceedings thereon," which would be referral to committee. The effect of this objection is to have the measure placed directly on the calendar in precisely the same parliamentary status it would have if it had been considered in committee and then reported back to the Senate. By this means, an individual Senator can avoid the possibility that a bill or joint resolution may be held indefinitely, and ultimately killed, by an unsympathetic committee. The same procedure may be used when a committee fails to act on a bill that has been referred to it. In that case, a Senator may introduce a second, identical bill and have that one placed directly on the calendar while the first bill remains trapped in committee. However, this procedure only succeeds in getting a measure to the calendar; it does not ensure that the bill or joint resolution ever will be brought up for consideration on the floor. A measure placed on the calendar in this way still must be taken up by unanimous consent or by a motion to consider it. <5.4. The Amending Process> A much more common and potent approach is for a Senator to bring a policy proposal directly to the Senate floor in the form of a non-germane amendment that the Senator offers to another bill, even if the amendment is totally unrelated to the subject of that bill. Senate rules require that amendments be germane only when offered to general appropriations and budget measures or when offered under cloture. At other times, the Senate may impose a germaneness requirement on itself, but only by unanimous consent. So a Senator who is unable to obtain floor consideration of a measure he or she supports may offer part or all of its text as a non-germane floor amendment to some other bill. Senators may oppose a non-germane amendment not only on its merits but also on the grounds that it deserves preliminary consideration in committee and that it will be unacceptable to the House, which does require that all amendments be germane. Nonetheless, such arguments are not always compelling, in part because non-germane amendments have become such a recognized and regular part of the Senate's legislative procedures. The Senator offering a non-germane amendment has the option of pressing the issue to a vote (which may come first on a motion to table the amendment) or of withdrawing the amendment if, for example, the Senator receives assurance that the committee of jurisdiction will act promptly on the issue that the amendment addresses. Finally, the amending process offers other strategic opportunities. The likelihood that the Senate will pass a measure sometimes depends on how the Senate amends it before the vote on final passage takes place. So an opponent of a measure can try to promote its defeat by offering or supporting amendments that may be attractive individually but that collectively may undermine majority support for the bill, or that might inspire defeat in the House or a presidential veto. Thus, Senators sometimes have found themselves in the anomalous position of voting for propositions they personally opposed in order to encumber a measure with amendments, germane or not, that could cost the measure necessary congressional or presidential support. Conversely, Senators who support a measure may feel compelled to oppose amendments they would favor under other circumstances in order to protect the bill's chances for passage and enactment. Of course, when Senators oppose a bill that is almost certain to pass, they also may offer amendments in an attempt to make it more palatable and reduce the undesirable consequences of its enactment. <6. Conclusion> These, then, are some of the means by which individual Senators or a minority of Senators can use the Senate's legislative procedures to their advantage. Undoubtedly, there are others that also could be discussed; the very flexibility of Senate practice makes it difficult to identify all the possibilities systematically. When combined with strategic planning and an acute sense of timing, the Senate's procedures give small groups of Senators a potential influence over what the Senate does, and when, that is far out of proportion to their numbers. But most Senators find it advisable to exercise restraint in using the rights and opportunities available to them. Comity and cooperation are at least as important to the Senate as any of its formal rules. A Senator who takes full advantage of his or her prerogatives at every opportunity is almost certain to discover that they are a double-edged sword helpful today but damaging tomorrow. This report was written by [author name scrubbed], formerly a Senior Specialist in the Legislative Process at CRS. Dr. Bach has retired, but the other listed author updated the report and can respond to inquires on the subject.

The rules of the Senate emphasize the rights and prerogatives of individual Senators and, therefore, minority groups of Senators. The most important of these rules allows unlimited debate on a bill or amendment unless an extraordinary majority votes to invoke cloture. Senators can use their right to filibuster, and simply the threat of a filibuster, to delay or prevent the Senate from even considering a bill they oppose. The Senate's rules also are a source of other minority rights, including the right to propose non-germane amendments to most bills and to prevent bills from being referred to committees that might not consider and report them. This report will be revised when necessary to reflect significant changes in relevant Senate rules, precedents, and practices.

<1. Introduction> Willie Davis was a passenger in a car stopped by police in Greenville, Alabama, for a traffic violation. The police arrested Davis for giving a false name. After handcuffing him and placing him in the back of a patrol car, the police searched the passenger compartment of the car in which Davis had been riding. The police found a gun inside Davis's jacket, and Davis was convicted of possessing a firearm as a convicted felon. At the time of the search, the police were acting in conformity with Eleventh Circuit precedent. The Eleventh Circuit had adopted the widely accepted interpretation of the Supreme Court's decision in New York v. Belton , which entitled police to conduct a warrantless and suspicionless search of a vehicle's passenger compartment after arresting one of its passengers. After Davis was convicted, however, the Supreme Court held in Arizona v. Gant that this type of suspicionless vehicle search incident to arrest violated the Fourth Amendment to the U.S. Constitution. The Fourth Amendment provides a right against "unreasonable searches and seizures." It secures privacy interests in one's person and property against unreasonable incursions by state and federal officials. However, the parameters of Fourth Amendment protection have significantly changed during the last century and continue to evolve in response to Supreme Court decisions. As the Court's Fourth Amendment jurisprudence shifts, so does its approach to related questions, such as when and how courts should remedy Fourth Amendment violations. Although the Supreme Court has often framed civil liberty and the rule of law as requiring that a legal remedy accompany every legal right, the Court did not announce a remedy for Fourth Amendment violations until 1914. Then, in Weeks v. United States , the Court held that unconstitutionally obtained evidence could be excluded at trial to remedy a Fourth Amendment violation. This remedy, subsequently termed the "exclusionary rule," initially only applied to Fourth Amendment violations by federal actors, but, in 1961, the Court extended it to violations by state actors as well. The scope of the exclusionary rule has narrowed since these early decisions. The exclusionary rule, for example, is no longer treated as a constitutional doctrine. Instead, the Supreme Court has described the rule as a pragmatic doctrine that only applies when the benefits of evidentiary suppression exceed its costs to the justice system. The Court has also articulated several exceptions to the exclusionary rule's applicability. The "good-faith exception," which renders the exclusionary rule inapplicable to evidence that the police obtained illegally but in "good-faith," is arguably the most significant of these exceptions. Today, the good-faith exception applies in such a wide number of circumstances that its application appears to be the norm from which evidentiary exclusion is the exception. Under recent Supreme Court jurisprudence, the good-faith exception applies to all illegally obtained evidence that was not seized as a result of "deliberate" and "culpable" police misconduct. The Court emphasized this standard in its decision in Davis , confirming that police culpability is now the dispositive factor in determining the exclusionary rule's applicability. <2. The Exclusionary Rule and Its Good-Faith Exception> Courts apply the exclusionary rule to deter Fourth Amendment violations by suppressing unconstitutionally seized evidence. The rule was initially conceived as a constitutionally required remedy for rather than a deterrent of illegal searches and seizures, but recent Supreme Court cases have emphasized that the exclusionary rule is neither rooted in nor required by the U.S. Constitution. This shift in judicial thinking may reflect a move toward textualism on the Supreme Court as well as concern that the exclusionary rule impedes the criminal justice system by barring probative evidence of a criminal defendant's guilt from admission at trial. The Supreme Court has narrowed the reach of the exclusionary rule over the years. Today, the exclusionary rule is applied only if the benefits of its application primarily its deterrent effect on unconstitutional police conduct outweigh the costs to law enforcement and the administration of justice. The Court has also articulated several exceptions to the exclusionary rule's operability. Arguably the good-faith exception is the most significant exception to the exclusionary rule. It permits the unconstitutionally obtained evidence to be introduced at trial when it was seized in "good-faith" by law enforcement officers. As it was initially articulated in United States v. Leon , the good-faith exception seemed to apply only when the police acted in "objectively reasonable reliance" on the legal error of an authority other than the police. These authorities included state legislatures and magistrate judges. However, the Supreme Court subsequently extended the good-faith exception to good-faith reliance on a clerical error within the police department namely, a mistake in a police database file regarding the status of the suspect's arrest warrant. In Herring v. United States , the Court held in 2009 that "to trigger the exclusionary rule, police conduct must be sufficiently deliberate that exclusion can meaningfully deter it, and sufficiently culpable that such deterrence is worth the price paid by the justice system." Supporters of the exclusionary rule criticized the decision for undermining the Fourth Amendment by expanding the good-faith exception's applicability. However, the Court wrote that "the flagrancy of the police misconduct" has always "constituted an important step in the calculus" of the exclusionary rule, and it characterized the exclusionary rule's evolution as a series of cases excluding evidence obtained as a result of flagrant or deliberate violations of suspects' rights. United States v. Davis was the first case in which the Supreme Court was asked to apply the Herring standard and determine whether particular police conduct was "culpable." Prior to the Supreme Court's opinion, the federal circuit courts of appeals had reached conflicting decisions about the admissibility of evidence seized in an unconstitutional search that, at the time it was conducted, complied with precedent. The Supreme Court held that this evidence is admissible because police do not act culpably by conducting an unconstitutional search that conformed with "binding appellate precedent." The case confirms that, under the Herring test, police culpability is now the sole relevant factor in determining whether the exclusionary rule applies. <3. United States v. Davis> <3.1. Opinion of the Court> In United States v. Davis , Davis contended that police culpability was only one relevant factor in determining whether the exclusionary rule applies. He contended that the exclusionary rule can also apply for other reasons, including (1) if doing so is constitutionally mandated under the retroactivity doctrine, which requires courts to apply recently announced Fourth and Fifth Amendment rules retroactively to certain cases on direct review, and (2) if its application would facilitate the development of Fourth Amendment law by incentivizing future appeals. As discussed below, the Court rejected Davis's approach and assessed the exclusionary rule's applicability solely with reference to the culpability standard prescribed in Herring . The Court determined that the police had not acted wrongfully by complying with appellate precedent, and it therefore held that the exclusionary rule did not apply. One Justice concurred in the judgment and two dissented. <3.1.1. Exclusionary Rule and the Retroactivity Doctrine> As to Davis's first argument, the Supreme Court drew a distinction between retroactively applying a new judicial rule for the conduct of criminal prosecutions and deciding how to remedy a violation of that rule. According to the retroactivity doctrine, Article III of the U.S. Constitution requires the retroactive application of a new Supreme Court precedent on criminal procedure to all cases not yet final. Davis relied on this doctrine to argue that, when a new Fourth Amendment rule is announced, both the new rule and the method of redress used to remedy the wrong suffered by the defendant in that case should both be applied retroactively on appeal. He drew support from language in the Supreme Court's opinion in Danforth v. Minnesota describing retroactivity as "about remedies, not rights" and a question of "redressability." However, the Court rejected Davis's contention as mischaracterizing the retroactivity jurisprudence so as to conflate it with the case law applying the good-faith exception. The Court wrote that the retroactivity doctrine and its case law determine "whether a new rule is available on direct review as a potential ground for relief ... [not] what 'appropriate remedy' (if any) the defendant should obtain." <3.1.2. Exclusionary Rule and the Development of Fourth Amendment Law> Having defined the retroactivity doctrine as a determining the appropriate rule and the exclusionary rule as a determining the appropriate remedy in a given case, the Court considered whether the exclusionary rule was applicable in Davis . Davis contended that the appropriate test for the exclusionary rule's application balanced the benefits of applying the exclusionary rule's application with its costs. Davis further argued that the benefits outweighed the costs because its application would, in addition to deterring unconstitutional police searches, facilitate the development of Fourth Amendment law. While the two dissenters found this argument persuasive, the Court held that it could not be reconciled with exclusionary rule precedent. Ensuring that defendants have incentives to challenge erroneous lower-court case law is not, the Court wrote, a relevant consideration in an exclusionary rule case. The Court emphasized that the exclusionary rule has only one purpose, deterring culpable police conduct, and it neither applies nor should apply for any other reason. However, the Court also left open the possibility that, in a future case, it "could, if necessary, recognize a limited exception to the good-faith exception for a defendant who obtains a judgment overruling ... Fourth Amendment precedents." <3.1.3. Exclusionary Rule and Police Compliance with Appellate Precedent> Instead of following Davis's approach, the Court assessed the exclusionary rule's applicability solely with reference to the culpability standard prescribed in Herring . Under this standard, a defendant benefits from the exclusionary rule's application only if his Fourth Amendment rights were violated "deliberately, recklessly, or with gross negligence" or as a result of "recurring or systemic negligence" by law enforcement. The Court found that Davis had not met this high standard because the police had "acted in strict compliance with binding precedent." Applying the exclusionary rule in this case, the Court wrote, would transform the exclusionary rule into "a strict liability regime" that penalizes police officers for unintentional constitutional violations. Accordingly, the Court determined that the exclusionary rule was inapplicable. <3.2. Concurrence> Supreme Court Justice Sotomayor found that Davis did not determine whether the exclusionary rule applies when the law governing the constitutionality of a particular search is unsettled. In its earlier opinion in Davis , the Eleventh Circuit had reached a similar conclusion, but it had adopted a different rationale than the one Justice Sotomayor put forth in her concurrence. The Eleventh Circuit confined its holding in Davis to a police officer's good-faith reliance on clear and unambiguous appellate precedent because, in its view, police officers engage in deliberate and culpable conduct when they try to conduct legal analysis. According to the Eleventh Circuit, police are ill-equipped to analyze precedent and answer legal questions, and therefore their attempts to perform this type of legal reasoning should be viewed as culpable conduct. The Eleventh Circuit also stated that requiring police to engage in more limited police action pending decisive judgments from the U.S. Supreme Court maintains a necessary "incentive to err on the side of constitutional behavior." In contrast, Justice Sotomayor stated in her concurrence that the Court's opinion in Davis would not control cases in which police had relied on ambiguous precedent because the facts in Davis did not present the Court with the opportunity to determine whether exclusion in those circumstances would be warranted. Justice Sotomayor did not adopt the Eleventh Circuit's view that a police officer's attempt at legal analysis is, necessarily, deliberate and culpable conduct. Moreover, unlike the Eleventh Circuit, she rejected the view that an officer's culpability is dispositive of the exclusionary rule's applicability. She wrote that she reads the exclusionary rule precedents as requiring evidentiary exclusion when it would "appreciably deter Fourth Amendment violations." While she said she had found that exclusion in Davis would not appreciably deter future Fourth Amendment violations, this did not determine "whether exclusion would appreciably deter Fourth Amendment violations when the government law is unsettled." <3.3. Dissent> Justice Breyer, joined by Justice Ginsburg, dissented from the majority opinion. The dissent criticized the majority for engaging in a formalistic and ultimately unworkable analysis, violating important principles of constitutional adjudication, and vitiating the exclusionary rule. First, the dissent contended that by distinguishing between the applicable rule of criminal procedure and the applicable remedy, the majority engaged in an overly formalistic analysis that would prove unworkable in practice. Davis will burden courts with the responsibility for determining when appellate precedent is sufficiently "binding" for police officers to have acted reasonably by complying with it. While this may be a simple analysis in Davis because the petitioner conceded the point, the dissent suggested that, in the future, it will be much more difficult for courts to assess whether a previous case was "binding." By way of illustration, the dissent wondered whether a case would be "binding" if its facts were readily distinguishable or its holding expressly limited to the facts presented in that particular case. Because the definition of "binding" is difficult to reduce to a single bright-line rule, the dissent argued lower courts' application of Davis is likely to confuse and confound police operations. Second, the dissent expressed concern for the justice of the majority's opinion. The dissent pointed out that the defendant in Davis suffered the same legal wrong as the defendant in Gant , and, therefore, principles of fairness entitled the defendant in Davis to benefit from the same legal remedy as the defendant in Gant . It recognized that the majority had suggested that this unfairness could be avoided in the future by refusing to apply the exclusionary rule to the defendant in the case in which the new rule was announced. However, the dissent argued that this approach would have even more harmful effects. It would, the dissent contended, vitiate the appellate function of the federal circuit courts and the U.S. Supreme Court in Fourth Amendment cases by eliminating the sole incentive for defendants to appeal lower court decisions. This would threaten the role of the U.S. Supreme Court in harmonizing constitutional law across the circuits by essentially eliminating Fourth Amendment cases from its docket. Finally, the dissent criticized the Court's adherence to the culpability standard for the exclusionary rule. The exclusionary rule, it argued, does not and was not intended to punish police officers for violating a defendant's Fourth Amendment rights, and, therefore, an officer's culpability should not determine the exclusionary rule's applicability. If, as the majority strongly suggested, the culpability standard is dispositive, then the good-faith exception effectively swallows the exclusionary rule. In turn, the dissent warned, "ordinary" Americans would lose their primary source of protection against unreasonable searches and seizures. <4. Implications for Congressional Action> Congress has occasionally considered supplementing the Supreme Court's exclusionary rule jurisprudence with legislation codifying the exclusionary rule or the good-faith exception. Over the years, some Members have expressed displeasure that the exclusionary rule substantially interferes with law enforcement and the conviction of criminal defendants against whom there is probative evidence that they have committed a crime. However, congressional efforts to curtail the exclusionary rule's reach have encountered resistance over concerns that, in the name of fighting crime, these efforts will result in the violation of the rights of innocent people. In 1968, Congress codified the exclusionary rule to a limited extent with respect to information obtained illegally through interceptions of certain wire or oral communications. More recently, the 104 th Congress considered codifying a good-faith exception to the exclusionary rule in the Exclusionary Rule Reform Act of 1995. Notably, Congress would not be able to curtail the exclusionary rule's application in circumstances in which it is constitutionally required. However, the Supreme Court has consistently emphasized that the rule has no constitutional basis. It is therefore widely accepted that Congress has broad authority to bar (or require) the exclusionary rule in federal cases, and the Court's opinion in Davis supports this position. Nevertheless, legislation barring the exclusionary rule might carry implications for the operability of "state exclusionary rules" and raise questions about whether and how Fourth Amendment violations should be deterred and/or remedied in the future. <5. Conclusion> Davis v. United States was the first case in which the Supreme Court applied the "deliberate" and "culpable" Herring standard for the good-faith exception's application. The Supreme Court held that evidence seized in an unconstitutional search that, at the time it was conducted, complied with precedent is admissible because police do not act culpably when they conform with "binding appellate precedent." The case also suggests that police culpability is the sole relevant factor in determining whether the exclusionary rule applies. Although the majority and dissent in Davis disagreed over whether the holding would dramatically limit the number of cases in which the exclusionary rule applies, Davis fits within a body of case law that, as a whole, narrows the rule's applicability. On one hand, this trend suggests that the exclusionary rule's opponents may no longer be motivated to reform the rule legislatively, and therefore any push to codify the exclusionary rule will originate with the rule's supporters. However, legislative reform may not only be motivated by a desire to see the exclusionary rule apply or not apply to remedy Fourth Amendment violations, it may also be motivated by a perceived need to provide clarity and predictability to police operations. Exclusionary rule jurisprudence has been described as so "severely contorted" and "complicated" as to be nearly impossible for police officers, who need to make quick decisions about the legality of their actions, to apply in the field. Drawing on this concern, the dissent in Davis suggested that the Court's decision would confound police operations by further complicating this jurisprudence and requiring courts and police to make difficult distinctions between "binding" and non-binding appellate precedent. However, supporters of the Court's opinion in Davis would presumably disagree with this assessment and contend that Davis clarified the exclusionary rule jurisprudence by restricting the rule's application to only the most flagrantly violative searches.

In Davis v. United States, the Supreme Court held that evidence seized in violation of the defendant's Fourth Amendment rights is admissible at trial when the police seized the evidence in good-faith reliance on "binding appellate precedent." The petitioner in that case, Willie Davis, was a passenger in a car that was stopped by police for a traffic violation. The police arrested the driver for driving while intoxicated and Davis for giving a false name. After handcuffing Davis and placing him in the back of a patrol car, the police searched the passenger compartment of the car in which Davis had been riding. The police found a revolver inside Davis's jacket, and Davis was convicted of possessing a firearm as a convicted felon. At the time of the search, the police were acting in conformity with controlling Eleventh Circuit precedent. However, after Davis was convicted and had filed an appeal, the Supreme Court ruled that this type of vehicle search incident to arrest was unconstitutional under the Fourth Amendment. Nevertheless, when Davis's appeal reached the Court, it held that even though the search was unconstitutional, the gun it produced was admissible under the good-faith exception to the exclusionary rule. The exclusionary rule bars evidence obtained in an unconstitutional search from being introduced at trial. The rule is a pragmatic doctrine intended to deter Fourth Amendment violations. It traditionally applies when (1) no exception, such as the good-faith exception, bars its operability; (2) exclusion will achieve "appreciable deterrence" of Fourth Amendment violations; and (3) the benefits of evidentiary suppression outweigh its burdens on the justice system. In 2009, the Supreme Court broadened the good-faith exception when it announced in Herring v. United States that unconstitutionally obtained evidence is admissible at trial unless the evidence was the product of "deliberate" and "culpable" police misconduct. Davis was the first Supreme Court case to apply the Herring standard. The case furthers the impression that police culpability is now the sole relevant factor in determining whether the exclusionary rule applies. The Court rejected Davis's contentions that other relevant factors include whether the exclusionary rule's application would facilitate the development of Fourth Amendment law and whether a recently announced Fourth and Fifth Amendment rule applies retroactively. Two Justices dissented from the Court's opinion. One Justice concurred in the judgment but rejected the Court's view that police culpability is the dispositive factor in an assessment of whether the exclusionary rule applies. Congress has occasionally considered legislation codifying the exclusionary rule or its good-faith exception. The scope of Congress's authority to enact or modify exclusionary rule jurisprudence depends on the extent to which the exclusionary rule is constitutionally required. The Supreme Court in Davis emphasized that the exclusionary rule's application is not constitutionally mandated by either the Fourth Amendment or the retroactivity doctrine. Accordingly, Davis supports the view that Congress has substantial authority to mandate the exclusionary rule's applicability or inapplicability in federal court cases.

<1. Overview> Mongolia is a vast, sparsely populated, mineral-rich nation sandwiched between Russia and China. Formerly a Soviet satellite state, the country peacefully ended one-party Communist rule and launched democratic and free market reforms in 1990. Congress has shown strong support for Mongolia since that date through funding of assistance programs, approval for the transfer of excess defense articles, ratification of a bilateral investment treaty, extension of permanent normal trade relations, and House, Senate, and concurrent resolutions commending Mongolia on its development of democracy and expressing support for expanded U.S.-Mongolia relations. (See Appendix A for a list of significant legislation related to Mongolia from the 102 nd Congress to the present.) Mongolia's is one of 16 parliaments worldwide that have been partnered with the U.S. House Democracy Partnership, a bipartisan, 20-member commission of the U.S. House of Representatives that has worked to support the development of "effective, independent, and responsive legislative institutions." U.S. interests in Mongolia include what a 2011 U.S.-Mongolia Joint Statement refers to as "common values and shared strategic interests." Most prominent is the two nations' "common interest in protecting and promoting freedom, democracy and human rights worldwide." Mongolia is the only formerly Communist Asian nation to have transitioned to democracy, and regards itself as a potential role model for the nations of Central Asia, and even China and North Korea, as well as for nations in other regions of the world attempting democratic transitions. In a statement issued after Mongolian President Tsakhiagiin Elbegdorj's re-election in 2013, President Obama stated that, "Through its impressive democratic achievements and its progress on economic liberalization, Mongolia serves as a significant example of positive reform and transformation for peoples around the world." As Mongolia begins to approve deals for development of its so far largely untapped mineral wealth, estimated to be worth as much as $1.3 trillion, the United States has an interest in strengthening the investment climate for U.S. businesses in Mongolia. The United States also has an interest in many aspects of Mongolia's engagement with the broader international community. Mongolia has contributed troops to the wars in Iraq and Afghanistan, and to global United Nations Peacekeeping Operations. It has supported U.S. positions in international organizations such as the United Nations, and embraced international democracy promotion initiatives. Uranium-rich Mongolia also has taken a strong stance in support of nuclear non-proliferation. As a nation with diplomatic relations with both North and South Korea, Mongolia has sought to support peace and stability on the Korean Peninsula. With a majority Tibetan Buddhist population and close ties to Tibet's exiled spiritual leader, the Dalai Lama, Mongolia also has a strong interest in Tibet's future. <2. Democratic Development> For nearly 70 years, Mongolia was a one-party state ruled by the communist Mongolian People's Revolutionary Party (MPRP). Mongolia's democratic revolution began with Eastern Europe-inspired street protests in the capital, Ulaanbaatar, in December 1989. The MPRP's Politburo chose to resign en masse in March 1990. Since then, Mongolia has made a rapid transition from one-party Communist rule to multi-party parliamentary democracy. In May 1990, constitutional amendments ended the MPRP's monopoly on power and created an indirectly-elected presidency. In 1992, a new democratic constitution guaranteed a broad set of rights and freedoms, created a directly-elected presidency, and established a multi-party, directly-elected, unicameral legislature, the State Great Hural (SGH). Since then, Mongolia has held six direct presidential elections and six direct parliamentary elections. (See Appendix B for the results of all ten elections.) Mongolia's revised "National Security Concept," passed by the Mongolian parliament in 2010, reaffirmed Mongolia's commitment to democracy, stating that, "Parliamentary governance built on respect for human rights and freedoms, the rule of law, as well as a democratic state structure built on social stability shall be the pre-eminent guarantee for the assurance of national security." Congress has passed resolutions congratulating Mongolia on a series of largely free and fair elections, and the State Department said that in 2013, Mongolia "generally respected" freedoms of speech, press, assembly, and association. <2.1. Challenges to Democracy and Human Rights> Mongolia's democratic development remains a work in progress. In its report on human rights practices in Mongolia in 2013, the State Department highlighted as serious human rights problems facing Mongolia: "police abuse of detainees, widespread corruption, and a lack of transparency in government affairs." According to the report, "Ample documentation establishes both that corruption was widespread and that the perception and reality of corruption were serious drags on democratic and economic development." Such issues are a concern to those who see a strong Mongolian democracy as vital to keeping Mongolia a neutral, sovereign country that is able to stand up for its interests in the face of its powerful neighbors, China and Russia. (For more information about Mongolia's efforts to increase government transparency, see " U.S.-Mongolia Transparency Agreement " and " Participation in International Democracy Promotion " below.) In a USAID-supported survey of the Mongolian business community in May 2013, 69.1% of respondents said that they "always" or "often" encountered corruption in public sector tenders and contracting, and 62.4% of respondents said they believed that steps taken by the government to control corruption were "hardly effective" or "not at all effective." The report warned that private sector corruption "makes Mongolia vulnerable to bad governance and chronic income inequality among citizens." Transparency International's Corruption Perceptions Index for 2013 ranked Mongolia 83 rd of 177 countries in the index, with the top ranked country (Denmark) being the least corrupt. Mongolia shared its ranking with seven other nations: Burkina Faso, El Salvador, Jamaica, Liberia, Peru, Trinidad and Tobago, and Zambia. Other concerns raised in the State Department report include, "arbitrary arrests; poor conditions in detention centers; government interference with the media; religious discrimination (including continued refusal by some provincial governments to register Christian churches); denial of exit visas and immigration holds on foreign citizens; inadequate measures to counter domestic violence against women; trafficking in persons; discrimination against persons with disabilities; and violence and discrimination against lesbian, gay, bisexual, and transgender (LGBT) persons." <2.2. The Corruption Case Against Former President Enkhbayar> In April 2012, Mongolia's Independent Authority Against Corruption (IAAC) arrested former President Nambaryn Enkhbayar and charged him with corruption and fraud. Enkhbayar, who served as President from 2005 to 2009, as speaker of the parliament from 2004-2005, and as Prime Minister from 2000-2004, remains the most high-profile figure in Mongolia ever to be charged with corruption. His case ignited impassioned debate in Mongolia. Some saw it as an object lesson in the difficulty of holding a politically powerful and internationally-connected figure to account. Others saw it as a politically-driven vendetta that brought into question Mongolia's commitment to human rights and the rule of law. Immediately after the former President's arrest, his supporters denounced the charges as politically motivated. His son, a United States-educated banker, described the government's treatment of his father as "a purge" and alleged that the government sought "to keep him away from the election and remove him from politics." Enkhbayar was then, and remains today, head of the Mongolian People's Revolutionary Party (MPRP), a breakaway party formed in 2011after the original MPRP changed its name to the Mongolian People's Party. Enkhbayar's arrest came two months before parliamentary elections and it made him ineligible to run for office. Had Enkhbayar been able to stand and had he won a seat, he would have gained parliamentary immunity. The IAAC stated that it had sought to question Enkhbayar for months and arrested him only after he repeatedly ignored its summonses. Enkhbayar was convicted at his first trial in August 2012 and sentenced to four years in prison. On appeal before the Supreme Court in December 2012, he was again convicted and this time sentenced to two-and-a-half years in prison. Throughout the process, his supporters alleged a variety of official abuses, from denial of adequate medical care, to denial of access to family and legal counsel, to judicial bias and procedural problems. Influential figures in the international community, including UN Secretary General Bank Ki-moon, expressed concern about the government's treatment of the former President. In its 2012 report on human rights practices in Mongolia, however, the State Department stated that, "Observers of the four postponement hearings and trials, which were televised and open to the public, generally found the process in compliance with law." With Enkhbayar reportedly in ill health, President Tsakhiagiin Elbegdorj issued a terse decree on August 1, 2013 pardoning him and ordering him released from the remainder of his sentence. Canadian Mongolia expert Julian Dierkes explained the pardon as a move that "deflects accusations against Elbegdorj and the DP [Democratic Party] that they are partisan in their pursuit of anti-corruption measures and makes the president look more like a head of state above the political fray." Enkhbayar subsequently traveled to South Korea for medical treatment, where he remains today. He has been reported to be planning a political comeback. In August 2014, however, the Mongolian Police reportedly initiated a new criminal fraud investigation against the former President related to his 2011 purchase of a headquarters building for his political party. <2.3. Institutions and Electoral Procedures> Presidential elections are held every four years, with the next presidential election scheduled for 2017. Each political party represented in Mongolia's parliament is permitted to nominate one candidate, with the winner requiring a simple majority of the popular vote. The President serves as head of state, commander in chief of the armed forces, and head of the National Security Council. He can veto all or some of laws passed by parliament, although parliament may override his veto. He may serve no more than two terms of four years each. One of the quirks of the Mongolian system is that the President is required to give up his party affiliation upon taking office. Elections to Mongolia's Parliament, the State Great Hural, are held every four years in June, with the next election scheduled for 2016. The State Great Hural has 76 members, of whom 48 are elected by a simple majority system in 26 electoral districts, and the remaining 28 are nominated by political parties according to their percentage of votes in the district elections. Once the State Great Hural is elected, members choose a speaker, the chairman of the State Great Hural, who ranks second in the state hierarchy and serves as an ex officio member of the National Security Council. The winning party or coalition of parties in the parliamentary elections proposes a nominee to be Prime Minister. The parliament votes on the nomination, and then formally proposes the candidate to the President for his or her approval. Once the Prime Minister is approved, he or she then nominates Cabinet members to the parliament, which proposes them for the President's approval. The State Great Hural meets semi-annually for sessions of at least 75 days. <2.4. Election Outcomes> The formerly Communist MPRP, which changed its name to the Mongolian People's Party (MPP) in December 2010, won three of the presidential elections since 1992 and won the most seats in four of the parliamentary elections. Since 2012, the Democratic Party has controlled the positions of President, Prime Minister, and Chairman of the State Great Hural. In the most recent parliamentary election in June 2012, the Democratic Party won 33 of the 76 seats in the State Great Hural. It leads a coalition government including the Justice Coalition (comprised of a new MPRP party, formed in early 2011 by a faction that split from the re-named MPP, and the Mongolian National Democratic Party) and the Civil Will-Green Party. The MPP, with 25 seats, now serves as the opposition party. President Tsakhiagiin Elbegdorj was re-elected to a second four-year term in June 2013. (See text box, Mongolia's Leaders .) <3. Economic Issues> Mongolia has vast mineral wealth, estimated to be worth as much as $1.3 trillion, which, if managed well, could allow it to evolve into an increasingly wealthy democracy. The country boasts reserves of coal, copper, gold, tin, and uranium, as well as reserves of molybdenum, silver, iron, phosphates, nickel, zinc, wolfram, fluorspar, and petroleum, only a small fraction of which have been developed. It also has reserves of rare earth elements, although their size is not yet known. In the short-term, however, Mongolia is grappling with declining foreign direct investment, weak mineral exports, a resulting serious imbalance in its balance of payments, high inflation, and rapid increases in non-performing loans in the banking sector. In June 2014, the World Bank called for a "structural shift in the economic policy framework to restore economic and financial stability," with a focus on tighter monetary policy, and better enforcement of lending regulations and of Mongolia's Fiscal Stability Law." It has also called for "a more prudent resource revenue management system," so that Mongolia can begin accumulating savings from its resource revenues. In the medium- to long-term, Mongolia faces several existential questions related to its economic development. One is how to avoid the "natural resource curse" that has afflicted some other resource-rich countries, involving such problems as currency pressures, ballooning government budgets, corruption, and environmental degradation. Mongolia is experiencing a taste of all those issues now, but economists do not judge it yet to be in the full throes of a "natural resource curse." A second challenge is how, in a democracy, to balance the need for legal guarantees for foreign investors with the perceived need to be responsive to popular pressure to renegotiate or otherwise change the terms of contracts in order to provide the Mongolian state and public with greater rewards, particularly in extractive industries. A third challenge is how to overcome constraints related to Mongolia's land-locked status and limited domestic transportation networks. All goods leaving or entering Mongolia must traverse the territory of one of Mongolia's two powerful neighbors, China and Russia. (Mongolia is separated from Kazakhstan in the west by 30 miles of Russian territory.) Within Mongolia, to get to either neighbor's border, goods must currently be either trucked on mostly unpaved roads, or transported on one of just two railway lines. Mongolia's main railway is a single-track, with passing places, which runs 690 miles from the Russian border in the north to the Chinese border in the south. An eastern railway runs 148 miles from Choybalsan to the Russian border. Although the government of Mongolia has ambitious rail development plans, it currently is constructing only one new rail line to the Chinese border from the eastern coal mining regions of the Gobi desert, principally to transport coal. The line is slated for completion in 2016. (See Figure 1 below for a map of Mongolia.) A final existential challenge is how to stave off economic domination by neighboring China, the world's second-largest economy, and lessen Mongolia's heavy dependence on Russia for energy supplies. China is currently both Mongolia's largest foreign investor and its biggest trading partner. The almost $6 billion in two-way trade between Mongolia and China is nearly four times the volume of trade between Mongolia and its second largest trading partner, Russia. (See Table 1 below.) As of mid-2012, Chinese investment in Mongolia accounted for just under one third of total foreign direct investment (FDI) in the country. Mongolia's National Security Concept document, adopted in 2010, directs the government to, "Design a strategy whereby the investment of any foreign country does not exceed one third of overall foreign investment in Mongolia." Mongolia's reliance on trade with and investment from China makes it particularly vulnerable to the effects of slower growth in China. <3.1. Investment Climate> Mongolia has sought to attract foreign direct investment (FDI) as a way to raise capital for exploitation of its mineral resources, introduce financial and managerial expertise and new technologies, and diversify its economic partners. Government officials and Members of Parliament have periodically registered their concerns about the terms of completed investments, however, including calling for renegotiation of the terms of Mongolia's flagship foreign-invested project, a massive copper and gold mine project at Oyu Tolgoi. (See " Oyu Tolgoi Copper and Gold Deposit " below.) In addition, Mongolia's parliament has in recent years passed new laws and amended existing laws and regulations in ways that foreign investors see as sometimes curtailing previously-granted rights. In its January 2013 Investment Climate Statement on Mongolia, the U.S. Embassy in Mongolia described the regulatory environment for foreign investment in the country as "extremely chaotic, characterized by abrupt, non-transparent attempts to change laws." In its July 2014 Investment Climate Statement on Mongolia, the Embassy softened its language, acknowledging that policies unpopular with foreign investors are "designed to protect Mongolia's sovereign interests and to respond to the expectations of the Mongolian public.... " It still reported, however, that investors have "the impression that laws are hastily passed and that regulations are slowly created and partially implemented." It also reported, "Some investors are concerned that criticism from some political quarters of current investment agreements and statutory obligations undertaken by past governments portends that commitments may not be fully respected." As investor concerns about Mongolia's investment climate have grown, FDI in Mongolia fell in 2013 by about 55%. The Asian Development Bank attributed the sharp decline to "uncertainties" related to the regulatory framework for foreign investment, as well as to slower growth in neighboring China, the completion of the first phase of construction of the Oyu Tolgoi mine, and delays in launching the second phase of the mine project. Alarmed by the drop, and responding to pressure from worried investors and from the U.S. government, Mongolia took two steps in the fall of 2013 that are credited with improving perceptions of its investment climate. They were the Mongolian parliament's October 2013 passage of a new investment law and Mongolia's September 2013 signing of a transparency agreement with the United States. <3.1.1. 2013 Investment Law> The 2013 Investment Law of Mongolia, which entered into effect on November 1, 2013, replaced a 1993 foreign investment law and a controversial 2012 law, the Strategic Entities Foreign Investment Law of Mongolia (SEFIL). The U.S. government had raised serious concerns about SEFIL, with the U.S. Embassy in Mongolia reporting in January 2013 that investors feared SEFIL "may bar them from participating in key sectors of the Mongolian economy or force divestment of Mongolian assets and equities in the affected sectors." Under the new investment law, approvals are no longer required for foreign private investment in Mongolia, and private investments are permitted in any production or services sector not prohibited by law, with prohibited sectors limited to narcotics, gambling, pornography, and pyramid sales and marketing. Foreign state-owned companies, defined as "a legal entity in which a foreign state directly or indirectly holds more than 50 percent of the entities issued shares," are subject to restrictions that do not apply to private firms; they must seek approval for investments of more than 33% in the sectors of minerals, banking and finance, and media and telecommunications. The law also provides greater legal guarantees for investments than the laws it replaces; a stable tax environment for up to 18 years, depending on the volume and geographic location of investments; and tax and non-tax incentives for investments. The U.S. Embassy in Mongolia has noted investor complaints about "some regulatory bumps" that seem to undermine the promise of a level playing field for foreign investors. It cites, for example, an increase in the minimum capital requirements for foreign-invested companies in Mongolia with two or more foreign shareholders. <3.1.2. U.S.-Mongolia Transparency Agreement (TA)> After years of negotiations, the United States and Mongolian governments in September 2013 signed what is formally known as the "Agreement on Transparency in Matters Related to International Trade and Investment between the United States of America and Mongolia." To the consternation of the U.S. government, however, a year later the Mongolian parliament has yet to ratify it. The U.S. Embassy in Mongolia has emphasized the importance of ratification as, "an unambiguous signal to businesses that Mongolia seeks to restore confidence in the statutory and regulatory processes affecting commerce and trade in Mongolia." The transparency agreement commits both countries to: Publish, in English, an explanation of the purpose of and rationale for proposed laws and regulations; Provide, to the extent possible, "a reasonable opportunity" for public comment on proposed laws and regulations related to trade and investment. The two countries agreed to provide, in most cases, at least 60 days advance notice of the due date for public comments, and to allow the submission of comments solely in English. Publish in English all laws and regulations adopted. The agreement also commits the two governments to take steps to combat bribery and corruption. A press release from the U.S. Trade Representative stated that the requirement that laws and regulations be published in English "should make it easier for U.S and other foreign enterprises to do business in, and invest in, Mongolia." According to USTR, the transparency agreement with Mongolia "represents the first time that the United States has concluded a stand-alone agreement addressing transparency in matters related to international trade and investment." Some in Mongolia believe that with transparency agreement, the United States is seeking to hold Mongolia to a higher standard than other nations. They see the requirements for English translations as particularly onerous. Mongolian supporters of the Transparency Agreement view its ratification as a step toward a possible future free-trade agreement (FTA) with the United States. Mongolia, the only member of the World Trade Organization that is not yet a party to any FTA, has long sought FTA negotiations with the United States, and was disappointed that plans for such negotiations were not included in USTR's Strategic Plan for FY2013 to FY2017. Mongolia's first FTA is expected to be with Japan. (See " Relations with Japan " below.) <3.2. Flagship Mining Projects> Two major mineral deposits have dominated headlines about Mongolia for several years. The Oyu Tolgoi copper and gold deposit and the Tavan Tolgoi coking coal deposit, both in Mongolia's South Gobi Desert, account for a large proportion of Mongolia's untapped mineral reserves. Beyond the potential profits involved, the projects have been widely viewed as important indicators of Mongolia's evolving attitude toward foreign investment. The U.S. government has expressed a particularly strong interest in Tavan Tolgoi because a U.S. company, St. Louis, Missouri-based Peabody Energy, is one of the companies competing for the rights to develop part of the deposit. <3.2.1. Oyu Tolgoi Copper and Gold Deposit> The Oyu Tolgoi deposit, commonly referred to as "OT," is believed to be the second-largest copper deposit in the world after the Escondido copper mine in Chile. In 2009, the Government of Mongolia signed a multi-billion dollar agreement for joint development of the deposit by Ivanhoe Mines of Canada (now known as Turquoise Hill Resources), the Australia-based Rio Tinto Group (which now holds a 51% controlling stake in Turquoise Hill Resources), and the Government of Mongolia, which holds a 34% stake in the OT project. Construction of the first phase of the project began in 2010 and production began in June 2013. The Government of Mongolia and Rio Tinto have been mired in drawn-out, contentious negotiations over financing of Phase II of the project, however, with no resolution in sight. The U.S. Embassy in Mongolia describes the Oyu Tolgoi project as "a barometer for foreign investment in Mongolia." The dispute over Phase II, it says, "has raised doubts about the GOM's [Government of Mongolia's] commitment to contract sanctity, has certainly become a factor in the downgrading of Mongolia's sovereign credit ratings, and has been blamed as a major factor in the severe drop in FDI since 2012." <3.2.2. Tavan Tolgoi Coal Deposit> The Tavan Tolgoi deposit, commonly referred to as "TT," is believed to contain 6.4 billion metric tons of coal, including the world's largest untapped deposit of coking coal, used in steel production. In late 2008, the Mongolian parliament authorized the government to negotiate with strategic investors for rights to develop part of the deposit. In March 2011, the government shortlisted six bidders for rights to develop the deposit's West Tsankhi block, which has an estimated 1.2 billion tons of coal. In addition to Peabody Energy, other shortlisted bidders included a Chinese-Japanese consortium, a Korean-Russian-Japanese consortium, and firms from Brazil and Europe. In May 2013, however, state-owned Erdenes Tavan Tolgoi LLC (also known as Erdenes TT) announced that it had decided to mine West Tsankhi by itself. The company indicated that it might still pursue some form of partnership with international mining companies as production ramps up. <4. Military Engagement> Mongolia's 2011 Concept of Foreign Policy document decrees that, "In the absence of an immediate military threat, Mongolia will adopt a strategy of non-participation in any military alliance, non-use of its territory or air space against any state, non-entry, non-stationing or non-transiting of foreign troops across its territory." Mongolia has won significant goodwill from the United States and its allies for its participation in coalition operations and contributions to United Nations peacekeeping operations around the globe. <4.1. Contributions to the Wars in Afghanistan and Iraq> Mongolia was one of the first countries to join the allied coalition for the Iraq War, rotating nearly 1,200 troops through 10 consecutive deployments in Iraq between August 2003 and September 2008. Mongolian troops continue to serve in Afghanistan, where they have been deployed since 2003 in support of Operation Enduring Freedom and the International Security Assistance Force in Afghanistan. They also served with the Kosovo Force in Europe. In an acknowledgement of the importance that the United States attaches to Mongolia's contributions to coalition operations and UN peacekeeping operations, Secretary of Defense Chuck Hagel visited Mongolia in April 2014 and, with his Mongolian counterpart, issued a "Joint Vision Statement for the U.S.-Mongolia Security Relationship." In the statement, the Department of Defense said it was "grateful for Mongolia's support," including in Afghanistan and Iraq. The statement also said the United States "commends Mongolia" for stating that if coalition forces remain in Afghanistan after 2014, it is willing to continue contributing personnel. In the statement, the United States said it welcomed Mongolian defense reform and supports improving military education for Mongolian forces. The Alaska National Guard has a partnership with Mongolia under the State Partnership Program. That program pairs the National Guards of 48 states, three territories, and the District of Columbia with active and reserve forces in 68 countries around the world. Alaskan National Guard soldiers are serving as advisors for Mongolian troops in Afghanistan, and performed the same role in Iraq. Mongolia and Alaska have conducted numerous exchanges to build capacity in disaster response, health and medical care, and peacekeeping operations. <4.2. Contributions to United Nations Peacekeeping Operations> Mongolia has been an active contributor of military personnel to United Nations Peacekeeping Missions. As of March 31, 2014, Mongolia had 928 troops and 10 United Nations Military Experts serving in six UN Peacekeeping Operations. Mongolia is currently the 27 th largest contributor of military and police personnel to UN operations, despite its small population, with approximately 10% of Mongolia's 10,000 armed forces serving overseas in peacekeeping operations at any one time. Past UN Peacekeeping missions to which Mongolia contributed personnel include the missions in Sierra Leone (UNAMSIL), Central African Republic and Chad (MINURCAT), Sudan (UNMIS), Ethiopia and Eritrea (UNMEE), and Georgia (UNOMIG). The April 2014 U.S.-Mongolia Joint Vision Statement pledged that the United States would "continue to encourage and support Mongolia's global peacekeeping deployments and its humanitarian assistance and disaster relief capabilities." The Mongolian and U.S. militaries jointly host Khaan Quest peacekeeping exercises in Mongolia each summer. Since 2009, the Department of Defense has also been supporting disaster preparedness exercises and humanitarian assistance projects aimed at improving Mongolia's disaster preparedness. <5. Foreign Policy> Mongolia's official formulation of its foreign policy, the Concept of Foreign Policy, updated and approved by Mongolia's parliament in 2011, presents the country's "foreign political strategy" as consisting of five elements. First, Mongolia seeks to build "balanced relations and wide-ranging good neighbor cooperation" with both its immediate neighbors, Russia and China. Russia is Mongolia's largest source of energy products. Elsewhere in the Concept document, Mongolia declares that, "While seeking to develop relations and cooperation with global and regional influential states, Mongolia will avoid becoming excessively reliant or dependent on any state." Second, Mongolia seeks strong relations with "such Western and Eastern states and coalitions as the United States, Japan, the European Union, India, Republic of Korea and Turkey." The document presents these relationships as being within the framework of Mongolia's "third neighbor" policy, under which Mongolia seeks to strengthen ties with democracies that do not share borders with Mongolia, but that support its independence and sovereignty and can help to balance the influence of China and Russia. In Asia, Mongolia seeks to "maintain friendly bilateral relations and cooperation" with Asian neighbors, participate in multilateral cooperation, and support "policies and activities aimed at strengthening strategic stability and security cooperation in East Asia, Northeast Asia, and Central Asia." Mongolia pledges to "cooperate actively with the United Nations" and "support the increase of the United Nations' role and responsibilities in world governance." Finally, Mongolia says it will work to develop relations with other developing states, including through cooperation within the "Group of 77" developing nations at the United Nations and within the Non-Aligned Movement. The original 1994 version of the Concept of Foreign Policy document included a focus on "reinforcing the positive legacy" of Mongolia's past relations with formerly socialist countries. That provision is missing from the 2011 version of the Concept, but Mongolia nonetheless continues to enjoy strong relations both with former socialist nations in Easter Europe and with the remaining socialist states: North Korea, Vietnam, Laos, and Cuba. <5.1. Participation in International Organizations> Mongolia is an active participant in a wide range of international organizations, where it has frequently been supportive of U.S. positions. According to a State Department tally, at the fall 2013 session of 68 th U.N. General Assembly, on votes that the United States considers important, Mongolia voted with the United States 83.3% of the time. By comparison, China voted with the United States on important votes 30% of the time, and Russia voted with the United States 20% of the time. Since its 1990 democratic revolution, Mongolia has joined such varied organizations and groupings as the Asian Development Bank (1991), the World Trade Organization (1997), the Association of Southeast Asian Nations (ASEAN) Regional Forum (1998), the International Criminal Court (2002), the Asia Europe Meeting (2009), and the Organization for Security and Co-Operation in Europe (2012). In 2005, it became an observer in the Shanghai Cooperation Organization, a group focused on Central Asia in which China and Russia are the dominant members, but it has so far chosen not to pursue full membership in the organization. Mongolia has sought U.S. support for its attempts to join several other organizations. High on Mongolia's wish list is membership in the 21-member Asia-Pacific Economic Cooperation (APEC) grouping. Mongolia sees APEC membership as a way to boost its economic integration with East Asia. The group currently has a moratorium on new members, however, and if or when APEC does consider adding new members, Mongolia will likely be one among many potential candidates. Other candidates are likely to include India, Brazil, Laos, Cambodia, and Burma, the latter three being members of the Association of Southeast Asian Nations (ASEAN) that are not yet members of APEC. <5.2. Participation in International Democracy Promotion Initiatives> Under President Elbegdorj, Mongolia has made its support for democracy a prominent part of its engagement with the international community. Examples include the following: From 2011 to 2013, Mongolia held the rotating chairmanship of the Community of Democracies , an inter-governmental coalition of democratic countries dedicated to "promoting democratic rules and strengthening democratic norms and institutions around the world." In May 2013, Mongolia began the process to join the Open Government Partnership (OGP) , a White House-backed, multilateral initiative that describes itself as having been, "launched in 2011 to provide an international platform for domestic reformers committed to making their governments more open, accountable, and responsive to citizens." Priorities listed in Mongolia's first national action plan under the partnership include increasing public transparency, improving public services, and enhancing justice and reducing corruption. In the summer of 2014, Mongolia took over the rotating chairmanship of the Freedom Online Coalition , which describes itself as "an inter-governmental coalition committed to advancing Internet freedom free expression, association, assembly, and privacy online worldwide." Mongolia is scheduled to host the 5 th Freedom Online Conference in its capital, Ulaanbaatar, in the spring of 2015. Coalition member states are "committed to working together diplomatically to voice concern over measures to restrict Internet freedom and support those individuals whose human rights online are curtailed." The coalition was founded in 2011 in The Hague, The Netherlands. Mongolia was one of 15 founding members. Japan is the only other Asian member. <5.3. Relations with the United States> Mongolia says it considers the United States to be the most important of Mongolia's "third neighbors," countries that do not share borders with Mongolia, but that Mongolia looks to for support of its independence and sovereignty and for balance against the influence of China and Russia. The United States established diplomatic relations with Mongolia in January 1987, after the rise of Mikhail Gorbachev in the Soviet Union produced a cautious warming in Soviet-United States relations. In that context, Moscow, which had previously objected to diplomatic relations between Mongolia and the United States, softened its position. The United States Embassy in Mongolia opened in September, 1988. Washington at that time saw the post as a useful vantage point for monitoring the Sino-Soviet relationship and the new policies of glasnost and perestroika emanating from Moscow. From the embassy, however, American diplomats found themselves afforded an up-close view of Mongolia's 1990 democratic revolution. Today, the United States and Mongolia have declared themselves to be in a "comprehensive partnership based on common values and shared strategic interests," language included in the U.S.-Mongolia Joint Statement issued during President Elbegdorj's visit to the United States in 2011. The Joint Statement pronounced the two countries united in their interest in "protecting and promoting freedom, democracy and human rights worldwide," in their commitment to "promoting a peaceful, stable and prosperous Asia-Pacific region," and in their desire to work together "to address their shared economic, security and development interests though multi-lateral institutions in the Asia-Pacific, the United Nations, and elsewhere. The statement highlighted U.S. gratitude to Mongolia for its participation in the international coalition in Afghanistan, and for its role in UN Peacekeeping Operations, and Mongolian gratitude to the United States for support provided under its 2008-2013 Millennium Challenge Corporation Compact. The two sides pledged "to strengthen trade, investment and people-to-people ties." <5.3.1. High-level Visits> A sign of the United States' strong support for Mongolia's young democracy is the fact that Mongolia has hosted visits by multiple senior U.S. executive branch officials and Congressional leaders since Mongolia's democratic transition in 1990. See Table 4 below for a list of executive branch visitors. House Speaker Dennis Hastert visited in 2005 and House Minority Leader John Boehner in 2009. Members of Congress have also visited Mongolia under the auspices of the House Democracy Partnership. <5.3.2. Major Bilateral Agreements> The Clinton Administration concluded a Bilateral Investment Treaty with Mongolia in 1994; the Senate ratified it in 1996 (Senate Treaty Doc. 104-10), and it went into effect on January 1, 1997. The 106 th Congress extended permanent normal trade relations to Mongolia in 1999, and the George W. Bush Administration concluded a Trade and Investment Framework Agreement with Mongolia in 2004. Two countries concluded a memorandum of understanding on cooperation in peaceful uses of nuclear energy in 2010, and signed an Agreement on Transparency in Matters Related to International Trade and Investment in 2013. (See " U.S.-Mongolia Transparency Agreement " above.) <5.3.3. U.S. Assistance to Mongolia> The United States provided $9.21 million in bilateral foreign assistance to Mongolia in FY2013, and an estimated $8.49 million in FY2014. For FY2015, the State Department has requested $9.4 million in bilateral foreign assistance, a $910,000 increase from the FY2014 estimate. (See Table 6 below.) Nearly two-thirds of the State Department's FY2015 request for Mongolia is in the form of development assistance. Reflecting high rates of economic growth in Mongolia in recent years, USAID is transitioning to a "legacy program" in Mongolia, or what the agency calls "an economic partnership based on shared commercial interests and investment," which will likely result in lower budget requests in future years. USAID and the Mongolian government are still negotiating the details of the legacy program, but the State Department says it will aim to "help build the capacity of the government to manage revenues generated from the extractive industries by strengthening the public administration system." Defense cooperation has been a major component of the U.S.-Mongolian relationship. Appropriations for Foreign Military Financing (FMF) for Mongolia dropped from $4.5 million in FY2010 to an estimated $2.4 million in FY2014. The Administration's FY2015 budget request further drops FMF for Mongolia to $2 million. FMF from the United States supports Mongolia's peacekeeping capacity, including communications equipment, "personal protective equipment," vehicles, and logistics equipment for Mongolian peacekeeping forces. The FY2015 budget request increases funding for International Military Education and Training (IMET) for Mongolia. IMET funds support professional military education and technical training, including English-language training for Mongolia's forces, and has supported the enrollment of Mongolian officers in such institutions as the U.S. National Defense University, the Army War College and command and staff colleges of the U.S. services. The State Department notes that IMET graduates led all ten Mongolian units that served in Iraq and have led all units deployed to Afghanistan. (For more information about U.S.-Mongolian military ties, see " Military Engagement " above.) <5.3.4. Millennium Challenge Corporation Compact> The United States' $284.9 million Millennium Challenge Corporation (MCC) Compact with Mongolia, signed in 2007, expired in September 2013. Included in the compact were five projects to build infrastructure, strengthen vocational education for the unemployed and marginally employed, address environmental challenges, strengthen property rights, and support public health. As noted in S. 2100 , the Clean Cookstoves and Fuels Support Act, introduced on March 10, 2014, the MCC Compact's included the United States' "largest stoves-related investment to date." The program, part of the compact's $47 million Energy and Environment component, subsidized Mongolian families' purchases of over 103,000 energy-efficient cookstoves in a bid to reduce urban air pollution, respiratory-related morbidity, and fuel consumption. At the end of 2012, Mongolia became an official partner in the U.S. State Department's Global Alliance for Clean Cookstoves. Mongolia sought but was not selected for a second MCC compact at the MCC's board's December 2013 meeting. Because the World Bank now categorizes Mongolia as a "Low Middle Income Country," it faces stiffer competition for more limited MCC funds. <5.3.5. Select U.S. Government Programs in Mongolia> The Peace Corps has 120 to 145 volunteers assigned to Mongolia each year. They are focused on building the capacity of Mongolian English teachers, social workers, and health care providers by teaching English and teaching methodology, as well as working in the areas of community-based health and community youth development. August 2, 2015, will mark the 25 th anniversary of the agreement that brought the Peace Corps to Mongolia. More than 1,050 Peace Corps volunteers have served in Mongolia since the arrival of the first volunteers on July 3, 1991. The Department of Commerce's International Trade Administration (ITA) organizes capacity building programs for Mongolian officials on trade issues and holds an annual United States-Mongolia Business Forum in the United States. The Department of the Treasury's Office of Technical Assistance (OTA) has a resident advisor stationed in Mongolia, assigned to Mongolia's Ministry of Finance. He has been advising the Ministry on "domestic and sovereign bond sales, cash forecasting and development of the sovereign wealth fund." <5.4. Relations with Russia> Mongolia was a satellite state of the Soviet Union from 1921 until 1990. The relationship entailed one-party rule under the communist Mongolian People's Revolutionary Party, a foreign policy dictated by the Soviet Union, state-owned industry, collectivized livestock herding, suppression of Mongolia's Tibetan Buddhist religion, and rounds of political purges. On the plus side of the ledger, Russia's backing helped Mongolia avoid Japanese occupation during World War II. It also contributed to building Mongolia's industrial base and transportation infrastructure and to the creation of a well-educated and cosmopolitan Mongolian elite. The Soviet Union partnered with Mongolia to build the country's main rail line, a single track running from the Russian border in the north to the Chinese border in the south. The two countries partnered, too, to develop the Erdenet copper and molybdenum mine, which opened in 1978 and was until recently Mongolia's top export earner. Mongolian students studied at top universities throughout the Soviet bloc. Mongolia continued to exist as a state in its own right throughout the period of its association with the Soviet Union. With Soviet support, it joined the United Nations in 1961 and the Council for Mutual Economic Assistance (Comecon), the economic organization for Soviet bloc countries in 1962. After Mongolia's 1990 democratic revolution and the collapse of the Soviet Union, Russia cut off aid, withdrew its last troops from Mongolia in 1992, and began to demand the repayment of aid the Soviet Union had given to Mongolia between 1946 and 1990. The debt remained a source of friction in bilateral relations until December 2010, when the two countries declared a final settlement of the dispute. In recent years, Mongolia has sought to bolster ties with Russia, in part to balance China's influence. The two countries declared themselves "strategic partners" in 2009. Mongolia remains dependent on Russia for energy products, particularly diesel fuel and gasoline, as well as for access to international markets. The Russian government continues to hold a 51% stake in Mongolia's railway, through the state-owned company JSC Russian Railways, and a 49% stake in the Erdenet copper mine. The two countries have discussed further cooperation in railway infrastructure. Russian firms are also involved in the bidding for the right to develop the Tavan Tolgoi coal deposit. Military ties are warming, too. In November 2008, Mongolia and Russia held their first joint military exercises in Mongolia since the departure of the last Russian troops from Mongolian soil in 1992. Russian President Vladimir Putin has visited Mongolia three times since 2000, most recently in September 2014. <5.5. Relations with China> Mongolia's foreign policy documents commit it to "balanced" relations with both Russia and China, but it is China that has become Mongolia's economic lifeline. China is by far Mongolia's largest trading partner, with nearly 90% of Mongolian exports destined for China. China is also Mongolia's largest source of foreign investment. The two countries formally embraced a "good neighborly partnership of mutual trust" in 2003, during Chinese President Hu Jintao's visit to Mongolia, and upgraded their relationship to a "strategic partnership" in 2011, during then-Mongolian Prime Minister Sukhbaatar Batbold's visit to China. At the military-to-military level, the two countries have engaged in bilateral peacekeeping exercises. The "Peacekeeping Mission 2009," held in China in the summer of 2009, was the first joint peacekeeping exercise China had held with another country, as well as the first joint military training between the two countries. During an August 2014 visit to Mongolia, current Chinese President Xi Jinping and Mongolian President Elbegdorj signed a raft of infrastructure, energy, and financial cooperation agreements. They included a memorandum of understanding for a $30 billion coal gas project that would give China "another important gas supply channel in addition to pipeline gas from Russia," according to China's official China Daily newspaper. Xi agreed to let Mongolia use six northern Chinese ports for its imports and exports, and pledged to support Mongolia's bid to join the Asia Pacific Economic Coooperation (APEC) grouping. The two countries also said they would launch bilateral free trade talks. Yet each side remains wary of the other. Mongolia worries about economic domination by China. The 2012 Strategic Entities Foreign Investment Law of Mongolia (SEFIL) is reported to have been enacted, at least in part, to block the acquisition of a Mongolian coal mining firm by a state-owned Chinese aluminum firm, Chalco. The 2013Mongolian Law on Investment that replaced it maintained restrictions on state-owned enterprises, a category that includes many of the biggest Chinese firms seeking to invest in Mongolia. Being sparsely populated, Mongolia also worries about being overrun by workers and immigrants from China, including from China's Inner Mongolia Autonomous Region, which has a larger ethnic Mongolian population (4.2 million) than the country of Mongolia itself (population 2.8 million). Culturally, Mongolia has been rankled by China's efforts to register elements of traditional Mongolian culture as Chinese with the United Nations Educational, Scientific, and Cultural Organization (UNESCO). For its part, China has lingering concerns about the potential for a "pan-Mongol" movement, linking Mongolians on both sides of the Chinese-Mongolian border, to undermine stability in Inner Mongolia. Beijing is also deeply uncomfortable with Mongolia's close ties to Tibet's exiled spiritual leader, the Dalai Lama, whom China blames for resistance to Chinese control in the Tibet Autonomous Region and other Tibetan areas of China. <5.6. Ties to Tibetan Buddhism and the Dalai Lama> Mongolia and Tibet have a long shared history. In 1578, a Mongolian ruler, Altan Khan, originated the title of the Dalai Lama, the title held by the spiritual leader of Tibet. Altan Khan conferred the title "Dalai" means "Oceanic" in Mongolian on a Tibetan Buddhist leader who was the third incarnation of his Gelugpa sect's reincarnation line. The man became the 3 rd Dalai Lama and his two predecessors retroactively became the 1 st and 2 nd Dalai Lamas. After the 3 rd Dalai Lama's death, a great-grandson of Altan Khan was identified as his reincarnation, becoming the 4 th Dalai Lama and the only Mongolian Dalai Lama in the history of the institution. For centuries, Tibetan Buddhism, and specifically the Dalai Lama's Gelugpa order of Tibetan Buddhism, was the predominant religion in Mongolia. Close religious ties were a backdrop to Mongolia and Tibet's decision in 1913 to sign a treaty declaring themselves free from Manchu Chinese rule and recognizing each other as independent states. Despite decades of religious suppression during the Soviet era, Tibetan Buddhism has revived in Mongolia in the democratic era. According to the Pew Forum on Religion and Public Life, 55.1% of Mongolia's population is Buddhist, making Mongolia one of seven nations in the world with Buddhist majorities. Mongolian monks train in the monasteries of the exile Tibetan movement in India, and the current incarnation of the Dalai Lama, the 14 th , has made six ostensibly private visits to Mongolia since the 1990 democratic revolution, in 1991, 1994, 1995, 2002, and 2006, and 2011, despite objections from China. (The 14 th Dalai Lama first visited Mongolia in 1979.) In November 2002, in a show of displeasure with Mongolia for hosting the Dalai Lama, China closed its side of the Chinese-Mongolian rail border for 36 hours, highlighting Mongolia's geographic dependence on China's goodwill. Mongolians are reportedly deeply concerned about signals that China intends to control the reincarnation process for the current Dalai Lama, with many Mongolians rejecting the idea that Beijing should be permitted to select their spiritual leader. <5.7. Relations with Japan> Japan is one of Mongolia's leading "third neighbors," countries that do not share geographic borders with Mongolia but to which Mongolia looks for diplomatic and other forms of support. Mongolia and Japan established diplomatic relations in 1972, but the relationship remained largely inactive until 1990. Shortly after the democratic revolution, the two countries exchanged prime ministerial visits and Japan organized a series of conferences for aid donors to Mongolia. Japan remains Mongolia's largest donor, having provided Mongolia with cumulative bilateral assistance of $2.13 billion (216,578 million yen) as of March 2013. Cultural relations have grown particularly strong in recent years thanks in part to the success of Mongolian wrestlers in the Japanese sport of sumo. As of July 2014, the three highest-ranked sumo wrestlers in Japan were all born in Mongolia. Mongolia has pledged support for Japan's campaign for a permanent seat on the U.N. Security Council, a campaign that China opposes. In July 2014, Mongolia and Japan announced that they had reached agreement in principle on the details of a free-trade agreement, which has the potential to transform their economic relationship. Within 10 years of their Economic Partnership Agreement's entry into force, tariffs are slated to be eliminated on 96% of Japan's exports to Mongolia. Japanese investors would also gain potentially important guarantees, including national treatment when they enter Mongolian resource and energy markets. The two sides have said they hope to sign the agreement before the end of 2014. <5.8. Relations with the Koreas> Mongolians have strong historical ties with the Korean peninsula, with many Koreans believing their ancestors came from Mongolia. In 1948, when Mongolia was a satellite of the Soviet Union, it was just the second country to recognize the new Democratic People's Republic of Korea (North Korea), after the Soviet Union itself. In 1990, one of Mongolia's first foreign policy acts after the democratic revolution was to establish diplomatic relations with the Republic of Korea (South Korea). Mongolia, like China and Russia, therefore has official relations with both Koreas. Mongolia sees South Korea as a model for free-market economic development and a source of technology and capital. It is also reportedly home to as many as one fifth of Mongolians living abroad, with 32,206 Mongolians living long-term in South Korea as of 2008. South Korea has become a major Mongolian trading partner, although two-way trade figures are dwarfed by those for Mongolia's trade with China and Russia. Mongolia deems South Korea to be one of its "third neighbors," countries that do not share borders with Mongolia but share close ties with it. With encouragement from Western governments, starting in 1996, a succession of Mongolian governments has reached out to North Korea, seeking to reduce the country's isolation and encourage it to engage with multilateral efforts to address security issues on the Korean peninsula. Mongolia is also keenly interested in securing access to North Korea's Rajin-Sonbong port, which would reduce Mongolia's reliance on the Chinese port of Tianjin, although Mongolian goods would still need to travel through Chinese or Russian territory to reach Rajin-Sonbong. North Korea's response to Mongolia's overtures has been mixed. High-level contacts, which had dropped off after Mongolia's 1990 democratic revolution, resumed in 1998. A year later, however, Mongolia expressed support for South Korea's "Sunshine" policy, leading an angry North Korea to shutter its embassy in the Mongolian capital, Ulaanbaatar. When the embassy re-opened in 2004, a North Korean official suggested establishing joint farm operations in several Mongolian provinces. Several thousand North Korean agricultural experts and workers are now estimated to be employed on farms in Mongolia. Mongolian officials hope that North Korean workers exposed to life in democratic Mongolia might help change mindsets back in North Korea after their return, although some also worry that North Korean workers' earnings may be lining the pockets of the North Korean elite. Mongolia's role as a transit stop for North Korean refugees arriving from China was for a period a sensitive issue in Mongolian-North Korean relations. According to Mongolia's former ambassador to the United States, between 1999 and 2003, more than 600 North Koreans who entered Mongolia from China were re-settled in South Korea. Since then, however, China has reportedly tightened security along its border, cutting off the flow of refugees. The Office of the United Nations High Commissioner for Refugees reported that as of January 2014, Mongolia had residing within its borders just nine refugees, four asylum seekers, and 16 stateless persons, for a total population of concern of 29. Mongolian President Elbegdorj visited Pyongyang in October 2013, becoming the first head of state to visit since Kim Jong Un succeeded his father as North Korea's top leader in December 2011. Elbegdorj gave a speech at Kim Il Sung University on his last day in the country entitled, "It is the Human Desire to Live Free That Is an Eternal Power." The speech including the memorable line, "No tyranny lasts forever." In a note on his website, Elbegdorj stated that the North Korean side proposed the lecture topic, although the North Korean government advised him to avoid use of the words "democracy" and "market economy." Elbegdorj did not meet Kim Jong Un on his trip; North Korea instead arranged for him to meet with its number-two leader, Kim Yong Nam. In March 2014, Mongolia hosted a reunion between the North Korea-based daughter of a Japanese woman abducted by North Korea in 1977 and her Japanese grandparents. <5.9. Nuclear-Weapons-Free Status> Mongolia unilaterally declared itself a nuclear-weapon-free zone (NWFZ) in 1992, soon after the 1990 democratic revolution, and has sought to establish an international legal basis for the status ever since. The Law of Mongolia on Its Nuclear-Weapon-Free Status, which was adopted in 1992 and entered into force in 2000, makes it illegal to develop, manufacture, possess, control, station, transport, test, or use nuclear weapons on Mongolian territory. It also makes it illegal to "dump or dispose nuclear weapons grade radioactive material or nuclear waste" on Mongolian territory. Mongolia's declaration was significant in that it signaled a rejection of nuclear weapons by a country with perhaps the world's second largest inferred reserves of uranium, an essential fuel for the nuclear power industry that can also be used to make nuclear weapons. Mongolia's Ambassador to the International Atomic Energy Agency (IAEA), Jargalsaikhan Enkhsaikhan, explained in a 2010 interview that a major impetus for the declaration was Mongolia's experiences during the Sino-Soviet split of the 1960s, when the threat of nuclear war between the two giants loomed large and Mongolia, as a Soviet satellite state with Soviet troops and missiles on its territory, found itself uncomfortably on the Russian front line. The Permanent Five (P-5) members of the U.N. Security Council Britain, China, France, Russia, and the United States welcomed Mongolia's NWFZ declaration, but until 2012 stopped short of extending it formal recognition. In his 2010 interview, Ambassador Enkhsaikhan attributed the P-5's reluctance to a concern that recognizing Mongolia's single-state NWFZ, "would reduce or undermine the incentive for establishing traditional (i.e., group) NWFZs and set a precedent for others to follow suit." Mongolia had no choice but to declare a single-state NWFZ, however, because its only contiguous neighbors are both nuclear powers. In September 2012, the P-5 countries signed parallel political declarations which, according to the State Department, "affirmed their intent to respect Mongolia's nuclear-weapon-free status and not to contribute to any act that would violate it." The P-5 have also supported seven UN General Assembly resolutions since 1992 inviting member states to support Mongolia's nuclear-weapon-free status. Appendix A. Select Legislation Related to Mongolia Appendix B. Results of Mongolian Elections 1992-Present

Mongolia is a sparsely populated young democracy in a remote part of Asia, sandwiched between two powerful large neighbors, China and Russia. It made its transition to democracy and free market reforms peacefully in 1990, after nearly 70 years as a Soviet satellite state. A quarter of a century later, the predominantly Tibetan Buddhist nation remains the only formerly Communist Asian nation to have embraced democracy. Congress has shown a strong interest in Mongolia since 1990, funding assistance programs, approving the transfer of excess defense articles, ratifying a bilateral investment treaty, passing legislation to extend permanent normal trade relations, and passing seven resolutions commending Mongolia's progress and supporting strong U.S.-Mongolia relations. Congressional interest is Mongolia has focused on the country's story of democratic development. Since passing a democratic constitution in 1992, Mongolia has held six direct presidential elections and six direct parliamentary elections. The State Department considers Mongolia's most recent elections to have been generally "free and fair" and said that in 2013, Mongolia "generally respected" freedoms of speech, press, assembly, and association. It raised concerns, however, about corruption and lack of transparency in government affairs. On the economic front, Mongolia's mineral wealth, including significant reserves of coal, copper, gold, and uranium, offers investment opportunities for American companies. Foreign investors and the U.S. government have criticized Mongolia's unpredictable investment climate, however. In the fall of 2013, Mongolia passed a new investment law and, after years of negotiations, signed a transparency agreement with the United States. Both developments served to reassure investors, although the Mongolian parliament has yet to ratify the transparency agreement. Mongolia was among the first nations to join the coalition for the Iraq War and its troops have been deployed in Afghanistan since 2003. It is also an active contributor of troops to United Nations Peacekeeping Operations and, with the United States, hosts an annual multinational peacekeeping exercise in Mongolia known as Khaan Quest. Mongolia is an active participant in many international organizations, in which it often supports U.S. positions. It has also been an active member of international groupings dedicated to promoting democracy, including the Community of Democracies, for which it held the rotating chairmanship from 2011 to 2013. In the summer of 2014, Mongolia took over the rotating chairmanship of the Freedom Online Coalition, which describes itself as "an inter-governmental coalition committed to advancing Internet freedom—free expression, association, assembly, and privacy online—worldwide." Mongolia is also in the process of joining the Open Government Partnership, a White House-backed multilateral initiative. Mongolia seeks to maintain "balanced relations" with its two immediate neighbors, China and Russia. China has emerged as Mongolia's largest trading partner and foreign investor. Russia is Mongolia's largest source of energy products. Mongolia has diplomatic relations with both North and South Korea and has sought to play a role in reducing tensions on the Korean Peninsula. To ensure its continued independence and sovereignty, Mongolia has also prioritized the development of relations with so-called "third neighbors," countries that do not border Mongolia, but have close ties to Mongolia. That list includes the United States. In 1992, Mongolia declared itself a single-state nuclear-weapons-free zone; in 2012, the five permanent members of the UN Security Council each pledged to respect the designation.

<1. Introduction> The 2010 Review Conference for the Nuclear Non-Proliferation Treaty (NPT) will take place in New York from May 3-28, 2010. The NPT is considered to be the cornerstone of the international nuclear nonproliferation regime. Many analysts and observers believe the regime is under great stress at this time, and that the 2010 review conference will, therefore, hold major implications for future efforts to stem the proliferation of nuclear weapons. Some review conferences, such as those in 1995 and 2000, have been viewed as successes; others, like the one on 2005, have been seen as failures. A number of factors affect these assessments, but many analysts agree that the treaty may suffer irrevocable harm if the parties do not agree on a range of measures that will strengthen the treaty and address growing concerns about nuclear proliferation. The Obama Administration has emphasized in strategy documents that it views the NPT as the "centerpiece" of the nonproliferation regime and has pledged to strengthen the treaty. The Administration sees a linkage between arms control and disarmament policies and progress in improving the nuclear nonproliferation measures. The 2010 Nuclear Posture Review, for example, says that progress on arms control is "a means of strengthening our ability to mobilize broad international support for the measures needed to reinforce the non-proliferation regime and secure materials worldwide." The Nuclear Posture Review also says that the conditions for nuclear disarmament will not be possible without stronger proliferation controls. Over the years, NPT states without nuclear weapons, particularly from developing countries, have cited lack of progress on disarmament as the reason they do not support further tightening of nonproliferation rules. The ability of the Administration to garner international support for its proposals to strengthen the nonproliferation regime may be tested at the 2010 NPT Review Conference. This report provides background information and analysis for Members of Congress and staff who are interested in following the discussions and debate at the Review Conference. The report includes a short summary of the provisions and goals of the NPT and a brief history of past review conferences. It also discusses the key issues that the participants are likely to address during the 2010 conference. <1.1. Overview of the NPT> The nuclear Non-Proliferation Treaty (NPT), which entered into force in 1970 and was extended indefinitely in 1995, is the centerpiece of the nuclear nonproliferation regime. The NPT is complemented by International Atomic Energy Agency (IAEA) safeguards, national export control laws, coordinated export control policies under the Nuclear Suppliers Group (NSG), UN Security Council resolutions, and ad hoc initiatives. The NPT recognizes five nations (the United States, Russia, France, Britain, and China) as nuclear-weapon states, and 189 countries are parties to the NPT. India, Israel, and Pakistan have never signed the treaty and possess nuclear weapons. North Korea ratified the NPT but announced its withdrawal in 2003. Several countries, including Argentina, Brazil, and South Africa, suspended their nuclear weapons programs and joined the NPT in the 1990s. Others Ukraine, Belarus, and Kazakhstan gave up former Soviet nuclear weapons on their territories and joined the NPT as non-nuclear-weapon states in the 1990s. Iraq and Libya are now in full compliance with the NPT after their respective nuclear weapons programs were dismantled. Iran was found in noncompliance with its IAEA safeguards obligations in 2005, and the matter was referred to the UN Security Council. The IAEA has reported as recently as February 2010 that Syria has not fully cooperated with an investigation into its nuclear activities. There are three key dimensions, or "pillars," of the NPT: nuclear nonproliferation, nuclear disarmament, and the peaceful use of nuclear energy. The nuclear-weapon states and non-nuclear- weapon states have different obligations under the NPT, often referred to as the "NPT bargain": In exchange for non-nuclear-weapon states (NNWS) pledging not to acquire nuclear weapons, they are guaranteed "the fullest possible exchange of equipment, materials and scientific and technological information for the peaceful uses of nuclear energy." (NPT, Article IV-2) The nuclear-weapon states agree to "pursue negotiations in good faith on effective measures relating to cessation of the nuclear arms race at an early date and to nuclear disarmament" (NPT, Article VI), and agree not to assist the development of nuclear weapons by any non-nuclear-weapon state. Non-nuclear-weapon NPT members are required to declare and submit all nuclear materials in their possession to regular IAEA inspections (safeguards) to ensure that nuclear materials and technologies are not diverted from civilian to military purposes. The IAEA also has a role in implementing Article IV of the NPT by providing technical assistance for peaceful applications of nuclear technology for energy, medical, and agricultural applications. Events in the past decade have stressed the nonproliferation regime. Revelations about the A.Q. Khan proliferation network, advancements in India and Pakistan's nuclear arsenals, North Korea's nuclear tests, Iran's defiance of UN Security Council resolutions regarding its nuclear program and noncompliance with IAEA safeguards, and questions about the Syrian nuclear program have all contributed to uncertainty over the future of the regime. Moreover, there has been increased interest in nuclear power and an attendant increase in demands on the IAEA's safeguards resources. At the same time, countries have been working together to interdict WMD transfers, improve nuclear security, and live up to requirements to control the transfer of technology under UN Security Council resolution 1540. Furthermore, the United States and Russia continue formal efforts to reduce their nuclear arsenals. Many see the 2010 NPT Review Conference as an important test of the viability of the treaty and how it will evolve to meet new challenges. The United States was instrumental in the negotiation of the NPT in the late 1960s and has played a leadership role in development of the nonproliferation regime ever since. As noted, the Obama Administration has prioritized nuclear nonproliferation in its foreign policy. For example, in September 2009, President Obama chaired a UN Security Council Summit that focused on nuclear nonproliferation. The Council unanimously adopted Security Council Resolution 1887, which outlined ways to strengthen the NPT and related nonproliferation measures. The United States is also the largest contributor to the IAEA . The Congressional Commission on the Strategic Posture of the United States concluded that U.S. leadership in nuclear nonproliferation, and in particular at the 2010 NPT Review Conference, is required to advance U.S. nonproliferation interests. <1.2. U.S. Policy Objectives> U.S. officials have emphasized that the primary objective for the Review Conference is to "strengthen all three pillars" of the NPT. Susan Burk, the U.S. ambassador to the upcoming 2010 NPT review conference, stated during a January 2010 interview that U.S. priorities for the Review Conference include addressing cases of noncompliance, preventing abuse of the NPT's withdrawal provisions, garnering additional resources for the IAEA and broader adherence to the Additional Protocol, and improving IAEA safeguards. Regarding the importance of a final conference document, she said that "it would be very positive if we could agree on a statement, a forward-looking statement ... [b]ut success can be defined in other ways as well." Obama Administration officials have emphasized that they view strengthening the nonproliferation regime as a responsibility for non-nuclear-weapon states as well as nuclear-weapon states. This would include treating cases of noncompliance "honestly and seriously." Ambassador Burk has said that a key U.S. objective is for the 2010 Review Conference discussions to give "valuable momentum" to efforts at the IAEA, the United Nations and the Conference on Disarmament to strengthen the nonproliferation regime. Some Members of Congress have expressed particular support for strengthened compliance measures as an outcome of the conference, and have stated that they view a strong statement on Iranian non-compliance with NPT requirements as a key objective of the review conference. U.S. officials have maintained that Iran's agreement would be necessary for a consensus document to be adopted. Although a consensus document is not required, past review conferences have traditionally sought one. Due to potential Iranian objections to U.S. proposals, some observers are skeptical that the conference will yield any practical results (see also " Possible Outcomes and Potential Impact "). <2. Past NPT Review Conferences> NPT Member States are to "review the operation of the Treaty" every five years, as required by Article VIII of the Treaty. NPT states parties have met to review implementation of the treaty every five years since 1970, so this will be the eighth such meeting. NPT Preparatory Committee (PrepCom) meetings are held annually in the three years prior to the Review Conference. States have attempted to negotiate a consensus "final declaration" at each review conference. Consensus documents were adopted in 1975, 1985, 1995, and 2000. In 1980, 1990, and 2005 no document was agreed upon mainly due to disagreements between the non-aligned movement states and nuclear-weapon states over progress on nuclear disarmament (1980, 1990, 2005), access to peaceful nuclear technology (1980) or cases of non-compliance and the Middle East resolution (2005). However, adoption of a final document is not required, nor is adopting it by consensus. The treaty does not specify what the review conferences should accomplish, other than the 1995 conference, which was to decide on extension of the treaty. As part of the compromise package that approved indefinite extension of the NPT in 1995 and again in the 2000 Final Document, states agreed to a strengthened review process. The 1995 decision created PrepComs where states were to make recommendations to the review conferences and decide on procedural issues. The Review Conferences are traditionally structured by issue areas: Main Committee I discusses nonproliferation, disarmament and negative security assurances; Main Committee II examines nonproliferation and safeguards compliance as well as nuclear-weapon-free zones; and Main Committee III looks at access to the peaceful use of nuclear energy, universality of the treaty (meaning all countries joining the NPT) and other issues. The 1995 decision also allowed for subsidiary bodies within each Main Committee for a focused look at particular issues. <2.1. The 1995 NPT Review and Extension Conference> In 1995, treaty members approved a decision to continue the treaty in force indefinitely, the key U.S. policy goal. As part of an "extension package," and to secure non-nuclear-weapon state support, NPT states adopted three decisions that strengthened the review process to oversee compliance with the treaty, outlined specific nonproliferation and disarmament steps, and called for universality of the treaty. Key to securing Middle Eastern NPT members' support for indefinite extension was the adoption of a Resolution that supported a nuclear-weapon-free zone in the Middle East (see Appendix B ). The 1995 decisions and resolution were crucial in gaining the support of some non-nuclear-weapon states resistant to extending the treaty indefinitely, such as Indonesia, Mexico, and Egypt. Some of these states felt that the treaty should be extended for another 25 years, which in their view would give greater leverage to non-nuclear-weapon states to press the nuclear-weapon states on disarmament steps. Because indefinite extension was seen as being granted in exchange for the other decisions and resolution, review conferences since 1995 have also examined progress on the nonproliferation and disarmament steps, universality of the treaty (membership by all states), and the Resolution on the Middle East. <2.2. The 2000 Review Conference Final Document> At the 2000 NPT Review Conference, two main blocs of states, the five nuclear-weapon states and the geographically diverse New Agenda Coalition, negotiated "13 Practical Steps" that were part of a consensus final document. These steps (see Appendix C ) entailed specific commitments to reduce the role and number of nuclear weapons. Such specificity was considered necessary because of the NPT's vague language regarding disarmament. Assessment of implementation of the 1995 Middle East Resolution was a point of strong contention at the 2000 Review Conference, but states reached agreement on language before the meeting concluded. Addressing treaty compliance questions in Iraq and North Korea was also controversial for the conference but eventually agreement was reached. The 2000 Review Conference also condemned the 1998 nuclear tests by India and Pakistan. <2.3. Political Dynamics of the 2005 Review Conference> The 2005 Review Conference did not reach consensus, and that conference concluded without a final document. States could not agree on how to address the issue of Iranian noncompliance, because Iran's approval was also needed for consensus. Egypt also held to its position on Middle East Nuclear-Weapon-Free zone issues (see Appendix B below). Another major point of contention in 2005 for Egypt and other states was the Bush Administration's position that it was not obligated to fulfill the "13 Steps" agreed to in 2000. Several Bush Administration policies (such as opposition to Comprehensive Test-Ban Treaty ratification) directly contradicted those steps. Non-nuclear-weapon NPT states resisted agreeing to strengthened nonproliferation measures in the absence of progress on disarmament steps. The skepticism of non-nuclear-weapon states toward the weapon states' commitment to the treaty continues today, although the Obama Administration made important progress on arms reductions and updating U.S. nuclear weapons policy in advance of the Review Conference. <3. Issues for the 2010 Review Conference> The 2010 NPT Review Conference will be held from May 3 to 28 at the United Nations in New York. Ambassador Libran Cabactulan of the Philippines will serve as President of the conference. The NPT does not have its own Secretariat, but UN staff support the meeting. The 2009 PrepCom agreed to an agenda for the review conference based on the Main Committee structure of past review conferences. It also discussed, but did not reach final agreement on, establishing subsidiary bodies on three issues: nuclear disarmament and security assurances; regional issues, including with respect to the Middle East and the implementation of the 1995 resolution on the Middle East; and "other provisions of the Treaty," including Article X which covers treaty withdrawal. The key controversies and challenges for U.S. policy makers during the review conference are discussed below in categories similar to the Main Committee structure of the review conference: disarmament, nonproliferation, and the peaceful use of nuclear energy, with separate sections devoted to non-NPT parties and the issue of a zone free of weapons of mass destruction in the Middle East. It is worth noting that the ability of the United States to obtain some non-nuclear-weapon states' cooperation on some U.S.-supported initiatives could be complicated by the Nuclear Suppliers Group's (NSG's) 2008 decision regarding India. That decision exempted New Delhi from the portions of the NSG guidelines requiring New Delhi to have full-scope IAEA safeguards. Since India obtained this benefit without joining the NPT or giving up its nuclear weapons, some countries may question the fairness of additional nonproliferation demands. <3.1. Disarmament> Article VI of the nuclear Non-Proliferation Treaty states, "Each of the Parties to the treaty undertakes to pursue negotiations in good faith on effective measures relating to cessation of the nuclear arms race at an early date and to nuclear disarmament, and on a treaty on general and complete disarmament under strict and effective international control." This article, in outlining the disarmament obligations of the parties to the treaty, serves as one of the three "pillars" of the NPT that the parties will seek to strengthen during the 2010 NPT Review Conference. Over the years, the parties to the NPT have not always agreed on the actions required by Article VI or on how to measure progress. For example, NPT members agreed in past consensus review conference documents that the entry into force of the Comprehensive Nuclear-Test-Ban Treaty (CTBT) is an essential step in meeting Article VI obligations (see Appendix C ). The United States, however, has not ratified the CTBT, and the Bush Administration indicated that it had no plans to do so. Instead, during the 2005 NPT Review Conference, the United States indicated it was in compliance with its Article VI obligations by pointing to the history of bilateral arms control treaties between the United States and Soviet Union and recent unilateral steps that the United States had taken to reduce its nonstrategic nuclear weapons and nuclear stockpile. It indicated that these steps represented "effective measures relating to the cessation of the arms race." Although members of the NPT welcomed these steps, some questioned whether these measures were enough, and whether the nuclear-weapon states ought to take stronger steps on the path to disarmament. This section describes several possible steps and the way the issue might be addressed in the 2010 Review Conference. <3.1.1. The New U.S.-Russian START Agreement> Most nations, including the United States, agree that reductions in the number of deployed and stored nuclear weapons are a clear indicator of compliance with Article VI. During the PrepComs leading up to the 2010 Review Conference, many of the participants called on the United States and Russia to negotiate a treaty to replace the 1991 START Treaty, which expired at the end of 2009, and to pursue reductions of deployed and nondeployed nuclear weapons. The United States and Russia signed this treaty on April 8, 2010. In his statement after signing the treaty, President Obama highlighted the relationship between this event and U.S. obligations under Article VI. He said that "we are keeping our commitments under the Nuclear Non-Proliferation Treaty, which must be the foundation for global non-proliferation." President Obama went on to say that "this treaty will set the stage for further cuts. And going forward, we hope to pursue discussions with Russia on reducing both our strategic and tactical weapons, including non-deployed weapons." Moreover, President Obama has pledged his support to the eventual elimination of all nuclear weapons. <3.1.2. The U.S. Nuclear Posture Review, Negative Security Assurances, and the NPT> Some parties to the NPT have complained that the United States has undermined the nonproliferation goals of the treaty and interfered with the disarmament objectives with its nuclear policy and nuclear weapons programs. The Bush Administration concluded a Nuclear Posture Review (NPR) in early 2002. Following the review, the Bush Administration proposed several new programs that might have led to the development of new nuclear weapons. The Bush Administration also sought to invest heavily in the U.S. nuclear weapons infrastructure. Moreover, some observers argued that the Bush Administration had increased U.S. reliance on nuclear weapons by threatening to use them in retaliation for chemical or biological weapons attacks. The Obama Administration sought to address these concerns in its recently released Nuclear Posture Review (NPR). It highlighted that nuclear proliferation, along with the threat of nuclear terrorism, were now primary security concerns for the United States and that Washington would adjust its nuclear posture with these concerns in mind. Specifically, the Administration pledged that, while the United States would maintain a safe, secure, and effective nuclear arsenal for as long as other nations maintained nuclear weapons, it would not design or develop any new nuclear weapons nor assign any new missions or capabilities to existing U.S. nuclear weapons. Moreover, the Obama Administration reaffirmed the U.S. negative security assurance, and linked it closely to efforts to strengthen the NPT when it stated, in the Nuclear Posture Review, that "the United States will not use or threaten to use nuclear weapons against non-nuclear weapons states that are party to the NPT and in compliance with their nuclear non-proliferation obligations." The Administration said that "this revised assurance is intended to underscore the security benefits of adhering to and fully complying with the NPT and persuade non-nuclear-weapon states party to the Treaty to work with the United States and other interested parties to adopt effective measures to strengthen the non-proliferation regime." The Administration did indicate that the United States reserved the right "to make any adjustment in the assurance that may be warranted by the evolution and proliferation of the biological weapons threat and U.S. capacities to counter that threat." But, for the most part, this new negative security assurance did narrow the range of circumstances under which the United States would consider using nuclear weapons and, therefore, reduced the role of nuclear weapons in U.S. national security strategy. <3.1.3. The Comprehensive Nuclear-Test-Ban Treaty and the NPT23> As noted earlier in this report, two of the three pillars of the NPT regime are that the non-nuclear-weapon states will forgo nuclear weapons and the nuclear-weapon states will move toward nuclear disarmament. A ban on future nuclear testing is seen as fulfilling both disarmament and nonproliferation goals by curbing the qualitative development of nuclear weapons in weapons states and preventing new states from testing a nuclear weapon. NPT states have said in consensus documents at past review conferences that the Comprehensive Nuclear-Test-Ban Treaty (CTBT) is considered part of implementing Article VI commitments under the treaty. One element of the 1995 Review Conference documents was a call for completing negotiations on a CTBT no later than 1996. The latter decision was instrumental in securing indefinite extension. The 2000 NPT Review Conference agreed to 13 "practical steps for the systematic and progressive efforts to implement Article VI" of the NPT, the first of which was the "early entry into force" of the CTBT. To date, three of the five NPT nuclear-weapon states (Britain, France, and Russia) have ratified the CTBT, while China and the United States have not. The Senate voted not to give its advice and consent to ratification of the CTBT in 1999, and U.S. policymakers and analysts continue to debate the merits of ratifying it. The Obama Administration is in favor of CTBT ratification, a change from U.S. policy toward the treaty under President George W. Bush. The Obama Administration's Nuclear Posture Review (NPR), released in April 2010, says that United States "will not conduct nuclear testing and will pursue ratification and entry into force of the CTBT." The NPR also says U.S. ratification would encourage NPT states, including China, and the non-NPT states to ratify the treaty. Much of the international community continues to view U.S. ratification of the CTBT as the touchstone of compliance with Article VI. For example, a report by the international WMD Commission in 2006 said that U.S. ratification of the treaty "would have more positive ramifications for arms control and disarmament than any other single measure." The 2010 International Commission on Nuclear Non-proliferation and Disarmament Report says that U.S. CTBT ratification would be the "circuit-breaker" in gaining ratification by other hold-out states. Some analysts argue that U.S. CTBT ratification would convince other countries to support U.S. initiatives to strengthen the nonproliferation regime and put pressure on those outside the regime. As discussed elsewhere in this report, some non-nuclear-weapon states are resistant to supporting proposals for strengthened nuclear proliferation measures when the nuclear-weapon states have not fulfilled past commitments on nuclear disarmament. On the other hand, it is not clear what specific steps on nuclear nonproliferation other nations would support only if the United States ratifies the CTBT, or what actions adverse to U.S. interests they might take if this nation does not ratify. Additionally, the United States has taken many steps over the years toward cessation of the nuclear arms race and nuclear disarmament, as outlined above. <3.1.4. The Fissile Material Cut-Off Negotiations and the NPT> The United States first proposed more than 50 years ago that the international community negotiate a ban on the production of fissile material (plutonium and enriched uranium) that could be used in nuclear weapons. Negotiators of the NPT realized that fissile material usable for nuclear weapons could still be produced under the guise of peaceful nuclear activities within the treaty. Consequently, a fissile material production ban, or FMCT, has remained on the long-term negotiating agenda at the Conference on Disarmament (CD) in Geneva and has been endorsed by past NPT review conferences. The Bush Administration supported a ban on the production of fissile material for weapons purposes but argued that such a ban is inherently unverifiable. In contrast, the Obama Administration supports the negotiation of an FMCT with verification measures. NPT Review Conferences in 1995 and 2000 have called for the immediate start of negotiations on a "non-discriminatory and universally applicable" convention. The start of FMCT negotiations are currently being blocked by Pakistan's opposition. The NPT review conference is likely to repeat its past calls to start negotiations on a verifiable treaty as soon as possible. Like the CTBT, the FMCT is viewed by many as having disarmament and nonproliferation benefits. The five NPT nuclear-weapon states have already ceased fissile material production for weapons. Such a treaty has the potential to include the non-NPT nuclear-weapon states, which are subject to very few if any restrictions or monitoring, in a major multilateral disarmament measure. One key issue still under debate is whether or not such a treaty would seek to dispose of existing stocks of fissile material. The United States has strongly objected to such an approach, but it is supported by some non-nuclear-weapon states. <3.2. Nonproliferation and Compliance> <3.2.1. Safeguards> Every non-nuclear-weapon states party to the NPT is required to conclude a comprehensive safeguards agreement with the International Atomic Energy Agency (IAEA). Such agreements are intended to verify a state's compliance with its undertaking to accept safeguards on all nuclear material in all its peaceful nuclear activities and to verify that such material is not diverted to nuclear weapons or other nuclear explosive devices. Comprehensive safeguards are designed to enable the IAEA to detect the diversion of nuclear material from peaceful purposes to nuclear weapons uses, as well as to detect undeclared nuclear activities and material. Safeguards include ongoing agency inspections and monitoring of declared nuclear facilities. The agency's inspections and monitoring authority in a particular country are limited to facilities that have been declared by the government. Additional Protocols to IAEA comprehensive safeguards agreements increase the agency's ability to investigate clandestine nuclear facilities and activities by increasing the IAEA's authority to inspect certain nuclear-related facilities and demand information from member states. <3.2.2. Noncompliance> Two NPT articles are particularly relevant to the question of compliance with safeguards agreements. Article III requires NPT non-nuclear-weapon states parties to adhere to their safeguards agreements. Article II states that non-nuclear-weapon states parties shall not "manufacture or otherwise acquire nuclear weapons or other nuclear explosive devices" or "seek or receive any assistance in the manufacture of nuclear weapons or other nuclear explosive devices." Two sections of the IAEA Statute explain what the agency should do if an IAEA member state is found to be in noncompliance with its safeguards agreement. Article III B. 4. of the statute states that the IAEA is to submit annual reports to the UN General Assembly and, "when appropriate," to the UN Security Council. If "there should arise questions that are within the competence of the Security Council," the article adds, the IAEA "shall notify the Security Council, as the organ bearing the main responsibility for the maintenance of international peace and security." Additionally, Article XII C states that IAEA inspectors are to report non-compliance issues to the agency's Director-General, who is to report the matter to the IAEA Board of Governors. The board is then to "call upon the recipient State or States to remedy forthwith any non-compliance which it finds to have occurred," as well as "report the non-compliance to all members and to the Security Council and General Assembly of the United Nations." <3.2.2.1. Cases of Noncompliance> Several past cases of noncompliance have been resolved by the IAEA. The Iraq Nuclear Verification Office was authorized by the Security Council to carry out inspections of Iraq's undeclared nuclear program, and today Iraq is in compliance with its IAEA safeguards agreement and has signed an Additional Protocol. The IAEA also monitored the dismantling of Libya's clandestine nuclear weapons program after Tripoli agreed in 2003 to end it. Libya now also has an Additional Protocol in force. The IAEA was also called upon in 1991 to verify that the South African nuclear weapons program had been completely dismantled. South Africa also has an Additional Protocol in force. In some cases, questions arose about undeclared nuclear activities in a country during the course of IAEA investigations, such as in Egypt and South Korea. The IAEA Director-General reported his concern to the Board of Governors, but the Board did not make a determination of non-compliance in either case. In the case of South Korea, these questions arose in the process of acceding to its Additional Protocol. Questions about undeclared experiments were promptly resolved with Seoul's full cooperation; the IAEA reported in 2007 that it had confirmed there were no undeclared nuclear activities in South Korea. In the case of Egypt, the Egyptian authorities were cooperative, and the IAEA did not find any link to military activities or a purposeful concealment strategy. However, because Egypt does not have an Additional Protocol in force, the IAEA is not able to confirm the absence of undeclared activities in the country as a whole. The nuclear programs of non-nuclear-weapon states, particularly Iran, North Korea, and Syria, are currently raised in discussions of noncompliance. The IAEA Board of Governors in 2005 found Iran to be in noncompliance with its safeguards obligations; some of its outstanding concerns have not been resolved. The Board found North Korea in noncompliance with its safeguards agreement in 1993, and Pyongyang remains in noncompliance. According to a February 2010 IAEA report to the Board of Governors, IAEA inspectors have found evidence that Syria may have conducted nuclear activities in violation of its safeguards agreement. The agency has been pressing Damascus to cooperate with the IAEA's investigation. The IAEA Board of Governors has not found Syria to be in noncompliance with its safeguards agreement. Some NPT states parties, including the United States, will likely address concerns about noncompliance by renewing calls for those states-parties who have not yet done so to conclude safeguards agreements and Additional Protocols. They may also call for increased resources for the IAEA. Resolution 1887 says that states parties without comprehensive safeguards agreements should conclude them "immediately." It also calls on all states parties to implement additional protocols to their safeguards agreements. <3.2.3. NPT Withdrawal> Some NPT states parties have been concerned, particularly after North Korea's 2003 announced withdrawal from the treaty, that other states parties could withdraw from the NPT after acquiring the capability to produce nuclear weapons. North Korea's withdrawal is not yet formally recognized by the NPT depositaries, at least partly due to the fact that withdrawal from the treaty is unprecedented and procedures for how to address it in the treaty are undefined. Several countries have developed proposals for addressing this issue, although they do not involve amending the treaty or altering parties' right to withdraw from it. UN Security Council Resolution 1887 signaled the importance of this issue, stating that the Council "undertakes to address without delay any State's notice of withdrawal from the NPT, ...while noting ongoing discussions in the course of the NPT review on identifying modalities under which NPT States Parties could collectively respond to notification of withdrawal." Resolution 1887 also affirms that a state is accountable for violations of the treaty it may have made prior to its withdrawal. The United States and others will likely attempt to reach agreement on outlining immediate consequences for countries who withdraw from the NPT without cause. The European Union, for example, proposed in a working paper at the 2005 NPT Review Conference, that the withdrawing state be required to return all nuclear materials and equipment acquired while an NPT member. <3.2.4. Nuclear-Weapon-Free Zones> In addition to the NPT, several regions have treaties in force that ban the development, deployment, and use of nuclear weapons. Nuclear-weapon-free zones (NWFZs) reinforce the undertakings of NPT non-nuclear-weapon state members and are adhered to by most of the world. Article VII of the NPT says, "Nothing in this Treaty affects the right of any group of States to conclude regional treaties in order to assure the total absence of nuclear weapons in their respective territories." Regions with NWFZs are Latin America (Treaty of Tlatelolco), Central Asia (Treaty on a Nuclear-Weapon-Free Zone in Central Asia), the South Pacific (Treaty of Rarotonga), Africa (Treaty of Pelindaba), and Southeast Asia (Treaty of Bangkok). Mongolia has declared itself a single-state NWFZ. Also, the Treaty of Antarctica established that Antarctica will be used for peaceful uses only. Nuclear weapons are also banned on the seabed, in outer space, and on the moon by international treaties. Since the previous NPT review conference, the African and Central Asian nuclear-weapon-free zones have entered into force. <3.3. Peaceful Uses of Nuclear Energy> Interest in alternatives to fossil fuel, energy security, and improved economic development conditions have led to a surge in interest in nuclear energy in many new countries. The United States has encouraged pursuit of nuclear energy and concluded new civilian nuclear cooperation agreements, but has tempered these efforts with caution over the proliferation risks of some aspects of the nuclear fuel cycle. President Obama proposed a "new framework for civil nuclear cooperation" that would include international fuel banks. The Administration is also looking to increase resources for the IAEA so that it will be able to perform its safeguards function in the face of expanded nuclear energy use. Access to nuclear technology for civilian purposes has long been viewed as an incentive for non-nuclear-weapon states to comply with their NPT obligations. However, this incentive may have been weakened by the 2008 decision by the Nuclear Suppliers Group to exempt India from the portions of its guidelines requiring New Delhi to have full-scope IAEA safeguards. This resulted in India, which is not a member of the NPT, gaining access to peaceful nuclear trade while maintaining a nuclear weapons capability. Some countries view this as contradictory to the goals of the NPT and this subject is likely to come up in debate at the review conference. The IAEA Technical Cooperation (TC) program is one way NPT countries receive access to peaceful nuclear applications. The United States is the TC program's largest donor. TC assistance is provided to states after a nonproliferation review and any transfers are under IAEA safeguards as required. <3.4. Peaceful Use and Compliance> Article IV of the NPT says, "Nothing in this Treaty shall be interpreted as affecting the inalienable right of all the Parties to the Treaty to develop research, production and use of nuclear energy for peaceful purposes without discrimination and in conformity with Articles I and II of this Treaty." A controversial topic for NPT states is whether the access to the "inalienable right" to peaceful use of nuclear energy for non-nuclear-weapon states is guaranteed even if the state is not meeting its safeguards obligations under Article III. Although the treaty itself does not make this direct connection, some argue that states should be able to access peaceful technology only when in full compliance with their safeguards obligations. In the 2000 NPT Review Conference Final Document, states agreed that "nothing in the Treaty shall be interpreted as affecting the inalienable right of all the parties to the Treaty to develop research, production and use of nuclear energy for peaceful purposes without discrimination and in conformity with articles I, II and III of the Treaty." UN Security Council Resolution 1887 addresses this issue: "enjoyment of the benefits of the NPT by a State Party can be assured only by its compliance with the obligations thereunder." However, some non-nuclear-weapon states argue that the right to the peaceful applications of nuclear energy should not affected by unresolved safeguards issues and there is no legal stipulation in the NPT. Indeed, some technical cooperation programs to Iran, for example, continue despite the IAEA's findings of noncompliance. <3.4.1. Future of the Nuclear Fuel Cycle> Access to the full range of fuel cycle activities is a major sticking point for some of the most vocal non-nuclear-weapon states in the developing world, such as Brazil, Egypt, Indonesia, Malaysia, and South Africa, some of whom do not want to accept either even voluntary limitations on this access, or strengthened safeguards under the Additional Protocol. The NPT does not forbid access to enrichment or reprocessing technologies, which can be used to produce both nuclear fuel and fissile material usable in a nuclear weapon. These technologies are required to be under IAEA safeguards. But in order to further discourage the spread of these technologies, states and the IAEA have proposed various options to create additional nuclear fuel supply assurances. These issues likely to be debated at the review conference. U.S. policy has sought to limit the spread of enrichment and reprocessing technology due to their military potential. The Nuclear Suppliers Group (NSG) is negotiating a set of criteria that would be used to decide whether to authorize a future transfer of enrichment or reprocessing technology. Previously, such transfers were not banned under NSG rules but suppliers have exercised self-restraint. Many developing countries are resistant to any changes to the rules that regulate nuclear commerce, as they perceive such restrictions as potentially limiting their access to economic and development benefits of nuclear energy under Article IV of the NPT. The Non-Aligned Movement is especially critical of both potential NSG restrictions on enrichment and reprocessing transfers and international fuel cycle initiatives more generally. Some developing countries also resist adoption of the IAEA Additional Protocol in their country. These states argue that the NPT does not limit their access to fuel cycle technology for peaceful use in any way and that only comprehensive IAEA safeguards are required by the treaty. In contrast, other states, as noted, view access to nuclear technology as conditional on a state's nonproliferation behavior. The debate over access to fuel cycle technology is further complicated by Iran's operation of an enrichment plant and noncompliance with its safeguards agreements, as discussed above. Nevertheless, the vast majority of states do support the Additional Protocol, and to date the IAEA Board of Governors has approved 139 Additional Protocols and 96 are in force. States at the review conference are likely to discuss how to universalize adherence to the Additional Protocol, which is a U.S. goal for the conference. NPT states are also likely to discuss proposals related to multilateral solutions to provide fuel supply assurances or models for multilateral fuel cycle facilities. For example, a fuel bank under IAEA auspices has been proposed that would supply nuclear fuel to a state if supply was cut-off for reasons other than nonproliferation (such a bank would not be the regular fuel supplier). Another model creates multilateral ownership in a uranium enrichment facility at Angarsk, Russia. Despite the voluntary nature of participation in these models, some non-nuclear-weapon states, as evidenced in Non-Aligned Movement statements, are skeptical toward multilateral fuel assurance proposals. They argue that these are unnecessary in current market conditions and could constrain future technology acquisition. The countries in favor of multilateral approaches, including the United States, argue that these models provide an extra layer of assurance, would not replace market solutions, and would provide a disincentive for indigenous enrichment and reprocessing plants. The latter would have nonproliferation benefits and lessen the IAEA's safeguards burden. <3.5. Universality of the Treaty> The refusal of India, Israel, and Pakistan to sign the NPT is an ongoing source of controversy that will likely be raised at the Review Conference. The NPT states parties in 1995 cited the need for "universal adherence," or membership by all countries in the NPT. Similarly, the final document from the 2000 conference reaffirmed "the long-held commitment of parties to the Treaty to universal membership." The document made clear that non-signatories acceding to the NPT must give up their nuclear weapons. Security Council Resolution 1887, adopted in September 2009, similarly called upon non-signatories "to accede to the Treaty as non-nuclear-weapon States." Moreover, Assistant Secretary of State for Verification, Compliance, and Implementation Rose Gottemoeller stated in May 2009 that "universal adherence to the NPT itself ... also remains a fundamental objective of the United States." It is not clear how the NPT states will address this issue at the Review Conference, beyond calling on non-NPT states to accede to the NPT and asking NPT states to work to achieve this, as was done in past review documents. India and Pakistan both acknowledge possessing nuclear weapons; both countries conducted explosive tests of nuclear devices in 1998. The final document from the 2000 Review Conference stated that India and Pakistan's 1998 tests "do not in any way confer a nuclear-weapon-State status or any special status whatsoever." Both countries have claimed that, in principle, they are willing to pursue nuclear disarmament. However, India has said it would not join the NPT and would only disarm when other nuclear weapons states did so in a legally binding framework. Recent Pakistani statements have indicated that Islamabad is unwilling to accede to the NPT as a non-nuclear-weapon state. Israel does not officially acknowledge possessing nuclear weapons, but has long said that it will not be the first to introduce them into the region. All informed observers believe that Israel possesses nuclear weapons. According to a 1974 U.S. National Intelligence Estimate, the intelligence community assessed that Israel "has produced and stockpiled a small number" of nuclear weapons. Israeli Prime Minister Ehud Barak on April 14, 2010, reiterated Israel's longstanding policy that it would not adhere to the NPT. <3.6. WMD-Free Zone in the Middle East> The 1995 NPT Review Conference adopted a resolution that called for "all States in the Middle East to take practical steps" toward establishing "an effectively verifiable Middle East zone free of weapons of mass destruction, nuclear, chemical and biological, and their delivery systems, and to refrain from taking any measures that preclude the achievement of this objective." It also called for all NPT states parties, including the nuclear-weapon states, "to extend their cooperation and to exert their utmost efforts with a view to ensuring the early establishment by regional parties of a Middle East zone free of nuclear and all other weapons of mass destruction and their delivery systems." Many NPT states parties have long argued in support of the concept of a nuclear-weapon-free zone in the region. Such a resolution was proposed to the UN Security Council in 1974, and similar provisions have been included in numerous Security Council and UN General Assembly resolutions. The final document of the 2000 conference reaffirmed "the importance" of the 1995 resolution. Despite these statements of support, there has been no significant movement on the establishment of such a zone. A March 2010 working paper by Brazil, Egypt, Ireland, Mexico, New Zealand, South Africa, and Sweden asserted that "no progress has yet been achieved on the establishment of a [Middle East] nuclear-weapon-free zone." A May 2009 Arab Group working paper contained a similar observation. Some observers are concerned that continued lack of progress on this issue could erode continued support for the NPT. A recent Arms Control Association report noted that "[m]any non-nuclear-weapon states see the resolution as a linchpin of the [1995] decision to extend the NPT indefinitely." Indeed, the final document of the 2000 Conference described the 1995 resolution as "an essential element of the outcome of the 1995 Conference and of the basis on which" the NPT was indefinitely extended. Furthermore, the Arab Group working paper stated that "failure to give effect" to the 1995 resolution would undermine the NPT's credibility "and the resolution to extend it indefinitely." The Obama Administration has stated its support for the nuclear-weapon-free zone. Ambassador Susan Burk told a Washington audience March 31, 2010, that the United States supports the 1995 resolution and is "working very hard with partners in the region and elsewhere to try to see if we can come up with some concrete measures that would begin to implement this resolution or at least move it forward in some direction." Supporters of the zone emphasize different aspects of nuclear proliferation in the region. Some focus on Israel's nuclear program while others place greater emphasis on the potential threats from Iran's and Syria's nuclear programs. Furthermore, the recent Arms Control Association report noted that "Arab states, Iran, and the Group of Non-Aligned States as a whole ... are primarily concerned with Israel's status as a nonparty to the NPT and de facto nuclear-weapon state," while the European Union, Japan, and the United States "place greater emphasis on general disarmament in the region, calling on all Middle Eastern states to join the full complement of nonconventional arms control agreements," such as the Chemical Weapons Convention and Biological Weapons Convention. Some states, including Japan and Russia, have called for all states in the region to ratify the Comprehensive Test Ban Treaty. Egypt's opinion on the 1995 resolution may be particularly influential during the upcoming Review Conference. Cairo's obstructionism is widely cited as one reason for the outcome of the 2005 conference. Egyptian statements indicate that Cairo's opposition was prompted, in part, by its dissatisfaction with the lack of progress on the nuclear-weapon-free zone. More recently, the country's foreign ministry in April 2010 "underlined the importance" of the Conference adopting "specific measures to implement" a nuclear-weapon-free zone. Egypt and the United States have been engaged in bilateral discussions about the matter, but there is no public indication that they have reached agreement. Egypt has submitted several proposals regarding this issue. A March 2010 working paper called on Conference participants to reaffirm their "unequivocal commitment" to implement the 1995 Resolution; call on Israel to accede to the NPT as a non-nuclear-weapon state; refrain from transferring certain nuclear material or related equipment to Israel until the country has acceded to the NPT; convene an international conference by 2011 "to launch negotiations, with the participation of all States of the Middle East, on an internationally and effectively verifiable treaty for the establishment of a nuclear-weapon-free zone in the Middle East"; "establish a standing committee to follow up" on progress in implementing the 1995 resolution and to "undertake necessary preparations" for convening the above-mentioned conference; and disclose "all information available to them on the nature and scope of Israeli nuclear facilities and activities, including information pertaining to previous nuclear transfers to Israel." Working papers from the Arab Group and Libya, as well as a statement from the Non-Aligned Movement, have endorsed some of these measures. For its part, Russia stated in 2009 that it supports holding a conference to "consider the prospects" for implementing all aspects of the resolution, but would like such a conference to address all WMD. The European Union has also endorsed this proposal. Israel has expressed support for a WMD-free zone, but has emphasized that regional powers should resolve other regional security issues before negotiating such a zone. Sha'ul Horev, Director General of Israel's Atomic Energy Commission, explained the government's position September 2009: It is our vision and policy, to establish the Middle East as a mutually verifiable zone free of weapons of mass destruction and their delivery systems. We have always emphasized, that such a process, through direct negotiations, should begin with confidence building measures. They should be followed by mutual recognition, reconciliation, and peaceful relations. Consequently conventional and non-conventional arms control measures will emerge ... In our view, progress towards realizing this vision cannot be made without a fundamental change in regional circumstances, including a significant transformation in the attitude of states in the region towards Israel. Other countries argue that establishing a Middle East WMD-free zone is necessary to improve the prospects for settling other regional disputes. <4. Possible Outcomes and Potential Impact> Many experts see the NPT 2010 Review Conference as a chance to renew obligations under the treaty both the non-nuclear-weapons states' pledge to remain non-nuclear, and nuclear-weapon states' commitment to further disarmament steps. This could happen with or without a final consensus document, although observers tend to place importance on achieving consensus agreement. Former NPT Preparatory Committee Chairman Henrik Salander described a dilemma concerning the pursuit of consensus: It is difficult to judge whether it is good to have a consensus outcome that governments can just barely accept. Are principled substantive positions better in the long run, even with failed conferences and no agreements, than pragmatic and practical compromises? Countries will likely have a higher degree of skepticism of any new promises coming out of the Review Conference because many pledges made at 1995 and 2000 Review Conferences remain unfulfilled. In general, however, the United States is likely to face an NPT membership that is largely cynical about U.S. intentions toward the NPT and fiercely defensive of its own right to access the full range of peaceful applications of nuclear energy. Despite a common view in Washington that progress has been made in improving the political climate in advance of the NPT meeting, according to some international observers, optimism after President Obama's Prague speech last spring has somewhat dissipated in the international diplomatic arena. After all, the CTBT has not been submitted to the Senate while the new START treaty has only just been concluded and is not yet in force. These are two key indicators of progress on Article VI for many NPT parties. More states may take the issue of noncompliance by Iran, and possibly Syria, more seriously following revelations in fall of 2009 about undisclosed an Iranian centrifuge plant as well as IAEA reports regarding the lack of cooperation by Iran and Syria with IAEA investigations. However, because Iran and Syria both participate in the Review Conference as member states, a consensus document that deals with these issues may be difficult to reach. Dr. William Potter has written about this dilemma: I worry that the mistaken tendency to equate achievement of a consensus final document with a successful review outcome means shunting aside the most serious proliferation challenges, including but not limited to DPRK and Iranian nuclear brinkmanship, the Indian and Pakistani nuclear arms race, the threat of non-state actors and nuclear terrorism, and the continuing emphasis given to nuclear weapons in the security postures of the nuclear-weapon states. If a consensus review document is adopted, it could contain new forward-looking nonproliferation and disarmament proposals. Some analysts recommend that instead of measuring implementation of the treaty, a contentious point, states should pursue agreement on forward-looking objectives. Daryl Kimball of the Arms Control Association, for example, has called for an "action plan to strengthen and reaffirm the NPT." Jean du Preez wrote that a forward-looking document could "serve as a lodestar to regain confidence in the treaty's core bargains." Agreement on many U.S. proposals or those contained in UN Security Council Resolution 1887 may be difficult to reach. However, it is also possible that a consensus document would reflect the status of agreement and disagreement on various NPT issues. Ambassador Susan Burk seems to be prepared for just such an outcome: We are looking forward to working with our Treaty partners to try to identify areas where agreement on concrete measures to reinforce the global nuclear nonproliferation regime can be reached now, and on areas where further work and deliberation are needed so that agreement might be possible in the future. Other important aspects of the nuclear nonproliferation regime will not likely be discussed in detail at the NPT Review Conference. They were, however, addressed to some extent at the recent Global Nuclear Security Summit. The NPT does not address proliferation of nuclear weapons to non-state actors. Some states have proposed that in the post-9/11 security environment, nuclear security issues should be a part of NPT discussions. UK Foreign Minister Millibrand proposed that nuclear security become the "fourth pillar" of the NPT. Also, EU nonproliferation representative Annalisa Giannella has said that since the NPT requires states to prevent proliferation, "one can argue that this obligation also implies the obligation to protect nuclear or radiological material." IAEA safeguards agreements under the NPT do require physical protection measures at declared facilities. Nuclear material security as well as efforts to detect or interdict illicit transfers may be discussed at the Review Conference, but some developing states prefer to address these issues in other fora such as IAEA meetings. <5. Legislation in the 111th Congress> Senate Resolution 446, "Commemorating the 40 th Anniversary of the Treaty on the Nonproliferation of Nuclear Weapons," originally introduced by Senator Casey, was reported out of the Foreign Relations Committee and placed on the Senate legislative calendar on April 13, 2010. The resolution reaffirms congressional support for the NPT; urges the President to work toward universality of the Treaty; encourages the President to work with international partners on establishing the Additional Protocol as "the global standard for safeguards and a requirement for nuclear commerce"; calls for the IAEA to be provided the necessary resources, personnel and technology to conduct NPT oversight responsibilities; and encourages the strengthening of enforcement mechanisms and "collective responses" to any withdrawal from the NPT. Appendix A. Text of the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) The States concluding this Treaty, hereinafter referred to as the "Parties to the Treaty", Considering the devastation that would be visited upon all mankind by a nuclear war and the consequent need to make every effort to avert the danger of such a war and to take measures to safeguard the security of peoples, Believing that the proliferation of nuclear weapons would seriously enhance the danger of nuclear war, In conformity with resolutions of the United Nations General Assembly calling for the conclusion of an agreement on the prevention of wider dissemination of nuclear weapons, Undertaking to co-operate in facilitating the application of International Atomic Energy Agency safeguards on peaceful nuclear activities, Expressing their support for research, development and other efforts to further the application, within the framework of the International Atomic Energy Agency safeguards system, of the principle of safeguarding effectively the flow of source and special fissionable materials by use of instruments and other techniques at certain strategic points, Affirming the principle that the benefits of peaceful applications of nuclear technology, including any technological by-products which may be derived by nuclear-weapon States from the development of nuclear explosive devices, should be available for peaceful purposes to all Parties to the Treaty, whether nuclear-weapon or non-nuclear-weapon states, Convinced that, in furtherance of this principle, all Parties to the Treaty are entitled to participate in the fullest possible exchange of scientific information for, and to contribute alone or in co-operation with other States to, the further development of the applications of atomic energy for peaceful purposes. Declaring their intention to achieve at the earliest possible date the cessation of the nuclear arms race and to undertake effective measures in the direction of nuclear disarmament, Urging the co-operation of a1l States in the attainment of this objective, Recalling the determination expressed by the Parties to the 1963 Treaty banning nuclear weapon tests in the atmosphere, in outer space and under water in its Preamble to seek to achieve the discontinuance of all test explosions of nuclear weapons for all time and to continue negotiations to this end, Desiring to further the casing of international tension and the strengthening of trust between States in order to facilitate the cessation of the manufacture of nuclear weapons, the liquidation of an their existing stockpiles, and the elimination from national arsenals of nuclear weapons and the means of their delivery pursuant to a Treaty on general and complete disarmament under strict and effective international control, Recalling that, in accordance with the Charter of the United Nations, States must refrain in their international relations from the threat or use of force against the territorial integrity or political independence of any State, or in any other manner inconsistent with the Purposes of the United Nations, and that the establishment and maintenance of international peace and security are to be promoted with the least diversion for armaments of the world's human and economic resources, Have agreed as follows: Article I Each nuclear-weapon State Party to the Treaty undertakes not to transfer to any recipient whatsoever nuclear weapons or other nuclear explosive devices or control over such weapons or explosive devices directly, or indirectly; and not in any way to assist, encourage, or induce any non-nuclear-weapon State to manufacture or otherwise acquire nuclear weapons or other nuclear explosive devices, or control over such weapons or explosive devices. Article II Each non-nuclear-weapon State Party to the Treaty undertakes not to receive the transfer from any transferor whatsoever of nuclear weapons or other nuclear explosive devices or of control over such weapons or explosive devices directly, or indirectly; not to manufacture or otherwise acquire nuclear weapons or other nuclear explosive devices; and not to seek or receive any assistance in the manufacture of nuclear weapons or other nuclear explosive devices. Article III 1. Each non-nuclear-weapon State Party to the Treaty undertakes to accept safeguards, as set forth in an agreement to be negotiated and concluded with the International Atomic Energy Agency in accordance with the Statute of the International Atomic Energy Agency and the Agency's safeguards system, for the exclusive purpose of verification of the fulfillment of its obligations assumed under this Treaty with a view to preventing diversion of nuclear energy from peaceful uses to nuclear weapons or other nuclear explosive devices. Procedures for the safeguards required by this Article shall be followed with respect to source or special fissionable material whether it is being produced, processed or used in any principal nuclear facility or is outside any such facility. The safeguards required by this Article shall be applied on all source or special fissionable material in all peaceful nuclear activities within the territory of such State, under its jurisdiction, or carried out under its control anywhere. 2. Each State Party to the Treaty undertakes not to provide: (a) source or special fissionable material, or (b) equipment or material especially designed or prepared for the processing, use or production of special fissionable material, to any non-nuclear-weapon State for peaceful purposes, unless the source or special fissionable material shall be subject to the safeguards required by this Article. 3. The safeguards required by this Article shall be implemented in a manner designed to comply with Article IV of this Treaty, and to avoid hampering the economic or technological development of the Parties or international co-operation in the field of peaceful nuclear activities, including the international exchange of nuclear material and equipment for the processing, use or production of nuclear material for peaceful purposes in accordance with the provisions of this Article and the principle of safeguarding set forth in the Preamble of the Treaty. 4. Non-nuclear-weapon States Party to the Treaty shall conclude agreements with the International Atomic Energy Agency to meet the requirements of this Article either individually or together with other States in accordance with the Statute of the International Atomic Energy Agency. Negotiation of such agreements shall commence within 180 days from the original entry into force of this Treaty. For States depositing their instruments of ratification or accession after the 180-day period, negotiation of such agreements shall commence not later than the date of such deposit. Such agreements shall enter into force not later than eighteen months after the date of initiation of negotiations. Article IV 1. Nothing in this Treaty shall be interpreted as affecting the inalienable right of all the Parties to the Treaty to develop research, production and use of nuclear energy for peaceful purposes without discrimination and in conformity with Articles I and II of this Treaty. 2. All the Parties to the Treaty undertake to facilitate, and have the right to participate in, the fullest possible exchange of equipment, materials and scientific and technological information for the peaceful uses of nuclear energy. Parties to the Treaty in a position to do so shall also co-operate in contributing alone or together with other States or international organizations to the further development of the applications of nuclear energy for peaceful purposes, especially in the territories of non-nuclear-weapon States Party to the Treaty, with due consideration for the needs of the developing areas of the world. Article V Each Party to the Treaty undertakes to take appropriate measures to ensure that, in accordance with this Treaty, under appropriate international observation and through appropriate international procedures, potential benefits from any peaceful applications of nuclear explosions will be made available to non-nuc1ear-weapon States Party to the Treaty on a non-discriminatory basis and that the charge to such Parties for the explosive devices used will be as low as possible and exclude any charge for research and development. Non-nuclear-weapon States Party to the Treaty shall be able to obtain such benefits, pursuant to a special international agreement or agreements, through an appropriate international body with adequate representation of non-nuclear-weapon States. Negotiations on this subject shall commence as soon as possible after the Treaty enters into force. Non-nuclear-weapon States Party to the Treaty so desiring may also obtain such benefits pursuant to bilateral agreements. Article VI Each of the Parties to the Treaty undertakes to pursue negotiations in good faith on effective measures relating to cessation of the nuclear arms race at an early date and to nuclear disarmament, and on a treaty on general and complete disarmament under strict and effective international control. Article VII Nothing in this Treaty affects the right of any group of States to conclude regional treaties in order to assure the total absence of nuclear weapons in their respective territories. Article VIII 1. Any Party to the Treaty may propose amendments to this Treaty. The text of any proposed amendment shall be submitted to the Depositary Governments which shall circulate it to all Parties to the Treaty. Thereupon, if requested to do so by one-third or more of the Parties to the Treaty, the Depositary Governments shall convene a conference, to which they shall invite all the Parties to the Treaty, to consider such an amendment. 2. Any amendment to this Treaty must be approved by a majority of the votes of all the Parties to the Treaty, including the votes of all nuclear-weapon States Party to the Treaty and all other Parties which, on the date the amendment is circulated, are members of the Board of Governors of the International Atomic Energy Agency. The amendment shall enter into force for each Party that deposits its instrument of ratification of the amendment upon the deposit of such instruments of ratification by a majority of all the Parties, including the instruments of ratification of all nuclear weapon States Party to the Treaty and all other Parties which, on the date the amendment is circulated, are members of the Board of Governors of the International Atomic Energy Agency. Thereafter, it shall enter into force for any other Party upon the deposit of its instrument of ratification of the amendment. 3. Five years after the entry into force of this Treaty, a conference of Parties to the Treaty shall be held in Geneva, Switzerland, in order to review the operation of this Treaty with a view to assuring that the purposes of the Preamble and the provisions of the Treaty are being realized. At intervals of five years thereafter, a majority of the Parties to the Treaty may obtain, by submitting a proposal to this effect to the Depositary Governments, the convening of further conferences with the same objective of reviewing the operation of the Treaty. Article IX 1. This Treaty shall be open to all States for signature. Any State which does not sign the Treaty before its entry into force in accordance with paragraph 3 of this Article may accede to it at any time. 2. This Treaty shall be subject to ratification by signatory States. Instruments of ratification and instruments of accession shall be deposited with the Governments of the United Kingdom of Great Britain and Northern Ireland, the Union of Soviet Socialist Republics and the United States of America, which are hereby designated the Depositary Governments. 3. This Treaty shall enter into force after its ratification by the States, the Governments of which are designated. Depositaries of the Treaty, and forty other States signatory to this Treaty and the deposit of their instruments of ratification. For the purposes of this Treaty, a nuclear-weapon State is one which has manufactured and exploded a nuclear weapon or other nuclear explosive device prior to 1 January, 1967. 4. For States whose instruments of ratification or accession are deposited subsequent to the entry into force of this Treaty, it shall enter into force on the date of the deposit of their instruments of ratification or accession. 5. The Depositary Governments shall promptly inform all signatory and acceding States of the date of each signature, the date of deposit of each instrument of ratification or of accession, the date of the entry into force of this Treaty, and the date of receipt of any requests for convening a conference or other notices. 6. This Treaty shall be registered by the Depositary Governments pursuant to Article 102 of the Charter of the United Nations. Article X 1. Each Party shall in exercising its national sovereignty have the right to withdraw from the Treaty if it decides that extraordinary events, related to the subject matter of this Treaty, have jeopardized the supreme interests of its country. It shall give notice of such withdrawal to all other Parties to the Treaty and to the United Nations Security Council three months in advance. Such notice shall include a statement of the extraordinary events it regards as having jeopardized its supreme interests. 2. Twenty-five years after the entry into force of the Treaty, a conference shall be convened to decide whether the Treaty shall continue in force indefinitely, or shall be extended for an additional fixed period or periods. This decision shall be taken by a majority of the Parties to the Treaty. Article XI This Treaty, the English, Russian, French, Spanish and Chinese texts of which are equally authentic, shall be deposited in the archives of the Depositary Governments. Duly certified copies of this Treaty shall be transmitted by the Depositary Governments to the Governments of the signatory and acceding States. Appendix B. Resolution on the Middle East (1995) The Conference of the Parties to the Treaty on the Non-Proliferation of Nuclear Weapons, Reaffirming the purpose and provisions of the Treaty on the Non-Proliferation of Nuclear Weapons, Recognizing that, pursuant to article VII of the Treaty, the establishment of nuclear-weapon-free zones contributes to strengthening the international non-proliferation regime, Recalling that the Security Council, in its statement of 31 January 1992, a/ affirmed that the proliferation of nuclear and all other weapons of mass destruction constituted a threat to international peace and security, Recalling also General Assembly resolutions adopted by consensus supporting the establishment of a nuclear-weapon-free zone in the Middle East, the latest of which is resolution 49/71 of 15 December 1994, Recalling further the relevant resolutions adopted by the General Conference of the International Atomic Energy Agency concerning the application of Agency safeguards in the Middle East, the latest of which is GC(XXXVIII)/RES/21 of 23 September 1994, and noting the danger of nuclear proliferation, especially in areas of tension, Bearing in mind Security Council resolution 687 (1991) and in particular paragraph 14 thereof, Noting Security Council resolution 984 (1995) and paragraph 8 of the decision on principles and objectives for nuclear non-proliferation and disarmament adopted by the Conference on 11 May 1995, Bearing in mind the other decisions adopted by the Conference on 11 May 1995, 1. Endorses the aims and objectives of the Middle East peace process and recognizes that efforts in this regard, as well as other efforts, contribute to, inter alia, a Middle East zone free of nuclear weapons as well as other weapons of mass destruction; 2. Notes with satisfaction that, in its report (NPT/CONF.1995/MC.III/1), Main Committee III of the Conference recommended that the Conference "call on those remaining States not parties to the Treaty to accede to it, thereby accepting an international legally binding commitment not to acquire nuclear weapons or nuclear explosive devices and to accept International Atomic Energy Agency safeguards on all their nuclear activities"; 3. Notes with concern the continued existence in the Middle East of unsafeguarded nuclear facilities, and reaffirms in this connection the recommendation contained in section VI, paragraph 3, of the report of Main Committee III urging those non-parties to the Treaty on the Non-Proliferation of Nuclear Weapons that operate unsafeguarded nuclear facilities to accept full-scope International Atomic Energy Agency safeguards; 4. Reaffirms the importance of the early realization of universal adherence to the Treaty, and calls upon all States of the Middle East that have not yet done so, without exception, to accede to the Treaty as soon as possible and to place their nuclear facilities under full-scope International Atomic Energy Agency safeguards; 5. Calls upon all States in the Middle East to take practical steps in appropriate forums aimed at making progress towards, inter alia, the establishment of an effectively verifiable Middle East zone free of weapons of mass destruction, nuclear, chemical and biological, and their delivery systems, and to refrain from taking any measures that preclude the achievement of this objective; 6. Calls upon all States party to the Treaty on the Non-Proliferation of Nuclear Weapons, and in particular the nuclear-weapon States, to extend their cooperation and to exert their utmost efforts with a view to ensuring the early establishment by regional parties of a Middle East zone free of nuclear and all other weapons of mass destruction and their delivery systems. Appendix C. "13 Practical Steps" (2000) The Conference agrees on the following practical steps for the systematic and progressive efforts to implement Article VI of the Treaty on the Non-Proliferation of Nuclear Weapons and paragraphs 3 and 4(c) of the1995 Decision on "Principles and Objectives for Nuclear Non-Proliferation and Disarmament": 1. The importance and urgency of signatures and ratifications, without delay and without conditions and in accordance with constitutional processes, to achieve the early entry into force of the Comprehensive Nuclear-Test-Ban Treaty. 2. A moratorium on nuclear-weapon-test explosions or any other nuclear explosions pending entry into force of that Treaty. 3. The necessity of negotiations in the Conference on Disarmament on a non-discriminatory, multilateral and internationally and effectively verifiable treaty banning the production of fissile material for nuclear weapons or other nuclear explosive devices in accordance with the statement of the Special Coordinator in 1995 and the mandate contained therein, taking into consideration both nuclear disarmament and nuclear non-proliferation objectives. The Conference on Disarmament is urged to agree on a program of work which includes the immediate commencement of negotiations on such a treaty with a view to their conclusion within five years. 4. The necessity of establishing in the Conference on Disarmament an appropriate subsidiary body with a mandate to deal with nuclear disarmament. The Conference on Disarmament is urged to agree on a program of work which includes the immediate establishment of such a body. 5. The principle of irreversibility to apply to nuclear disarmament, nuclear and other related arms control and reduction measures. 6. An unequivocal undertaking by the nuclear-weapon States to accomplish the total elimination of their nuclear arsenals leading to nuclear disarmament to which all States parties are committed under Article VI. 7. The early entry into force and full implementation of START II and the conclusion of START III as soon as possible while preserving and strengthening the ABM Treaty as a cornerstone of strategic stability and as a basis for further reductions of strategic offensive weapons, in accordance with its provisions. 8. The completion and implementation of the Trilateral Initiative between the United States of America, the Russian Federation and the International Atomic Energy Agency. 9. Steps by all the nuclear-weapon States leading to nuclear disarmament in a way that promotes international stability, and based on the principle of undiminished security for all: (a) Further efforts by the nuclear-weapon States to reduce their nuclear arsenals unilaterally. (b) Increased transparency by the nuclear-weapon States with regard to the nuclear weapons capabilities and the implementation of agreements pursuant to Article VI and as a voluntary confidence-building measure to support further progress on nuclear disarmament. (c) The further reduction of non-strategic nuclear weapons, based on unilateral initiatives and as an integral part of the nuclear arms reduction and disarmament process. (d) Concrete agreed measures to further reduce the operational status of nuclear weapons systems. (e) A diminishing role for nuclear weapons in security policies to minimize the risk that these weapons ever be used and to facilitate the process of their total elimination. (f) The engagement as soon as appropriate of all the nuclear-weapon States in the process leading to the total elimination of their nuclear weapons. 10. Arrangements by all nuclear-weapon States to place, as soon as practicable, fissile material designated by each of them as no longer required for military purposes under IAEA or other relevant international verification and arrangements for the disposition of such material for peaceful purposes, to ensure that such material remains permanently outside of military programs. 11. Reaffirmation that the ultimate objective of the efforts of States in the disarmament process is general and complete disarmament under effective international control. 12. Regular reports, within the framework of the NPT strengthened review process, by all States parties on the implementation of Article VI and paragraph 4 (c) of the 1995 Decision on "Principles and Objectives for Nuclear Non-Proliferation and Disarmament," and recalling the Advisory Opinion of the International Court of Justice of 8 July 1996. 13. The further development of the verification capabilities that will be required to provide assurance of compliance with nuclear disarmament agreements for the achievement and maintenance of a nuclear-weapon-free world.

The nuclear Non-Proliferation Treaty (NPT), which entered into force in 1970 and was extended indefinitely in 1995, is the centerpiece of international nuclear nonproliferation efforts. The NPT recognizes five nations (the United States, Russia, France, Britain, and China) as nuclear-weapon states; 189 countries are parties to the NPT. India, Israel, and Pakistan have never signed the treaty and possess nuclear weapons. North Korea acceded to the NPT but announced its withdrawal in 2003. Several countries, including Argentina, Brazil, and South Africa, ended their nuclear weapons programs and joined the NPT in the 1990s. Others—Ukraine, Belarus, and Kazakhstan—gave up former Soviet nuclear weapons on their territories and joined the NPT as non-nuclear-weapon states in the 1990s. Iraq had a nuclear weapons program prior to the 1991 Persian Gulf War. UN inspectors subsequently oversaw the program's dismantlement, and Iraq is now in full compliance with the NPT. Libya gave up a clandestine nuclear weapons program after a 2003 agreement. Iran was found in noncompliance with its International Atomic Energy Agency (IAEA) safeguards obligations in 2005, and the matter was referred to the UN Security Council. The IAEA has reported that Syria has not fully cooperated with an investigation into its nuclear activities. There are three key dimensions, or "pillars," of the NPT: nuclear nonproliferation, nuclear disarmament, and the peaceful use of nuclear energy. In exchange for non-nuclear-weapon states (NNWS) pledging not to acquire nuclear weapons, they are guaranteed access to the peaceful use of nuclear energy. For their part, the NPT nuclear-weapon states agree to pursue nuclear disarmament and not assist another country in developing nuclear weapons. The IAEA implements the treaty in as far as it is responsible for monitoring the peaceful use of nuclear energy and providing technical assistance to states. Events in the past decade have stressed the nonproliferation regime. Revelations about illicit procurement networks, advancements in India and Pakistan's nuclear arsenals, North Korea's nuclear tests, Iran's defiance of UN Security Council resolutions regarding its nuclear program and noncompliance with IAEA safeguards, and questions about the Syrian nuclear program have all contributed to uncertainty over the robustness of the regime. There has been increased interest in nuclear power, placing additional resource demands on the IAEA. The United States and Russia continue formal efforts to reduce their nuclear arsenals. At the same time, several states have given up their nuclear weapons programs during the past decade, and countries have been working together to prevent illicit nuclear transfers and improve nuclear security. Many see the 2010 NPT Review Conference, beginning on May 3, 2010, as an important test of the viability of the treaty and how it will evolve to meet new challenges. History suggests that the United States plays a leadership role in all aspects of the nonproliferation regime. The Obama Administration has emphasized in strategy documents that it views the NPT as the "centerpiece" of the nonproliferation regime and has pledged to strengthen the treaty. The Administration sees a linkage between the disarmament and nonproliferation commitments under the treaty. The 2010 Nuclear Posture Review, for example, says that progress on arms control is "a means of strengthening our ability to mobilize broad international support for the measures needed to reinforce the nonproliferation regime and secure materials worldwide." The Nuclear Posture Review also says that the conditions for nuclear disarmament will not be possible without stronger proliferation controls. The ability of the Administration to garner international support for its proposals to strengthen the nonproliferation regime may be tested at the 2010 NPT Review Conference. This report will be updated as events warrant.

<1. War Dates> Congress, usually through a declaration of war, has often been the first governmental authority to designate the beginning date of a war or armed conflict. The President, or executive branch officials responsible to him, through proclamation, or Congress, through legislation, has been responsible for designating the war's termination date. In some cases, later legislation is enacted to extend these beginning and ending dates for the purpose of broadening eligibility for veterans' benefits. This report notes the variations in the dates cited in the Code of Federal Regulations (C.F.R.) "periods of war" and those dates given in the declarations of war beginning and the proclamations, laws, or treaties terminating such conflicts. Adding to the confusion, during World War II, wars were declared and terminated with six individual combatant countries. Moreover, armistice dates are also often confused with termination dates. Title 38, Part 3, Section 3.2 of the Code of Federal Regulations , dealing with the Department of Veterans Affairs (VA), lists official beginning and termination dates for most war periods from the Indian Wars to the present to be used in determining the availability of veterans' benefits. The material below summarizes these dates. Where applicable, a summary of the Department of Veterans Affairs official beginning and termination dates is provided followed by a citation to the lettered C.F.R. section. For some entries, this initial summary is followed by an explanatory note or declaration, armistice, cease-fire, or termination dates cited by other official sources. Also included are dates for the recent conflicts in Iraq and Afghanistan. <2. Indian Wars> January 1, 1817, through December 31, 1898, inclusive. Service must have been rendered with U.S. military forces against Indian tribes or nations. Code of Federal Regulations , 3.2 (a). <3. Spanish-American War> April 21, 1898, through July 4, 1902, inclusive. If the veteran served with the U.S. military forces engaged in hostilities in the Moro Province, the ending date is July 15, 1903. The Philippine Insurrection and the Boxer Rebellion are included for the purposes of benefit determination under this C.F.R. section. Code of Federal Regulations , 3.2 (b). Declared by an act of Congress April 25, 1898 (30 Stat. 364, Ch. 189). An armistice signed August 12, 1898. Terminated by Treaty signed at Paris, December 10, 1898 (30 Stat. 1754), ratified and proclaimed April 11, 1899. <4. Mexican Border Period> May 9, 1916, through April 5, 1917. In the case of a veteran who during such period served in Mexico, on the borders thereof, or in the adjacent waters thereto. Code of Federal Regulations , 3.2 (h). <5. World War I> April 6, 1917, through November 11, 1918, inclusive. If the veteran served with the U.S. military forces in Russia, the ending date is April 1, 1920. Service after November 11, 1918, and before July 2, 1921, is considered World War I service if the veteran served in the active military, naval, or air service after April 5, 1917, and before November 12, 1918. Code of Federal Regulations , 3.2 (c). <5.1. World War I Against Germany> Declared by Joint Resolution of Congress of April 6, 1917 (40 Stat. 429, Ch. 1). Armistice signed near Compi gne, France, November 11, 1918. Terminated July 2, 1921, by Joint Resolution of Congress (42 Stat. 105, Ch. 40, 1). <5.2. World War I Against Austria-Hungary> Declared by Joint Resolution of Congress, December 7, 1917 (40 Stat. 429, Ch. 1). An armistice signed near Compi gne, France, November 11, 1918. Terminated July 2, 1921, by Joint Resolution of Congress (42 Stat. 106, Ch. 40, 3). <6. World War II> December 7, 1941, through December 31, 1946, inclusive. If the veteran was in service on December 31, 1946, continuous service before July 26, 1947, is considered World War II service. Code of Federal Regulations , 3.2 (d). During World War II, war was officially declared against six separate countries. The war with each was not over until the effective date of the Treaty of Peace. Note also the confusion cited below over which day is the official Victory in Europe Day (V-E Day) and Victory over Japan Day (V-J Day). <6.1. World War II with Germany> Declared by Joint Resolution of Congress, December 11, 1941 (55 Stat. 796, Ch. 564). German representative Colonel General Alfred Jodl signed the unconditional act of surrender to Allied representatives in a schoolhouse in Reims, France, on May 7, 1945. A second German surrender ceremony was held on May 8 in Berlin at the insistence of the U.S.S.R. Cessation of hostilities declared as of noon, December 31, 1946, by presidential proclamation of December 31, 1946 (Proc. no. 2714, 61 Stat. 1048). State of war with the "government of Germany" terminated October 19, 1951, by Joint Resolution of Congress of that date (65 Stat. 451, Ch. 519), by Presidential Proclamation 2950, October 24, 1951. No peace treaty with Germany was signed. <6.2. World War II with Japan> Declared by Joint Resolution of Congress, December 8, 1941 (55 Stat. 795, Ch. 561). Japanese representatives publicly signed unconditional surrender document on the deck of the USS Missouri anchored in Tokyo Bay on September 2, 1945. President Truman proclaimed this date Victory over Japan Day or V-J Day. Cessation of hostilities declared as of 12 noon, December 31, 1946, by presidential proclamation of December 31, 1946 (Proc. no. 2714, 61 Stat. 1048). Terminated by Multilateral Treaty of Peace with Japan, signed at San Francisco, September 8, 1951 (3 UST 3329), and ratified March 20, 1952, effective April 28, 1952. <6.3. World War II with Italy> Declared by Joint Resolution of Congress, December 11, 1941 (55 Stat. 797, Ch. 565). Cessation of hostilities declared as of noon December 31, 1946, by presidential proclamation of December 31, 1946 (Proc. no. 2714, 61 Stat. 1048). Terminated by Treaty of Peace dated at Paris, February 10, 1947 (61 Stat. 1247), effective September 15, 1947. <6.4. World War II with Bulgaria> Declared by Joint Resolution of Congress, June 5, 1942 (56 Stat. 307, Ch. 323). Cessation of hostilities declared as of noon December 31, 1946, by presidential proclamation of December 31, 1946 (Proc. no. 2714, 61 Stat. 1048). Terminated by Treaty of Peace dated at Paris, February 10, 1947 (61 Stat. 1915), effective September 15, 1947. <6.5. World War II with Hungary> Declared by Joint Resolution of Congress, June 5, 1942 (56 Stat. 307, Ch. 324). Cessation of hostilities declared as of noon December 31, 1946, by presidential proclamation (Proc. no. 2714, 61 Stat. 1048). Terminated by Treaty of Peace dated at Paris, February 10, 1947 (61 Stat. 1757), effective September 15, 1947. <6.6. World War II with Romania> Declared by Joint Resolution of Congress, June 5, 1942 (56 Stat. 307, Ch. 325). Cessation of hostilities declared as of noon December 31, 1946, by presidential proclamation of December 31, 1946 (Proc. no. 2714, 61 Stat. 1048). Terminated by Treaty of Peace dated at Paris, February 10, 1947 (61 Stat. 1757), effective September 15, 1947. <7. Korean Conflict> June 27, 1950, through January 31, 1955, inclusive. Code of Federal Regulations , 3.2 (e). On June 25, 1950, North Korean Communist forces attacked South Korean positions south of the 38 th parallel, leading to an immediate United Nations (U.N.) Security Council resolution calling for a cease-fire and withdrawal of the North Korean forces. On June 26, President Truman ordered U.S. air and sea forces in the Far East to aid South Korea. On June 27, the U.N. Security Council adopted a resolution asking U.N. members for assistance in repelling the North Korean armed attack and in restoring peace and security in the area. On June 30, the President stated that he had authorized the use of certain U.S. air and ground units wherever necessary. No declaration of war was requested of Congress and no authorization for use of force, by statute, was requested or enacted. An armistice signed at Panmunjom, Korea, on July 27, 1953, between U.N. and Communist representatives (4 UST 234; TIAS 2782). No peace treaty was ever signed. <8. Vietnam Era> The period beginning on February 28, 1961, and ending on May 7, 1975, inclusive, in the case of a veteran who served in the Republic of Vietnam during that period. The period beginning on August 5, 1964, and ending on May 7, 1975, inclusive, in all other cases. Code of Federal Regulations , 3.2 (f). <8.1. Tonkin Gulf Resolution> No declaration of war was requested of Congress. Instead, there was a Joint Resolution of Congress to promote the maintenance of international peace and security in Southeast Asia, which stated in part that Congress "approves and supports the determination of the President, as Commander in Chief, to take all necessary measures to repel any armed attack against the forces of the United States and to prevent any further aggression." H.J. Res. 1145, P.L. 88-408, August 10, 1964 (78 Stat. 384). The Tonkin Gulf Resolution was formally repealed on January 12, 1971, by P.L. 91-672, (84 Stat. 2055). The Agreement Ending the War and Restoring Peace in Vietnam signed in Paris, January 27, 1973 (TIAS 7674). Joint communiqu implementing the agreement and protocols of January 27, 1973, signed at Paris and entered into force, June 13, 1973. <9. Conflicts in Lebanon 1982-1983, Grenada 1983, and Panama 1989-1990> Lebanon . U.S. Marines deployed on August 21, 1982 and September 29, 1982, were part of a temporary multinational force in Lebanon. See S. 639 , P.L. 98-43 (Lebanon Emergency Assistance Act of 1983). Grenada. On October 25, 1983, U.S. troops were deployed to Grenada "to restore law and order" and to protect American lives at the request of the members of the Organization of Eastern Caribbean States. Known as Operation Urgent Fury, by December 15, 1983, all forces had been withdrawn. Panama. On December 21, 1989, President George H.W. Bush reported that he had ordered U.S. military forces to Panama to protect the lives of American citizens and bring General Noriega to justice. Known as Operation Just Cause, by February 13, 1990, all the invasion forces had been withdrawn. Note: Participation in these conflicts alone does not confer automatic veterans' status for servicemembers. For more information, see CRS Report R42324, Who Is a "Veteran"? Basic Eligibility for Veterans' Benefits , by Scott D. Szymendera, and CRS Report RL31133, Declarations of War and Authorizations for the Use of Military Force: Historical Background and Legal Implications , by Jennifer K. Elsea and Matthew C. Weed. <10. Persian Gulf War> August 2, 1990, through April 6, 1991, when Iraq officially accepted cease-fire terms. Congress passed H.J.Res. 77 , Authorizing the Use of Military Force Against Iraq, the same day it was introduced (January 12, 1991), and it was signed by the President on January 14, 1991 ( P.L. 102-1 ). Operation Desert Storm and the air war phase began at 3 a.m. January 17, 1991 (January 16, 7 p.m. Eastern Standard Time). Allied ground assault began at 4 a.m. February 24 (February 23, 8 p.m. EST). Cease-fire declared at 8:01 a.m. February 28, 1991 (12:01 a.m. EST). Cease-fire terms negotiated at Safwan, Iraq, March 1, 1991. Iraq officially accepted cease-fire terms, April 6, 1991. Cease-fire took effect April 11, 1991. Currently, the Code of Federal Regulations , 3.2 (i) does not list an official end date. On May 18, 2018, President Donald J. Trump issued a Notice to Congress, "to continue in effect beyond May 22, 2018, for 1 year the national emergency with respect to the stabilization of Iraq declared in Executive Order13303." <11. Recent Conflicts: Afghanistan and Iraq> Shortly after the terrorist attacks in the United States on September 11, 2001, President George W. Bush called on Afghanistan's leaders to hand over Osama bin Laden and other al Qaeda leaders and close their terrorist training camps. He also demanded the return of all detained foreign nationals and the opening of terrorist training sites to inspection. These demands were rejected. The Administration sought international support from the United Nations (U.N.) for military action against Afghanistan. U.N. Security Council Resolution 1368 of September 12, 2001, stated that the Council "Expresses its readiness to take all necessary steps to respond to the terrorist attacks of September 11, 2001 ... " This resolution was interpreted by many as U.N. authorization for military action in response to the 9/11 attacks. As a result, Congress passed S.J.Res. 23 , "Authorization for Use of Military Force," on September 14, 2001. This bill was signed by President George W. Bush on September 18, 2001, as P.L. 107-40 , and it authorized the President to use "all necessary and appropriate force against those nations, organizations, or persons he determines planned, authorized, committed, or aided the terrorist attacks that occurred on September 11, 2001, or harbored such organizations or persons.... " Operations in the region began with U.S. military forces deployed to the region on October 7, 2001. <11.1. Afghanistan Operation Enduring Freedom (OEF)> Operations began with U.S. military forces deployed to Afghanistan to combat terrorism on October 7, 2001, and designated Operation Enduring Freedom. On March 27, 2009, President Barack Obama announced a new strategy in Afghanistan and Pakistan and ordered the deployment of 17,000 troops that had been previously requested by General David McKiernan. In President Obama's "Address to the Nation on the Way Forward in Afghanistan and Pakistan" at West Point on December 1, 2009, he stated that "it is in our vital national interest to send an additional 30,000 U.S. troops to Afghanistan. After 18 months, our troops will begin to come home. These are the resources that we need to seize the initiative, while building the Afghan capacity that can allow for a responsible transition of our forces out of Afghanistan." On June 22, 2011, President Obama again addressed the American people about the way forward in Afghanistan: "We will begin the drawdown of U.S. troops from a position of strength. We have exceeded our expectations on our core goal of defeating al-Qaeda killing 20 of its top 30 leaders, including Osama bin Laden. We have broken the Taliban's momentum, and trained over 100,000 Afghan National Security Forces." As a result, U.S. forces began the withdrawal of 10,000 troops from Afghanistan. On December 28, 2014, after 13 years of combat operations, President Obama and Secretary of Defense Chuck Hagel announced the end of OEF, a conflict that claimed the lives of more than 2,200 American troops, and the beginning of a follow-on mission on January 1, 2015. A transition ceremony was held at the International Security and Assistance Force headquarters in Kabul, Afghanistan, attended by U.S. commanders and allied troops from the North Atlantic Treaty Organization (NATO). For more information, see CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy , by Kenneth Katzman and Clayton Thomas. <11.2. Afghanistan Operation Freedom's Sentinel (OFS)> Effective January 1, 2015, Secretary of Defense Hagel announced that the U.S. mission in Afghanistan would focus on training, advising, and assisting Afghan security forces and designated it as Operation Freedom's Sentinel. During 2015, approximately 13,000 troops, with nearly 10,000 from the United States, were deployed alongside NATO's 28 member nations and 13 partner nations for its Resolute Support Mission (RSM). RSM focused on training, advising, and assisting (TAA) the Afghan Security Institutions (ASI) and the Afghan National Defense & Security Forces (ANDSF) in order to build their capabilities and long-term sustainability. On October 1, 2015, General John F. Campbell, commander, RSM, U.S. Forces-Afghanistan/ISAF, defined the U.S. military's objectives: "U.S. forces are now carrying out two well-defined missions: a Counter-Terrorism (CT) mission against the remnants of Al-Qaeda and the Resolute Support TAA mission in support of Afghan security forces. Our CT and TAA efforts are concurrent and complementary. While we continue to attack the remnants of Al-Qaeda, we are also building the ANDSF so that they can secure the Afghan people, win the peace, and contribute to stability throughout the region." On October 15, 2015, President Obama announced that the posture of 9,800 U.S. troops in Afghanistan would remain through 2016. By the end of 2016, 5,500 troops were expected to remain in Afghanistan to support the U.S. embassy in Kabul and at bases in Bagram, Jalalabad, and Kandahar to train Afghans and focus on counterterrorism operations in the region. On August 21, 2017, President Donald Trump announced his strategy in Afghanistan and South Asia in a speech at Fort Myer, VA. He stated, "In Afghanistan and Pakistan, America's interests are clear: We must stop the resurgence of safe havens that enable terrorists to threaten America, and we must prevent nuclear weapons and materials from coming into the hands of terrorists and being used against us, or anywhere in the world for that matter." On September 2, 2018, Army General John M. Nicholson passed command of NATO's Resolute Support Mission and U.S. Forces Afghanistan to Army General Austin S. Miller during a ceremony in Kabul, Afghanistan. General Miller emphasized to coalition troops that what they are doing in Afghanistan makes their own countries and citizens safer. The "train, advise, assist" mission allows Afghan security forces to take the fight to the enemy, and to give the Afghan government the security needed to provide stability and no longer a safe haven for terrorists. See CRS Report R44853, Additional Troops for Afghanistan? Considerations for Congress , by Kathleen J. McInnis and Andrew Feickert, for more information. <11.3. Iraq Operation Iraqi Freedom (OIF)> In mid-2002, the George W. Bush Administration began deploying U.S. troops to Kuwait. During the 107 th Congress (2001-2002), Congress debated whether to send U.S. troops to Iraq, and on October 16, 2002, H.J.Res. 114 was signed into law as P.L. 107-243 , Authorization for the Use of Military Force Against Iraq Resolution of 2002. This law authorized the President to use military force to "defend the national security of the United States against the continuing threat posed by Iraq" and "to enforce all relevant U.N. Security Council resolutions against Iraq." On November 8, 2002, the U.N. Security Council adopted Resolution 1441. This resolution found Iraq in breach of past U.N. resolutions prohibiting stockpiling and importing weapons of mass destruction (WMDs). The Hussein government in Iraq continued to be uncooperative with U.N. investigators, which heightened the situation through spring 2003. In an address to the nation on March 17, 2003, President George W. Bush gave Iraqi President Saddam Hussein and his sons a 48-hour ultimatum to leave Iraq. On March 19, 2003, President Bush announced to the nation that the early stages of military operations against Iraq had begun and designated them Operation Iraqi Freedom (OIF). On May 1, 2003, in an address to the nation, President Bush declared that "major military combat actions in Iraq have ended," yet U.S. troops remained in Iraq. A ceremony at Camp Victory in Baghdad on January 1, 2010, marked the end of the Multinational Forces-Iraq (MNF-I) and the beginning of United States Forces-Iraq (USF-I), which merged five major command groups into one single headquarters command. As General David Petraeus, head of U.S. Central Command (CENTCOM), noted, "This ceremony marks another significant transition here in Iraq. It represents another important milestone in the continued drawdown of American Forces." Troops from 30 countries have served in MNF-I since 2003. On August 31, 2010, President Obama announced that the American combat mission in Iraq had ended. A transitional force of U.S. troops remained in Iraq with a different mission: advising and assisting Iraq's security forces, supporting Iraqi troops in targeted counterterrorism missions, and protecting U.S. civilians. <11.4. Iraq Operation New Dawn (OND)> Effective September 1, 2010, the military operations in Iraq acquired a new official designation: Operation New Dawn. A short ceremony marked the transfer in which Army General Ray Odierno passed command of USF-I to Army General Lloyd J. Austin. On December 15, 2011, U.S. Armed Forces in Baghdad marked the official end of the war in Iraq. The Chairman of the Joint Chiefs of Staff and other top U.S. military leaders observed the official end of U.S. Forces Iraq's mission after nearly nine years of conflict that claimed the lives of nearly 4,500 U.S. troops. On the military side of Baghdad International Airport, Army General Martin E. Dempsey, Defense Secretary Leon E. Panetta, Army General Lloyd J. Austin III, commanding general of U.S. Forces Iraq, and U.S. Ambassador to Iraq James F. Jeffrey addressed U.S. and Iraqi officials and more than 150 troops and media from around the world. For more information, see CRS Report R45025, Iraq: Background and U.S. Policy , by Christopher M. Blanchard, and CRS In Focus IF10404, Iraq and U.S. Policy , by Christopher M. Blanchard. <11.5. Islamic State-Operation Inherent Resolve (OIR)> Effective October 15, 2014, the DOD designated U.S. and coalition operations "Operation Inherent Resolve" against the terrorist group the Islamic State in Iraq and the Levant (ISIL, another name for the Islamic State) along the Syrian-Iraqi border. The commander of U.S. 3 rd Army and Army Forces Central Command was designated the commander of the Combined Joint Task Force Operation Inherent Resolve (CJTF-OIR) on October 17, 2014. Airstrikes by U.S. and coalition forces continue. As of June 30, 2017, the total cost of operations related to ISIS since kinetic operations started on August 8, 2014, is $14.3 billion and the average daily cost is $13.6 million for 1,058 days of operations. For more information, see CRS Report R44135, Coalition Contributions to Countering the Islamic State , by Kathleen J. McInnis, CRS In Focus IF10328, The Islamic State , by Christopher M. Blanchard and Carla E. Humud.

Many wars or conflicts in U.S. history have federally designated "periods of war," dates marking their beginning and ending. These dates are important for qualification for certain veterans' pension or disability benefits. Confusion can occur because beginning and ending dates for "periods of war" in many nonofficial sources are often different from those given in treaties and other official sources of information, and armistice dates can be confused with termination dates. This report lists the beginning and ending dates for "periods of war" found in Title 38 of the Code of Federal Regulations, dealing with the Department of Veterans Affairs (VA). It also lists and differentiates other beginning dates given in declarations of war, as well as termination of hostilities dates and armistice and ending dates given in proclamations, laws, or treaties. The dates for the recent conflicts in Afghanistan and Iraq are included along with the official end date for Operation New Dawn in Iraq on December 15, 2011, and Operation Enduring Freedom in Afghanistan on December 28, 2014. Operation Inherent Resolve continues along the Syrian-Iraqi border effective October 15, 2014. For additional information, see the following CRS Products: CRS In Focus IF10539, Defense Primer: Legal Authorities for the Use of Military Forces, by Jennifer K. Elsea; CRS Report RL31133, Declarations of War and Authorizations for the Use of Military Force: Historical Background and Legal Implications, by Jennifer K. Elsea and Matthew C. Weed.

<1. Introduction> Under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148 , as amended), the definition of income for eligibility for certain Medicaid populations and premium credits in the exchanges is based on modified adjusted gross income (MAGI). The initial intent of using MAGI was to standardize the definition of income for Medicaid eligibility purposes to reduce some of the variability and complexity that exists under the current Medicaid program and to provide consistency between Medicaid and the health insurance exchange. MAGI is equal to adjusted gross income (AGI) plus certain foreign earned income and tax-exempt interest. AGI is equal to gross income minus certain exclusions (e.g., public assistance payments, contributions to retirement plans) minus some above-the-line deductions (e.g., trade and business deductions, losses from sale of property, and alimony payments). The use of MAGI, however, has raised concerns among Congress and the Obama Administration, as it excludes some income categories either partially or altogether and is, thus, different than the income definition used in most other federal low-income programs, like Supplemental Security Income (SSI) and Department of Veterans Affairs (VA) benefits, which include most sources of income, taxable and nontaxable, when determining eligibility. By excluding some types of income, individuals and families with a higher percentage of total income relative to the federal poverty level may qualify for Medicaid and premium credits. This report first describes the relevant Medicaid and health insurance exchange provisions in ACA that rely on MAGI. It then discusses what is and is not included in this definition of income. Since Social Security income has been noted by others as a concern when defining income, the report discusses the enactment of legislation to include all Social Security benefits in the MAGI definition (and not just taxable benefits). Finally, the report raises some issues for Congress in considering changes to the definition of income for Medicaid eligibility and premium credits in the health insurance exchanges. <2. Medicaid Eligibility and ACA> Medicaid is a means-tested program providing health insurance to certain low-income individuals. Today, people qualify for Medicaid if they meet the program's categorical requirements and have income and assets equal to or below state-specified thresholds. Section 2001 of ACA added a new mandatory coverage group to the Medicaid statute to include certain individuals (under the age of 65) with income at or below 133% of the federal poverty level (FPL) (effectively 138% FPL as a result of the 5% income disregard) by January 1, 2014, or sooner at state option. This mandatory expansion of Medicaid was included in a legal challenge of the law: National Federation of Independent Business v. Sebelius (NFIB). On June 28, 2012, the United States Supreme Court issued its decision in NFIB. The Supreme Court held that the federal government cannot terminate current Medicaid federal matching funds if a state refuses to expand its Medicaid program to include nonelderly, nonpregnant adults under 133% of the federal poverty level. If a state accepts the new ACA Medicaid expansion funds, it must abide by the new expansion coverage rules. However, based on the Court's opinion, a state can refuse to participate in the expansion without losing any of its current federal Medicaid matching funds. The Court's decision leaves enforcement of all other provisions of ACA intact, including the exchange provisions and the use of MAGI. States that choose to participate in this ACA expansion will cover most nonelderly citizens (including childless adults, parents, and individuals with disabilities) up to 133% FPL, and the income that is compared with this threshold for individuals in this group will be based on MAGI. (Greater detail about what is and is not included in MAGI will be discussed later in this report.) In addition to individuals eligible under the ACA expansion group, ACA also requires the new MAGI counting rule to be used to assess the financial eligibility for most of Medicaid's other nonelderly populations eligible under prior law. Under ACA, certain groups 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 the following groups: (1) individuals who are eligible for Medicaid through another federal or state assistance program (e.g., foster care children and individuals receiving SSI), (2) the elderly, (3) certain disabled individuals who qualify for Medicaid on the basis of being blind or disabled without regard to whether the individual is eligible for SSI, (4) the medically needy, and (5) enrollees in a Medicare Savings Program (e.g., Qualified Medicare Beneficiaries for whom Medicaid pays the Medicare premiums or coinsurance and deductibles). In addition, MAGI does not affect eligibility determinations through Express Lane enrollment (to determine whether a child has met Medicaid or CHIP eligibility requirements), for Medicare prescription drug low-income subsidies, or for determinations of eligibility for Medicaid long-term services and supports. During a transitional period between April 1, 2010, and January 1, 2014, states have the option to extend Medicaid to individuals eligible under the new eligibility group up to 133% FPL as long as the state does not extend coverage to (1) individuals with higher income before those with lower income or (2) parents unless their children are enrolled under the state plan, a waiver, or in other health coverage. Prior to 2014, states are not required to use the MAGI counting rules when determining income eligibility for the new eligibility group up to 133% FPL. States that pick up this option may apply a different income counting methodology, such as that used by SSI, as long as it is approved by the Secretary. During this transitional period, states may apply less restrictive income counting methodologies as long as such methodologies are available to all members in a given group. <3. Premium Credits Under ACA> ACA requires health insurance exchanges to be established in every state by January 1, 2014, either by the state itself or by the Secretary of Health and Human Services (HHS). The ACA exchanges are not insurance companies; rather, they will coordinate the offer of private health plans to qualified individuals and small businesses. Generally, the plans offered through the exchanges will provide comprehensive coverage and meet all ACA market reforms, as applicable. To make exchange coverage more affordable, eligible individuals may receive premium assistance in the form of tax credits. Eligibility for the premium credit is based, in part, on income and relies on the MAGI definition. <3.1. Income Eligibility for Premium Credits> Beginning in 2014, qualifying individuals will be able to receive premium tax credits toward the purchase of exchange coverage. The credit is an advanceable, refundable tax credit, meaning taxpayers need not wait until the end of the tax year to benefit from the credit (advance payments will actually go directly to the insurer ) and may claim the full credit amount even if they have little or no federal income tax liability. ACA specifies that premium credits will be available to "applicable taxpayers" in a "coverage month" beginning in 2014. An applicable taxpayer is an individual who is part of a tax-filing unit; is enrolled in an exchange plan; and has household income (defined as MAGI) between 100% and 400% of the federal poverty level (with exception ). A coverage month refers to a month in which the applicable taxpayer paid for coverage offered through an exchange, not including any month in which the taxpayer was eligible for "minimum essential coverage," other than through the individual health insurance market, with exceptions. <3.1.1. Amount of Premium Credits> The amount of the tax credit will vary from person to person: it depends on the MAGI of the tax-filer (and dependents), the premium for the exchange plan in which the tax-filer (and dependents) is (are) enrolled, and other factors. In certain instances, the credit amount may cover the entire premium and the tax-filer will pay nothing toward the premium. In other instances, the taxpayer may be required to pay part (or all) of the premium. For this latter scenario, the amount that a taxpayer who receives a premium credit would be required to contribute toward the premium is capped as a percentage of MAGI. That percentage will be less for those with lower MAGI compared with those with higher MAGI, where income is measured based on MAGI relative to the FPL. For taxpayers with MAGI between 100% FPL and 133% FPL, the amount they would be required to contribute toward the premium will be capped at 2% of MAGI. For taxpayers with income 300%-400% FPL, their premium contribution will be capped at 9.5% of MAGI. ACA further specifies the "applicable percentages" that premium credit recipients, whose incomes are between those two MAGI bands, would be required to pay toward the cost of exchange coverage. The premium credit amount would be the arithmetical difference (if any) after subtracting the maximum premium contribution amount from the premium for the second-lowest-cost silver plan in the enrollee's local area. While premium credits will not be available until 2014, for illustrative purposes, consider what the maximum premium contributions would be for exchange enrollees if premium credits were available in 2012. For example, an exchange enrollee who is eligible for the credit with MAGI at 200% FPL may be required to pay up to 6.3% of MAGI toward the cost of exchange coverage. In 2012, 6.3% of MAGI at 200% FPL for one person is equal to approximately $117 per month (see Table 1 ). In other words, the required monthly contribution for self-only coverage is $117, if premium credits were available in 2012. If the premium for the second-lowest-cost silver plan is greater than $117 per month, that excess would be the amount of that enrollee's premium credit (provided that the premium for the plan in which the person actually enrolled was more than the excess amount). With respect to this premium credit calculation, an individual who enrolls in an exchange plan that is more expensive than the second-lowest-cost silver plan will have to pay the additional premium amount. <4. The Definition of Income Under ACA as Amended> ACA created Sec. 36(B) of IRC to define household income based on MAGI for purposes of Medicaid eligibility for certain populations and premium credits for coverage through the health insurance exchanges. Specifically, gross income is total income minus certain exclusions (e.g., public assistance payments, contributions to retirement plans). From gross income, adjusted gross income (AGI) is calculated to reflect a number of deductions, including trade and business deductions, losses from sale of property, and alimony payments. MAGI is defined as AGI plus certain foreign earned income and tax-exempt interest. As originally enacted under ACA, AGI (and consequently MAGI) includes only sources of income that are taxable. Thus, some sources (or types) of income that may be considered resources for determining whether a person (or couple) is low-income were only partially included, whereas others were not included at all. Two sources of income that were partially included in the initial ACA MAGI definition were non-taxable Social Security benefits and non-taxable pension and annuity income. Examples of other sources of income that are not included in MAGI are fringe benefits, cafeteria plan benefits, gifts (cash, property, or in-kind), and inheritances (see ). These may be considered resources for determining low-income. In addition, as discussed later, many other low-income programs include some measure of liquid assets as resources when determining eligibility. This definition of MAGI raised concerns, especially with respect to exclusion of non-taxable Social Security benefits. Generally, Social Security beneficiaries aged 65 and older are eligible for Medicare coverage for health care services. However, under the initially enacted ACA definition of MAGI, individuals and households who choose to receive their Social Security benefits early at the ages of 62 through 64 could potentially qualify for Medicaid if their MAGI was no higher than 133% of the FPL (or 138% of FPL because of the 5% disregard), or for premium credits in the newly established health care exchanges if their MAGI was between 100% to 400% of the FPL, even if their total income was much higher. Specifically, if the ACA definition of MAGI was used, not all Social Security income would be included in the MAGI definition and, for the majority of Social Security beneficiaries, no Social Security income would be included in MAGI. To address this concern, the original ACA definition of MAGI was later amended under P.L. 112-56 , which among other things, included non-taxable Social Security in the definition of MAGI. This change did not affect the treatment of non-taxable pension and annuity income, which continues to be partially excluded under the amended definition of MAGI. <5. Issues for Congress> There has been increased interest in Congress to change the ACA definition of income for determining Medicaid eligibility for new enrollees and premium credit eligibility to be more inclusive and more consistent with other low-income programs. A number of issues might be considered in exploring the consequences of the change. First, the initial intent of ACA was to standardize current rules governing Medicaid eligibility for a majority of Medicaid-eligible groups (e.g., non-disabled children, parents, pregnant women, and caretaker relatives) in order to reduce the variability and complexity of these definitions under the current Medicaid program. An alternative definition may add complexity compared with MAGI. In addition, because adjusted gross income (on which MAGI is based) can be computed largely from information on an individual's federal tax return, verification of income is streamlined. If an alternative definition is used that is not based on tax return information, the administrative complexity of verifying nontaxable income from different sources comes into play. Third, the definition was developed to be consistent so that qualifying for Medicaid and qualifying for premium credits in the exchange would be mutually exclusive. So changing the definition for Medicaid should also apply to premium credits. Finally, many of the current legislative proposals have focused largely on the inclusion of Social Security benefits in income definitions for eligibility purposes. However, most other low-income programs include other types of income (e.g., nontaxable pensions) and asset holdings that are also excluded from MAGI. This section discusses these issues in greater detail and identifies how other federal low-income programs define and verify income for eligibility purposes. <5.1. Variability and Complexity of Current Medicaid Income Definitions> Under today's general rules for determining income eligibility for Medicaid, states are required to follow the same rules and processes used by the most closely related cash assistance program in their state to determine eligibility. For example, children eligible for Medicaid who are receiving child welfare services follow the income eligibility rules of the Title IV-E foster care and adoption assistance programs. Low-income families with children follow the income counting rules of the former Aid to Families with Dependent Children (AFDC) program, and aged, blind, or disabled individuals follow the eligibility rules of the Supplemental Security Income (SSI) program, except in states that have elected the option of not providing Medicaid for all SSI recipients (209(b) states). Differences in income eligibility determination rules across different Medicaid eligibility categories increase the complexity of determining eligibility for the Medicaid program. For Medicaid eligibility groups that rely on the former AFDC income eligibility rules, not only were the rules complex but there was large variability across the states. For example, the state AFDC methodologies had both mandatory and optional income exclusions and disregards. Some of these disregards applied to recipients but not applicants, meaning that it was harder to become eligible for AFDC than to continue receiving benefits. To further complicate matters, a gross income test equal to 185% of a state's standard of need applied after certain exclusions and disregards were taken into account (e.g., the first $50 of child support) but before others (e.g., earned income disregards). In addition, many states obtained waivers to operate their AFDC programs outside of the standard rules including those that applied to disregards. Program rules also defined the group of individuals whose income, resources, and needs were considered as a family or a unit for purposes of determining eligibility and payment amounts. As with the former AFDC program, not all income and resources are counted in the SSI income methodologies. In general, the SSI program assesses unearned income as well as earned income for the purpose of determining eligibility. Examples of monthly unearned income exclusions permitted under the SSI program's income counting rules include food stamps, housing assistance, energy assistance, student grants and scholarships for educational expenses, and a general income exclusion of $20 that applies to income that is not needs-based. Examples of monthly earned income exclusions permitted under the SSI income counting rules include the first $65 of earnings, one-half of earnings over $65, and impairment-related expenses for blind and disabled workers. In some cases, the income and resources of non-recipients (e.g., a parent or spouse) are counted in determining eligibility and payment amounts. In addition, while the Medicaid statute requires states to start by using the same rules and processes (or methodology) as the cash assistance programs, the statute also gives states the authority to cover higher-income individuals under many eligibility pathways by using additional disregards (i.e., less restrictive methodologies) that reduce their countable income to the threshold that is normally allowed. These statutory authorities permit states to cover higher-income individuals under many eligibility pathways. Although some information is available, with the flexibility that states are provided for determining countable income under Medicaid, it is difficult to identify the full range of exclusions and disregards that states may use in practice today. The transition to MAGI income counting rules for most Medicaid-eligible populations (e.g., non-disabled children, parents, pregnant women, and other caretaker relatives) beginning in 2014 (or sooner at state option) was intended, in part, to reduce the variability and complexity of the definition of income under the current Medicaid program. However, because the MAGI definition of income is less inclusive than the definitions of income used in many social programs, it may result in permitting individuals and families with a higher percentage of total income relative to the federal poverty level to qualify for Medicaid. For example, under today's Medicaid income counting rules, any voluntary contributions made by relatives or friends are to be taken into account by the state in determining Medicaid eligibility. Under the MAGI income counting rules, gifts (cash and in-kind) and inheritances are not taken into account when determining income eligibility for populations where MAGI income counting rules will apply. It is possible that an individual eligible under the new mandatory eligibility pathway with annual income less than 133% of FPL could be determined eligible for Medicaid, and while receiving gifts (cash and in-kind) to cover, for example, the cost of food, rent, and other living expenses that are not counted as income. The same also may be true for groups exempted from the MAGI income counting rules. It is also possible that an individual eligible for Medicaid under one of the optional eligibility groups that are explicitly exempt from MAGI income counting rules (beginning in 2014) may also meet the income eligibility test for the new mandatory eligibility group that will rely on MAGI income counting rules. In general, that individual may choose the pathway that is in the best interest of the recipients. For example, the individual might choose the pathway that would entitle him or her to more benefits, or one that uses the MAGI income eligibility definition in lieu of the SSI income definition rules to protect funds (e.g., gifts) not taken into account when determining the individual's eligibility for Medicaid. For individuals who would be eligible under more than one category, Medicaid regulations specify that the individual will be determined eligible for the category he or she selects. <5.2. Administrative Costs of Using a More Inclusive Income Measure> The problem with not using MAGI (or any income measure tied to the tax return) is that validation of income would no longer be done primarily through tax returns. While non-taxable Social Security income is reported for informational purposes on a tax return, not all non-taxable income is reported on an individuals' tax return. For example, as shown in Table 3 , individuals applying for SSI must provide documentation directly to an entity that must ensure that those documents are complete and valid. This could be administratively cumbersome to collect and validate. These administrative costs would be highest for premium credits largely because it is an entirely new program and because of the expected volume of potential applicants. CBO estimates that approximately 19 million individuals would receive premium credits in 2019. For Medicaid eligibility this would be less of an issue because many states already use SSI definition for other categories of Medicaid eligibility and have set up processes for income verification. Under current law, the Medicaid program requires states to collect applicants' Social Security numbers and wage information from agencies administering state unemployment compensation laws, as well as wage income and other information from the Social Security Administration and the Internal Revenue Service. Employers are also required to make quarterly wage reports to a state agency. The health insurance exchanges, on the other hand, would have to develop and support an administrative process to verify nontaxable income not currently included in MAGI. <5.3. Consistency Between Medicaid and Premium Credit Definition of Income> The definition of income in ACA (as amended by P.L. 112-56 ) was developed to be consistent between the Medicaid and premium credit provisions. As long as a person is eligible for Medicaid and can access those benefits through a state Medicaid program, that person may not receive a premium credit. ACA further requires state exchanges to identify individuals eligible for Medicaid and premium credits. Likewise, Medicaid programs must be able to determine applicants' eligibility for subsidized exchange coverage. These eligibility determination and enrollment provisions ("ACA screen and enroll requirements") were intended to ensure that there is coordination between the exchanges and Medicaid. <5.4. Definitions of Income Used in Selected Low-Income Programs> If the MAGI definition of income is changed, the key question becomes what definition of income should be used. In determining this, it is instructive to understand key differences between using the current definition of income derived from a tax return versus income definitions used by other low-income programs for eligibility purposes. Definitions of income and household (or family unit) are different between the tax system and low-income programs, reflecting the different purposes of the systems. In general, the purpose of the income tax system is to collect income taxes, and the definitions of income and tax unit were developed to meet this purpose. A tax unit (or tax filing unit) is the taxpayer and, if married, the taxpayer's spouse. The tax unit may have qualified children or qualified relatives associated with the tax unit as dependents for certain tax provisions. For tax purposes this is the "household." A household, using the Census definition, may consist of a number of tax units. For example, a single household may have three tax units: (1) a married couple with minor children; (2) an adult child of the married couple; and (3) an elderly parent of the married couple. All three of these tax units would be evaluated separately for Medicaid eligibility. Beginning in 2014, tax unit 2 would have a Medicaid eligibility pathway not currently available. Use of MAGI may permit entitlement to Medicaid that would not exist under current income rules for tax units 1 and 2. Income for tax purposes is the income that is taxed at that level; in this case, the personal income tax level. Generally, income is only the income of the taxpayer, and if married the taxpayer's spouse. However, under certain circumstances, the income of minor children may be included. Some types of income may be excluded partially or fully from income for tax purposes because they have been, or will be, taxable to other personal income tax units, or at other levels (such as business, gift, or estate taxes). Also, some types of income are excluded to encourage (or reward) certain behavior by tax units, such as saving for retirement. In contrast, the purpose of social programs is to provide support (financial, medical, or other) to persons and families that may not be able to provide the needed support themselves. The programs generally rely on a concept of need that uses definitions of household and income to determine the level of financial resources available from the household to support the needs of the family or individual. A social program may consider everyone related in the household (or residence) as a household regardless of the tax unit status of the members of the household. Also, many social programs use a definition of income that is more inclusive than the definition for income taxes. This is because for social programs, the relevant factor for income is not who is responsible for paying the taxes associated with the income, but who is the final recipient of the income. For this reason many social programs require applicants and individuals receiving benefits to report gifts (cash and in-kind) and inheritances, as these gifts and inheritances can be used to support the applicant or recipient, even though they are not taxable to the applicant or recipient. Across social programs, the definition of income (what income is counted) and the specific rules for counting income are not consistent and will vary. Table 3 shows some of the definitions of income used by various social programs. <6. Conclusion> Both the Administration and Congress have recognized potential shortcomings of using MAGI to determine eligibility for Medicaid provisions and premium credits in ACA. The initial intent of using MAGI was to standardize the definition of income for Medicaid eligibility purposes in order to reduce some of the variability and complexity that exists under the current Medicaid program and to provide consistency between Medicaid and the health insurance exchange. Although changing the definition of income to include a more comprehensive measure that includes other nontaxable income sources would be more consistent with other low-income programs, such as SSI, this change may increase the administrative complexity, especially for the premium credits in the health insurance exchanges.

Under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended), the definition of income for eligibility for certain Medicaid populations and premium credits in the exchanges is based on modified adjusted gross income (MAGI). The initial intent of using MAGI was to standardize the definition of income for Medicaid eligibility purposes to reduce some of the variability and complexity that exists under the current program and to provide consistency between Medicaid and the health insurance exchange. The use of MAGI, however, raised some concerns among Congress and the Obama Administration, as the definition in ACA excluded some types of income either partially or altogether. Of particular interest was the potential impact on eligibility for Medicaid and premium credits for early retirees (aged 62 through 64) receiving Social Security benefits, as some or all of their Social Security income may have been excluded from the MAGI definition of income. By excluding some types of income from the ACA definition, individuals and families with a higher percentage of total income relative to the federal poverty level may qualify for Medicaid and premium credits. To address these concerns, P.L. 112-56 was enacted into law on November 21, 2011, which among other things, amended the definition of income for these programs and included non-taxable Social Security in the definition of MAGI. The new law, however, does not address other forms of non-taxable income that are not currently in the MAGI definition (e.g., retirement plan contributions, gifts and inheritance). In evaluating the definition of MAGI, a number of issues might be considered. First, an alternative definition may add complexity compared with the use of MAGI. Specifically, because adjusted gross income (on which MAGI is based) can be computed largely from information on an individual's federal tax return, verification of income is streamlined. If an alternative definition is used that is not based on tax return information, the administrative complexity of verifying nontaxable income from different sources comes into play. Second, the definition was developed to ensure coordination between Medicaid and premium credits in the health insurance exchange. A change in the definition of income for Medicaid also would be necessary for premium credits to ensure consistency between Medicaid and the premium credit offered to selected individuals who purchase private health insurance through the exchanges. Finally, the enactment of P.L. 112-56 focused largely on the inclusion of Social Security benefits in income definitions for eligibility purposes. However, most other low-income programs include other types of income (e.g., nontaxable pensions) and asset holdings that are also excluded from MAGI.

<1. Introduction> Member-constituent communications serve a vital role in representative government. If information about legislative activity cannot easily flow from Members to constituents, citizens will be less capable of drawing policy judgments regarding congressional actions. Likewise, if constituents cannot easily communicate their preferences to Members, congressional action is less likely to reflect the interests of the governed. Constituent communication is one of the basic building blocks of a representative democracy. Throughout American history, concerns about this vital democratic connection have underpinned the existence of the franking privilege, which for much of the 19 th century allowed not only Members to send mail without personal cost, but also constituents to send mail to Congress free of charge. Technological changes during the 19 th and early 20 th centuries most notably the rise of mass newspapers, the invention of the telephone, and advances in transportation that allowed Members to travel more easily aided Members and constituents in exchanging information with each other. Until the late 20 th century, most Member-constituent interactions consisted of four forms of communication postal mail; telephone calls; press releases, including through newspapers and other media; and face-to-face meetings. Although Members continue to use these traditional modes of interaction, the use of new electronic communications technology is dramatically increasing. For example, prior to 1995, there were virtually no email exchanges between Members and constituents. More recently, the volume of emails received by the House of Representatives has come to dwarf the volume of postal mail, while the amount of postal mail sent to Congress has continued to decline. Member official websites, blogs, YouTube channels, and Facebook pages all nonexistent 20 years ago also receive significant traffic. In less than 20 years, the entire nature of Member-constituent communication has been transformed, perhaps more than in any other period in American history. The rise of such electronic tools has altered the traditional patterns of communication between Members and constituents. Electronic technology has reduced the marginal cost of Member-constituent communications; unlike postal letters, Members can reach large numbers of constituents for a fixed cost, and constituents can reach Members at virtually no cost. The relay of information from Capitol Hill to the rest of the country (and vice versa) has been reduced to at times an instantaneous exchange. As soon as something happens in Congress, it can be known widely in real time. Members can now reach large numbers of citizens who are not their own constituents. These changes have wide-ranging implications for the work of Congress. They are altering how Members organize their personal offices and influencing how Members manage their legislative activities on and off the floor. And, perhaps most importantly, they are changing the nature of representation in the United States, as Members can more easily engage wider political and policy constituencies, in addition to their core interactions with their geographic constituencies. This report is divided into five parts. First, it discusses the role of constituent communications in a representative democracy, and briefly reviews the historical development of constituent communications in the United States. Second, it reviews the current nature of electronic communications in Congress. Third, it discusses how existing laws, rules, and regulations might apply to social media. Fourth, it discusses some of the strategic opportunities and challenges social media presents to Member offices. Finally, it presents some concluding observations that cover both the public nature of social media and the changing nature of representation. <2. Evolution of Member-Constituent Communications> Since the Continental Congress, constituents have been communicating with their elected representatives. How communication occurs, however, has changed significantly. Changes in congressional communications technology and use can be considered in three groups: 1. historical communications (e.g., postal mail, telephone calls, press releases, and face-to-face meetings), 2. electronic communications (e.g., email and websites), and 3. social media (e.g., web 2.0, Twitter, Facebook, and other social media platforms). <2.1. Historical Communications> Constituent communications serve a vital role in representative government. In early America, concerns about these vital democratic connections underpinned the existence of the franking privilege. The franking privilege has its roots in the 17 th century. The British House of Commons instituted it in 1660, and free mail was available to many officials under the colonial postal system. In 1775, the First Continental Congress passed legislation giving Members mailing privileges so they could communicate with their constituents. In 1782, under the Articles of Confederation, Congress granted Members of the Continental Congress, heads of various departments, and military officers the right to send and receive letters, packets, and dispatches under the frank. After the adoption of the Constitution, the First Congress passed legislation for the establishment of federal post offices, which contained language continuing the franking privilege as enacted under the Articles of Confederation. Under the Post Office Act of 1792, Members could send and receive under their frank all letters and packets up to two ounces in weight while Congress was in session. Subsequent legislation extended Member use of the frank to a specific number of days before and after a session. The act of 1825 also provided for the unlimited franking of newspapers and documents printed by Congress, regardless of weight. Scholarly work suggests that franked mail played an important role in national politics during the late 18 th and early 19 th centuries. In 1782, James Madison described the postal system as the "principal channel" that provided citizens with information about public affairs. Members mailed copies of acts, bills, government reports, and speeches, serving as a distributor for government information and a proxy for the then-nonexistent Washington press corps. The distribution of information by Members provided local newspapers across the country with news on Washington politics. Because franking statutes allowed Members to both send and receive franked mail during much of the 19 th century, constituents could also mail letters to their Senators and Representatives for free. Historically, the franking privilege was seen as a right of the constituents, not of the Members. When the franking statutes were first revised in 1792, a proponent argued that "the privilege of franking was granted to the Members ... as a benefit to their constituents." More generally, President Andrew Jackson suggested that the Post Office Department itself was an important element of a democratic republic: This Department is chiefly important as a means of diffusing knowledge. It is to the body politic what the veins and arteries are to the natural carrying, conveying, rapidly and regularly to the remotest parts of the system correct information of the operations of the Government, and bringing back to it the wishes and the feelings of the people. Even in the modern era, in addition to direct communications with constituents about matters of public concern, proponents of franking argue that free use of the mails allows Members to inform their constituents about upcoming town-hall meetings, important developments in Congress, and other civic concerns. Proponents argue that without a method of directly reaching his or her constituents, a Member would be forced to rely on intermediaries in the media or personal costs in order to publicize information. Technological changes during the late 19 th and early 20 th centuries most notably the rise of mass newspapers, the invention of the telephone, and advances in transportation aided Members and constituents in the exchange of information. Until the late 20 th century, the vast majority of Member-constituent communications comprised four forms of communication postal mail; telephone calls; press releases, including through newspapers and other media; and face-to-face meetings. How Representatives and Senators have used various forms of communication to reach constituents and understand their preferences has changed based on media. For example, one Representative recounted that "newspapers, editors, and newsmen in one's district are particularly helpful in assessing public opinion" among constituents in the district. Another Representative emphasized the importance of being seen by constituents in the district and making sure everyone knows your name. Finally, another Representative recalled purposefully making phone calls to constituents who disagreed with him "not to change the individual's minds, but to let them know that I had read their letters, appreciated their opinion, but had legitimate reasons for disagreeing with them." Contemporary law and chamber regulations continue to reflect the belief that these traditional forms of Member-constituent communication are vital to the functioning of our representative system. By law, Representatives and Senators are provided an annual allowance that may be used to frank letters, make long-distance phone calls, travel to and from their districts for the purpose of interacting with constituents, and buy office equipment that supports their constituent contact. <2.2. Electronic Communications> Although all Members continue to use traditional modes of constituent communication, they have many more choices and options than they did 20 years ago. In addition to traditional modes of communication Members can now reach their constituents via email, websites, tele-townhalls, online videos, social networking sites, and other electronic-based communication applications. Constituents can take advantage of these new mediums as well. There is overwhelming evidence that both Members and constituents are taking advantage of these new mediums; the use of new electronic communications technology is dramatically increasing. On the constituent side, email has now become the preferred form of communication with Congress. Prior to 1995, there were virtually no email exchanges between Members and constituents. More recently, the volume of emails received by the House of Representatives has come to dwarf the volume of postal mail received. Similar growth was seen in incoming Senate electronic mail. Figure 1 shows the rapid growth of email from constituents to Congress between 1995 and 2011, after widespread Internet access became available in the late 1990s. In comparison, the amount of postal mail sent to Congress dropped by more than 50% during the same time period, from almost 53 million pieces of mail in 1995 to fewer than 22 million pieces in 2011. But it had been replaced by over three hundred million emails. By 2011, postal mail was 7% of all mail coming to Capitol Hill. Communications from Congress have seen a similar transformation, with electronic communications over time seeing much greater volume than more traditional means of communication. Figure 2 reports the volume of quarterly mass postal mailings in the House from 1998 to 2008, and then the quarterly volume of all mass communications (which include postal mailing) from 2009 to 2015. Electronic communications have become, far and away, the most common method of Members communicating with their constituents. Whereas aggregate postal mass mailings never reached 60 million pieces in any quarter between 1998 and 2008, hundreds of millions of pieces of mass communication were sent in most quarters between 2009 and 2015. At the same time that Member use of email communications is increasing, the use of franked mail is at record lows. The total cost of official mail coming out of Congress (adjusted for inflation) is at its lowest point since Congress began reimbursing the Post Office for congressional mail costs in FY1954. In nominal dollars, official mail costs were down to $8.3 million in FY2015, from a high of over $113 million in FY1988. This decline in expenditures on postal mail was initially due to reform efforts in the late 1980s, including public disclosure of mail costs for individual Members and direct charging of Members' budgets for the cost of mail they send. However, nominal mail costs have also declined over 60% in the past 12 years, from $19.3 million in FY2003 to $8.3 million in FY2015. Adjusted for inflation, this is over a two-thirds decrease in mail expenditures, almost certainly driven by a shift toward electronic communications. <2.3. Social Media Adoption and Usage> In addition to the rise of email, the official websites, blogs, YouTube channels, and Facebook pages of Members all nonexistent 20 years ago also receive significant traffic. By January 2013, all 100 Senators had created Twitter accounts, and virtually all Members of Congress had at least one official congressional social media account. These numbers reflect a continued increase in the adoption of social media by individual Members. Whereas in September 2009, only 205 Members 39 Senators and 166 Representatives (a total of 38%) had a registered Twitter account, by January 2012, that number had doubled with a total of 78.7% of Members having an official congressional Twitter account, and 87.2% having an official congressional Facebook account. Social media is not only adopted by Members of Congress. Congressional committees have also begun to use the technology. In a recent study of committee social media usage, 90% of committee majorities were found to have either a Twitter or Facebook account, while 76% of committee minorities had adopted the platforms. In addition to the adoption and use of Facebook and Twitter, Members of Congress and committees have begun to use other social media services. Surveys of Member webpages in 2015 found that YouTube, Instagram, and Flickr are the most popular social media platforms after Facebook and Twitter. In fact, more than 90% of Representatives and Senators had adopted YouTube, 42% had adopted Flickr, and 25% had adopted Instagram. Fewer than 10% of Representatives and Senators had adopted other social media platforms. <3. The Nature of Electronic Communications> The rise electronic communication has altered the traditional communication between Members and constituents. Unlike postal letters, Members can reach large numbers of constituents for a fixed cost, and constituents can reach Members at virtually zero cost. Likewise, information gets from Capitol Hill to the rest of the country much more quickly, to the point that as soon as something happens in Congress, it can be known everywhere in real time. Finally, Members can easily reach large numbers of citizens who are not their own constituents. <3.1. Electronic Communications Are Inexpensive> The representational communication activities of both Members and constituents are constrained by cost. Representatives and Senators are given a fixed amount of money known as the Members' Representational Allowance (MRA) in the House and the Senators' Official Personnel and Office Expense Account (SOPOEA) in the Senate for the hiring of staff, travel expenses to and from their district or state, constituent communications, and other office expenses. Prior to the rise of electronic communications, this budget was a larger constraint on Members' representation and communications activities; postal mail and long-distance phone calls have a stable marginal cost. Likewise, constituents were constrained by their own personal financial budget; the marginal value of a phone call or letter to Congress had to be weighed against the marginal value of any other use of the same money. In effect, both Members and constituents were constrained, with the decision to contact made only when the importance of communication outweighed the cost of the communication. Electronic communications have virtually no direct marginal cost. Once a Member or constituent pays the startup and recurring costs of owning a computer and purchasing Internet access, there is no further financial cost for each individual email communication between them. Almost all electronic communication media (e.g., email, social media, tele-townhalls, and web advertisements) tend to have fixed capital or startup costs, but are then largely free to post messages on the margin. The result is that, for both Member and constituent, the only marginal cost to sending an additional communication is time. Direct financial costs have been largely eliminated. The impact of the near-zero cost of communications between Members and constituents likely has an effect on a Member's ability to determine the intensity of preferences, since the cost for a constituent reach out to Congress has been reduced significantly, and the volume of communications has increased significantly. In fact, studies have found that social media drives individuals toward one-sided news information, and that generally, individuals have a preference for one-sided information over a more balanced approach. If the preference for one-sided information holds, Members might be less likely to hear from constituents who disagree with them than those that agree, because those individuals may choose not to follow the Member's posts or Tweets. <3.2. Electronic Communications Are Fast> Electronic communications are faster than traditional forms of Member-constituent communications. This is obvious, but it has several important implications for how congressional offices choose to use electronic communications and how it shapes communications strategy. In the past, if Members wanted to send out time-sensitive communications on congressional action, the best outlet was probably a faxed press release to the media, perhaps to the local newspapers serving their district or state. There was no point in trying to send postal mail directly to constituents for time-sensitive information. Now, however, Members can update constituents on floor activity or other business instantly, using subscribed email lists or social media. Likewise, constituents can use email and social media to contact Members in real time. This changes not only how quickly information can be shared but also the types of information Members and constituents might provide each other. In the past, real-time information about an upcoming amendment on the floor might not have been possible to communicate; the vote might have taken place before the Member could alert the constituents about it, or before constituents could communicate preferences to the Member. With the rise of electronic communications, constituents and Members can easily share information about such an amendment in real time. The rise of direct, speedy communications has the potential to change how Members behave vis-a-vis their constituent's preferences. In his 1990 study, The Logic of Congressional Action , R. Douglas Arnold discussed how constituents might try to influence individual legislators and how Members work to "keep their public positions and actions within the bounds of what their constituents find acceptable." While historically it was difficult to know what constituents thought about many issues, today social media has provided a platform to facilitate constant communication often in real-time to provide specific preferences on a myriad of issues. As Arnold suggested, however, whether or not the preferences expressed on social media represent the most intense followers or are more broadly representative of the district or state, is still unknown. <3.3. Electronic Communications Interact with a Wider Audience> Perhaps the greatest difference between traditional constituent communications and electronic communications is the change in the constituents reached. Traditionally, Members could only reach citizens who were actually their electoral constituents. Following a federal court action ( Coalition to End the Permanent Government v. Marvin T. Runyon , et al ., 979 F.2d 219 (D.C.Cir. 1992)), the Rules of the House were amended to restrict Members from sending franked mail outside of their districts. Even if it was not cost-prohibitive, Members were not allowed to reach a wider-than-district audience using postal mail paid for through official funds. Electronic communications, however, are not so limited. Members can build email subscriber lists many offer such subscription options immediately upon an individual entering their website and the use of social media tools like Facebook, Twitter, and YouTube allows Members to broadcast and interact with a potential constituency far wider than their geographic district. This does, however, create some potential difficulties for Members who would prefer to only communicate with constituents in their district or state; unlike a postal address, an email account or a Facebook account is not attached to a verifiable geographic location. A further discussion of the changing nature of representation will be discussed in the " Concluding Observations " section. <4. Regulation of Social Media> Both the House and the Senate have adopted formal social media policies to guide Representatives and Senators on the appropriate use of official resources in support of their offices' social media policy. The House and Senate policies, however, are not identical and treat the adoption of individual social media platforms in different ways. As social media continues to evolve, regulations may continue to evolve as well. <4.1. House Rules> The Committee on House Administration defines social media accounts as "profiles, pages, channels, or any similar presence on third-party sites that allow individual or organizations to offer information about themselves to the public." Included in the Members' Congressional Handbook , the House Internet policy allows Members to "establish profiles, pages, channels or other similar presence on third-party sites ... ," so long as Members ensure that their official position (i.e., Representative, Congressman, Congresswoman) is clearly stated in the account name. Further, all information provided on Member-controlled social media accounts "is subject to the same requirements as content on Member websites." Therefore, material posted on official Member social media accounts "must be in compliance with Federal law and House Rules and regulations applicable to official communications and germane to the conduct of the Member's official and representational duties." House regulations further allow Members to use official funds from their Member Representational Allowance (MRA) for ordinary and necessary expenses associated with the creation and continued operation of official websites. The creation of profiles, pages, channels, or any similar presence on third-party sites that allow individuals or organizations to offer information about themselves to the public is covered under these regulations. <4.2. Senate Rules> First adopted in 2008, the Senate Internet Services and Technology Resources Usage Rules (Senate Internet Policy) sets rules and guidelines for Senators using social media to conduct official business. The Senate Internet Policy defines covered services, sets out responsibilities and prohibited uses, addresses the use of Senate.gov webpages, and addresses the Senate Committee on Rules and Administration process to approve third-party social media platforms. When a Senator is interested in using a third-party social media site for official communications, the Senate Rules Committee evaluates that platform and determines whether or not it can be used for official purposes. Once the committee has determined that a platform can be used for official purposes, it issues a "Dear Colleague" letter approving the platform and any additional information or requirements necessary for a Senator to use that service. As more tools are developed, the relevant authorities review the platform and provide guidance to Senators. For example, in 2013, the Rules Committee formally announced that Vine was an approved platform. <4.3. Application of Franking Regulations> Use of the congressional franking privilege which allows Members of Congress to transmit postal mail under their signature without postage is regulated by federal law, House and Senate rules, orders of the Committee on House Administration and Senate Rules and Administration Committee, and regulations of the Senate Select Committee on Ethics and the House Commission on Congressional Mailing Standards. Because social media communications do not require use of the postal mail, Member use of social media platforms is not directly affected by franking regulations. The franking regulations, however, are incorporated via reference into some of the chamber and committee regulations regarding electronic communications, particularly unsolicited mass communications. Most Member use of social media platforms is considered "solicited" communication and is exempt from such regulations. However, some forms of social media use may be considered unsolicited mass communications. For example, electronic advertisements purchased by Representatives using their MRA are subject to advisory opinions from the House Commission on Congressional Mailing Standards and must follow commission regulations regarding timing and frankable content. If a Representative decides to purchase a "promoted" tweet on Twitter, it may be considered an unsolicited mass communication and subject to franking timing and content regulations. <5. Challenges of Social Media for Members> As was discussed above under " The Nature of Electronic Communications ," the decision to adopt and use social media as a constituent communications tool has important implications for Member office operations. The cost, speed, and scope of social media present Members with new opportunities to communicate with constituents and wider audiences. The nature of electronic communications presents unique challenges for Members of Congress. These include challenges in the areas of office operations, communications strategies, and constituent representation. <5.1. Challenges for Office Operations> Each congressional office is sometimes thought of as analogous to a small business. As such, individual Representatives and Senators have the ability to decide how to organize and staff their Washington, DC, and district or state offices within the confines of House or Senate rules and available funding. As Members choose to adopt and use social media, how constituent expectations are responded to and how staff are allocated become key challenges. <5.1.1. Communication Expectations> The adoption of electronic communications by congressional offices has increased the potential for speedier communications with constituents and other relevant actors, but has also increased constituent expectations about the speed of communications. Whereas communication with a congressional office used to require the use of the postal system, today communication can be nearly instantaneous using email and social media. The ability to reach constituents in real time has created, for some constituents, an expectation that Members will use electronic communications to rapidly respond. In the past Members may have had days to consider how they would present issues or voting decisions to constituents. Today in many cases they may be expected to provide the same in a matter of hours. Even email, however, does not present the office operations challenges associated with social media. Email, in many ways, is a faster version of postal mail. Most email senders expect a prompt response, but few likely expect an instantaneous interaction. For social media, that is likely not the case. As some analysts have put it, "social media has accelerated the speed at which information is shared, amplified the reach of the messages, and solidified the ability of disparate individuals to organize." Posting to Facebook or Twitter naturally invites followers (who may or may not be constituents) to post responses and to expect real-time replies. In 2012, the American Red Cross conducted a survey of the expectations of individuals who make requests on social media for disaster assistance and found that "three out of four Americans (76 percent) expect help in less than three hours of posting a request on social media, up from 68 percent [in 2011]." Communications with a congressional office likely do not take on the same urgency as someone requesting disaster assistance, but if the response expectations are similar, staff would need to continuously monitor social media accounts to meet constituent expectations. Interacting with constituents on social media, which is arguably one of its most compelling features, would likely require resources to be devoted to ensure timely responses. Some studies have also found that as the speed of communications increases, social context cues decline. Therefore, a change in how Members communicate with constituents could have significant implications for the dissemination of information. As the speed of communications and the number of possible platforms increase, Members likely need to create a communications plan that accounts for these changes and for the use of shorter, more direct language that can convey a message within the defined limits of social media (e.g., 140 characters or less on Twitter). The pressure to craft succinct, social-media-ready communications means that Members are often left unable to explain nuances or complexities of issues to the degree that they might like. <5.1.2. Staff Allocation> Allocation of staff resources is a fundamental building block of office operations strategies, reflecting the priorities of the Member. Constituent service and communications is an important aspect of what goes on in Members' personal offices, but it is far from the only important activity. Members must choose how to allocate resources for communications against other legislative and oversight responsibilities. Consequently, Representatives and Senators choose to allocate staff in different ways. The explosion of electronic communications has put increased pressure on these allocation decisions. To the degree that more staff time needs to be allocated to the collection, processing, and responding tasks associated with communications, less time can be allocated to policy or other work. The number of staffers working in personal offices has increased modestly in the last generation (about a 4% increase in House Members' offices since 1982). There may not be resources to hire additional staff to handle communications. There is evidence that social media is adding to this pressure. One study has found that in the 113 th Congress (2013-2014), 16% of Senators had staff members with "social media" or "new media" in their job titles, reflecting the growing importance of electronic media in staff resource allocation. If an office chooses to use social media only to share information much like a press release it is possible that existing staff levels could be sufficient to manage social media accounts. If, however, Members want social media to be interactive between the office and constituents, existing resource allocations may or may not be sufficient to handle the need to respond in a timely manner. <5.2. Challenges for Communications Strategies> Every congressional office engages in official communication with constituents, other relevant actors, media outlets, and others. The rise of electronic communications and social media has created both opportunities and challenges for such office activities. Whereas in the past many offices were concerned with their ability to reach a wider audience or the ability to react quickly to relevant developments, in the current context concerns may be as much about managing communications with an audience that is overwhelmingly large, or about whether to engage in communications at the real-time pace that is now possible. <5.2.1. Evaluating Constituent Opinion> As described above, the number of incoming emails to Congress in 2011 was more than 10 times as great as the number of pieces of postal mail in 1995. This is almost certainly due to the elimination of a marginal cost for constituents to communicate their preferences to Members electronically. There is virtually no marginal financial cost to sending an email or posting to a social media site, and such electronic communications also have less time costs than sending traditional postal mail, particularly when the communications are produced and distributed by groups, and only forwarded or reposted to Congress by individual citizens. In effect, the intensity threshold at which a constituent might express a preference to a Member has been greatly reduced. Before electronic communications, Members could expect that any constituent willing to spend the time and money to write them had a fairly strong preference or opinion about the subject matter. Members can no longer count on various communications representing the same level of intensity. In effect, congressional offices receive more constituent opinion, but have less ability to determine the intensity of the opinion. Conversely, social media can provide Members of Congress with real-time data that if monitored by staff could provide insight into constituent thinking in a way that has never been possible before. As discussed above, however, dedicating staff to follow and analyze social media trends is not without a cost to staff resources. <5.2.2. Content> The real-time nature of social media presents new challenges for Member offices about what types of content will be covered in communications. In the past, the limiting factor of speed prevented Member offices from engaging in certain types of communications. For example, an amendment introduced in a committee markup and voted on 15 minutes later could only be discussed retroactively. With the advent of social media, Members have the opportunity, if they wish, to engage the public in real time, making it possible to discuss such an amendment between the time it is introduced and when the committee votes on it. Furthermore, if other Members are engaging in such discussions on social media platforms, both constituents and the wider public may become aware of the amendment in real time, and attempt to engage with other Members prior to the vote. If Members or staff choose to take on such real-time communications, there are potential benefits and costs. Real-time communications offer the possibility of Member-constituent information sharing that was never before possible, potentially increasing the degree to which each is informed about the others' preferences. Likewise, the potential for Members to educate their constituents on issues or process in a compelling and interesting way may be dramatically faster, but depending on the social media platform, could be without as much nuance or context. On the other hand, using real-time communications leaves Members and staff with less time for reflection or careful consideration of the message they are sending. Also, engaging in real-time communications, particularly those related to Member activities that were previously impractical from a technological standpoint (such as live-tweeting markup amendments) may create constituent expectations for future engagement and consultation. <5.2.3. Interactivity> Social media can be used to send information to recipients in similar ways to traditional communications. Social media, however, also allows for the possibility of Members or staff to engage both with other legislators and with constituents in real-time online conversations. Recent studies have found that social media is mostly used as a "push" tool by government agencies and elected officials. For Members of Congress, early studies of Twitter found little evidence of anything other than Members posting links to press releases and media events. More contemporary studies have documented the beginning of a shift to more interactive activities, but the percentages of all congressional Tweets, for example, that reply to other users are still very low. The decision to employ an interactive strategy on social media presents a number of challenges. First, the office may want to formalize interactivity protocols. Who can interact on social media on behalf of the office? In what circumstances or for which topics? Second, the scope of interactivity that the office will engage in may need to be clarified. Will the Member or office ever respond to individual tweets, or will they only use social media interactivity capabilities in formalized settings, like a pre-arranged Facebook question-and-answer session? As with other aspects of social media, setting expectations may become an overarching concern. Relatedly, social media seems to change the traditional relationship between Members of Congress and constituents. Instead of information being primarily a one-way street (e.g., either from the constituent to the Member or from the Member to the constituent), with interaction only available in face-to-face or telephone based settings, social media transforms communications into two-way interactions. In fact, social media not only promotes two-way communication, but it also allows constituents to interact with each other, something that has never before been possible. How Members deal not only with two-way communication with constituents, but also the information generated by constituents talking to each other on Twitter or Facebook, may be an important strategic decision. Social media has the potential to provide real-time information about public preferences to Members. <5.2.4. Posting and Responding Policies> Over the past few years, many government agencies (especially in the executive branch) have adopted guidelines or rules for posting and responding to comments on social media platforms. These guidelines or rules often discuss the use of social media during work time, what positions are allowed to access and post on official agency accounts, and policies about timeliness and content of replies. For example, the Department of the Interior's (DOI's) social media policy for official accounts includes a list of covered services (e.g., YouTube, Twitter, Facebook, and Flickr), a reminder that all official communications must follow standard records accessibility and records management practices, and a requirement that communications be officially sanctioned by the agency or bureau. Similarly, the General Services Administration's (GSA's) social media policy includes many of the same features as DOI's, but also includes reminders that content is in the public realm, that language should be chosen with caution, and that discussion of agency-related matters "may need [be] coordinat[ed] ... with the Office of Communications and Marketing (OCM) and the Office of General Counsel (OGC)." Both the House of Representatives and Senate have overarching social media policies for their respective chambers. Because individual Representatives and Senators can control their own office budgets subject to the guidelines and rules set by the House and Senate, respectively, the chamber-wide policies tend to focus on the use of official resources for constituent communications. A more detailed discussion of House and Senate rules and guidelines can be found below under " Regulation ." Within the chamber rules and guidelines, some Members have created their own policies for the use of social media. For example, some Members of Congress include disclaimers or commenting policies on their Facebook or Twitter pages. One Member reminded potential commenters that This is the official page for [the district].... Comments posted by users do not necessarily reflect the views of [the] Congressman ... or his Congressional office. We reserve the right to delete user comments that include profanity, name-calling, threats, personal attacks, or other inappropriate comments or material. Please help us keep this a welcome place for everyone. Setting such policies is seen by some as an important step to setting limits for what can and cannot be posted on official congressional social media pages. While these disclaimers allow the Representative or Senator to be proactive in stopping certain types of posts and language, in order for them to be effective they must be enforced. Enforcement of these types of policies requires appropriate staffing to monitor inappropriate comments quickly and fairly. Since a norm exists, and ethics rules require, that Representatives and Senators treat all constituents the same, regardless of factors such as political viewpoint or activity, the implementation of policies like the one above could be important for the Members and staff and might affect the amount of time necessary to enforce such policies. <5.3. Challenges and Opportunities for Representation> The foundation of representation for Members of Congress is their geographic constituency. The adoption and use of social media, however, is potentially changing the nature and challenges of representation in at least two ways. First, social media grants users potential anonymity. Since individuals fill out their profile information with as much or as a little information as they choose and most social media services allow users to "turn off" geolocation services, it is not always possible to know where a specific user is located. This presents a unique challenge for Members of Congress, many of whom want to interact mostly or exclusively with geographic constituents. Additionally, House and Senate rules for franked mail have long required that franked mail only be sent to postal addresses in a district. While social media is virtually cost free and franking regulations likely do not apply, the idea of gathering information from or otherwise interacting with nongeographic constituents has the potential to change the very nature of representation. The rise of electronic communications and social media has also increased the opportunities for surrogate representation. Political scientist Jane Mansbridge defines surrogate representation as Members representing constituents outside their district based on other shared characteristics. In the traditional formulation, this often happens around specific issues with dispersed national constituencies: for example, a woman might be viewed as best representing or advocating for women's rights. Prior to the rise of electronic communications, few Members were engaged in such surrogate activities. They simply did not have the resource capacity. Representatives were (and still are) barred from sending franked postal mail outside of their districts. The only way to grow a national audience was to appear on television which usually meant having at least the power of a committee chair, or doing something unusually newsworthy. Electronic communications have rearranged this playing field. Even rank-and-file Members can gather a national following to advance their policy objectives with relative ease, and at virtually no financial cost. The zero marginal cost of the Internet, and in particular the social media applications like Twitter, YouTube, and Facebook, have opened up opportunities. Any Member can stake out an issue, make a concerted effort to become a national leader on the issue, and have some chance of success, all without expending almost any marginal resources on communications. Finally, scholars of Congress and the presidency have argued that the rise of mass media, particularly television, has given the President a comparative advantage over Congress. While the President can employ the resources of the executive branch to promote his unitary message, individual Members of Congress lack the institutional resources to compete with the President, and Congress as a whole lacks a unity of message. The rise of electronic communications has arguably allowed Congress, as a sum of its Members, to have a more influential voice in public political debates. <6. Concluding Observations> Since the Continental Congress, individual citizens have been corresponding with their elected representatives. Over time, how these communications took place and the expectations for response have changed. As the speed of communications has increased and the real and marginal costs decreased, the type of information that Members of Congress can communicate and the scope of individuals they communicate with have increased. As this report has discussed, the volume of information that is sent and received by Members' offices and the ability for Representatives and Senators to communicate with more than just their geographic constituencies have created unique challenges and opportunities for constituent communications. The nature of communications between Members of Congress and constituents is evolving. In light of the constant change, several potential implications exist for the continued use of social media as a communications tool. These include the public nature of social media and further consequences for representation. <6.1. Public v. Private Communications in an Online Arena> A major difference exists between engaging in online conversations versus traditional in-person discussions or written letters or emails. Whereas postal mail and email are private conversations between the senders, most social media posts are available for public inspection by anyone who visits the users "wall," "feed," or timeline. Additionally, hidden costs may be associated with adopting social media. For example, one study reiterates that the decision to use third-party social media software requires data to be owned by the third-party, not by the government entity establishing the account. Further, as one observer noted, "agencies cannot opt out of revisions of the technology. They cannot hire contractors to outsource changes or request customization of services to platforms to accommodate government needs. Public managers in charge of social media accounts are therefore exposed to constant changes of the platforms and at the same time have to deal with emergent citizens and employee behavior that challenge government's one-directional communication paradigm." The location of congressional data on non-congressional servers is a potential concern. To address these concerns the House and Senate have established policies for the use of third-party websites and the linkage of official house.gov or senate.gov webpages to those services. Finally, privacy concerns beyond who "owns the data" exist in the online world. Information posted to social media sites potentially exists for everyone to see, even those for whom the information was not intended. Both the House and the Senate have developed privacy policies to help guide Representatives and Senators on the content of websites and to remind users that information posted to sites is considered public information. These policies could impact how a Representative or Senator chooses to use social media and whether Twitter, Facebook, or other platforms are helpful to a Member with his or her representational responsibilities. <6.2. Changing Representation> The decision to adopt and use social media has broader implications than just the ability to disseminate information or to gauge constituent positions on policy issues. For individual Members, there are clear benefits to using social media. Engaging with individuals on social media provides the potential for a higher political profile both inside and outside the House or Senate. This could translate into greater opportunity to influence public policy. While there is little hard empirical evidence, analysts have suggested that some Members are beginning to alter their representational strategies, leveraging the power of social media to engage broader audiences to advance their policy and political goals. The interaction of such "surrogate" representation and traditional district and state representation may be a subject of interest as social media evolves. Certain things, of course, have not changed. First, only people in a district or state can vote for a Member of Congress. Second, district offices have to be in the district and franked mail still can only be sent to the district. So, while Members might use electronic communications to expand their "constituencies," they will likely always be primarily tied to a geographic district or state. Nevertheless, the evolving use of social media may make the relationship between national and local issues more complex.

The mediums through which Members and constituents communicate have changed significantly over American history and continue to evolve today. Whereas most communications traditionally occurred through the media, via postal mail, or over a telephone, the adoption and use of electronic communications via email and social media technologies (e.g., Twitter, Facebook, YouTube, and other sites) changes how Representatives and Senators disseminate and gather information, who they communicate with, and what types of information they share and receive from the general public, many not residing in their district or state. In less than 20 years, the entire nature of Member-constituent communication has been transformed, perhaps more than in any other period in American history. Over the last several years, the number of Representatives and Senators adopting social media and the number of different services being utilized has increased. In 2009, for example, Members of Congress were just beginning to adopt social media and only a small number were actively using Twitter, mostly as a dissemination tool. Today, all 100 Senators and almost all Representatives have adopted Twitter, Facebook, and other social media tools as a way to supplement their overall office communication strategies and disseminate information. Electronic communication and social media differ from traditional Member-constituent communication in three key ways. Electronic communication is inexpensive. Members can reach large numbers of constituents for a fixed cost, and constituents can reach Members at virtually zero cost. Electronic communication is fast. The relay of information from Capitol Hill to the rest of the country (and vice versa) has been reduced, time-wise. As soon as something happens in Congress, it can be known everywhere in real time. Electronic communication reaches a wide audience. Members can reach large numbers of citizens who are not their own constituents. The cost, speed, and reach of social media have wide-ranging implications for the work of Congress. When Members choose to use electronic communication, they must consider many issues, including office operations (communications expectations and staff allocation); communications strategies (gathering and evaluating constituent opinions, content, interactivity, policies for posting and responding to content); and consequences for representation, including whether the office will respond to postings and, if so, how often. How an office evaluates and manages its social media presence varies from Member to Member.

<1. Background> Since becoming independent in 1991, Armenia has made unsteady progress toward democratization, according to many international observers. These observers including international organizations such as the Council of Europe (COE), the Organization for Security and Cooperation in Europe (OSCE), and the European Union (EU), and some governments including the United States had viewed Armenia's previous legislative and presidential elections in 2003 as not free and fair. These observers cautioned the Armenian government that the conduct of the May 2007 legislative election would be taken into account in future relations. Significant events in the run-up to the May 2007 legislative race included constitutional amendments approved in November 2005 which strengthened the role of the legislature, including giving it responsibility for appointing some judicial and media regulatory personnel and a voice in appointing a prime minister. Amendments to the election law increased the legislative term from four to five years and restricted voting by citizens who were outside the country at the time of elections. In May 2006, the Rule of Law Party left the ruling government coalition and joined the opposition, leaving the remaining coalition members the Republican Party of Armenia and the Armenian Revolutionary Federation in a strengthened position. A new party formed in 2004, the Prosperous Armenia Party, led by businessman Gagik Tsarukyan, seemed to gain substantial popularity. In March 2007, Prime Minister Margoyan died, and President Kocharyan appointed then-Defense Minister Serzh Sargisyan as the new prime minister. Sargisyan's leadership of the Republican Party of Armenia placed him at the forefront of the party's campaign for seats. <2. The Campaign> The Central Electoral Commission (CEC) of Armenia followed an inclusive policy and registered 23 parties and one electoral bloc (Impeachment) on April 4 for the proportional part of the legislative election. In the constituency races, the CEC registered 119 candidates. In seven constituencies, candidates ran unopposed. Campaigning began on April 8 and ended on May 10. The Pan-Armenian National Movement (the party of former president Levon Ter-Petrossyan) dropped out in late April and called for other opposition parties to follow suit to reduce the number of such parties competing for votes. Another formerly prominent party, the National Democratic Union headed by Vazgen Manukyan, refused to take part in what it claimed would be a fraudulent election. The political campaign was mostly calm. Exceptions included explosions at offices of the Prosperous Armenia Party on April 11, the arrest of two members of the opposition Civic Disobedience Movement on money laundering charges on May 7, and the use of police force against marchers from the Impeachment bloc on May 9, which resulted in some injuries. Armenian media reported that Kocharyan accused Artur Baghdasaryan, the head of the Rule of Law Party, of "betrayal" for allegedly discussing with a British diplomat how the West might critique the election. Under the electoral law, the parties and candidates received free air time for campaign messages. Except for these opportunities, the main public and private television channels mostly covered pro-government party campaigning, and private billboard companies mostly sold space to these parties. The public radio station appeared editorially balanced. Positive or neutral reports dominated in the media, according to OSCE/COE/EU election observers. Most campaigning appeared to stress personalities rather than programs, according to many observers. To the extent issues were discussed, the focus was largely on domestic concerns such as rural development, pensions, education, jobs, and healthcare. <3. Results and Assessments> The CEC reported that almost 1.4 million of 2.3 million eligible voters turned out (about 60%). The Republican Party of Armenia gained more seats than it won in the last legislative election. The Prosperous Armenia Party failed to get as many votes as expected. It also was surprising that the United Labor Party failed to gain seats. The opposition parties (Rule of Law and Heritage) won 16 seats, fewer than the opposition held in the previous legislature, although parties considered oppositionist received about one-fourth of the total popular vote. While hailing the election as "free, fair, and transparent," Kocharyan on May 14 reportedly pledged that "shortcomings and violations, which took place during the elections, will be thoroughly studied in order to take necessary measures and re-establish legality," a pledge reiterated to the OSCE by Sarkisyan on May 22. According to the preliminary conclusions made by observers from the OSCE, COE, and the EU, the legislative elections "demonstrated improvement and were conducted largely in accordance with ... international standards for democratic elections." They praised an inclusive candidate registration process, dynamic campaigning in a permissive environment, extensive media coverage, and a calm atmosphere in polling places. However, they raised some concerns over pro-government party domination of electoral commissions, the low number of candidates in constituency races, and inaccurate campaign finance disclosures. Observers also reported a few instances of voters apparently using fraudulent passports for identification, of vote-buying, and of individuals voting more than once. In a follow-on assessment, the OSCE/COE/EU observers raised more concerns that vote-counting problems could harm public confidence in the results. The inability of opposition parties to form a coalition like the former Justice Bloc in 2003 harmed their chances by splitting the vote. The failure of some formerly prominent opposition parties to win seats raises questions of their future viability. These include the People's Party of Armenia (led by Demirchyan, the runner-up in the 2003 presidential election), the National Unity Party (led by Artashes Geghamyan), and the Republic Party (led by Aram Sargisyan). While the pro-government Republican Party of Armenia and Prosperous Armenia Party argued that the losing parties sealed their own marginalization because they were not attractive to the electorate, the losing parties responded that they were outspent and hurt by voter apathy and electoral fraud. At a rally on May 18, the two opposition parties that won seats in the legislature (Rule of Law and Heritage) joined the Impeachment bloc and other opposition parties to call on the Constitutional Court to void the election. The Pan-Armenian National Movement, which had dropped out the race, issued a statement alleging that sophisticated methods had been used to rig the vote. Addressing such accusations, CEC spokesperson Tsovinar Khachatrian reportedly gave assurances that the vote count and results were "normal." She stated that the CEC had received only seven complaints, and that recounts had resulted in "no essential changes in the results." Armenian media reported on May 21 that four cases had resulted in criminal charges, but only one involved the falsification of the election results by polling place workers. The Impeachment bloc and other opposition parties held more rallies on May 25 and June 1 to demand a new election. <4. Implications for Armenia> Since President Kocharyan is constitutionally limited to two terms, the parties showing well in the legislative election are expected to be best poised to put forth their candidates for a presidential election in 2008. The Republican Party of Armenia's strong showing places Prime Minister Sargisyan as the front runner for president if he chooses to run. According to analyst Emil Danielyan, opposition parties may counter by appealing to the cynicism of many Armenians about the electoral results and by urging them to support alternative presidential candidates. Some observers suggest that the opposition parties may again fail to cooperate and instead put forward multiple presidential candidates, fracturing the opposition vote. The election also may be more significant than previous ones because the legislature has been given enhanced constitutional powers, according to some observers. In calling for the election of pro-government legislators, Kocharyan warned on May 10 that "it is important that the new parliament and the president cooperate and that these two state institutions do not confront each other," or otherwise the country's citizens will suffer. Since the Republican Party of Armenia increased its number of seats to a near-majority in the legislature and the opposition parties lost seats, it is unlikely that the domestic and foreign policies of the government will change greatly, according to many observers. There conceivably could be some changes in some policies, however, as the Republican Party of Armenia seeks to form a coalition government. Reasons for the Republican Party of Armenia to seek a coalition rather than form a one-party government include increasing its legislative support and influence in the run-up to the presidential race. Other spurs to forming such a coalition may include the plans by the Rule of Law and Heritage parties to use their presence in the legislature to challenge government policies, rather than to repeat the failed past opposition strategy of boycotting the legislature. Such plans may reinforce Kocharyan's reported view that these parties are not "constructive" opposition parties and that they need to be countered by a legislative coalition. Some observers warn that Kocharyan, as a lame-duck president, may become less influential in Armenian politics and that he and Sargisyan could come to clash on personnel and policy issues in coming months. Other observers suggest that both leaders who are comrades-in-arms of the conflict over Azerbaijan's breakaway region of Nagorno Karabakh will cooperate to achieve their future political goals, which conceivably might include a position for Kocharyan in a political party or a potential Sargisyan administration. Kocharyan and Sargisyan may cooperate in negotiations with Azerbaijan to settle the Nagorno Karabakh conflict, possibly because a Sargisyan administration might have responsibility for implementing a potential settlement. Another possible clash between Sargisyan and Tsarukyan may be mitigated to some degree through power-sharing negotiations on forming a coalition government. Russia appeared interested in the outcome of the election by stressing its good relations with the existing Armenian government. During the height of campaigning in April, the Russian Minister of Foreign Affairs, the First Deputy Prime Minister, and other high-level officials visited Armenia. A group of election observers from the Commonwealth of Independent States judged the election as "free and fair." European institutions such as the OSCE, COE and the EU appeared poised to accept the electoral outcome as being sufficiently progressive to bolster their assistance and other ties to Armenia, according to some initial statements. The EU Council President, German Chancellor Anela Merkel, seemed to typify this stance when she stated that the elections were "on the whole, conducted fairly, freely and largely in accordance with the international commitments which Armenia had entered into," and that she was "very much in favor of intensifying cooperation with Armenia. This would breathe new life into the European Neighborhood Policy and the Action Plan agreed under it." <5. Implications for U.S. Interests> The Bush Administration generally viewed the Armenian legislative election as marking progress in democratization. The U.S. State Department reported on May 14 that "all and all, [the Armenian election was] an improvement over past elections; though certainly if you look at what the observers said, it did not fully meet international standards." While praising the electoral progress, the State Department also urged the Armenian government to "aggressively investigate allegations that are there of electoral wrongdoing and prosecute people in accordance with Armenian law." Armenia's election may rank it with Georgia as making progress in democratization in the South Caucasus region, according to some observers. Under this view, democratization facilitates cooperation, so a more democratic Armenia might be able to deepen ties with nearby NATO members in the wider Black Sea region. In the Caspian Sea region, it might serve as an exemplar to local democracy advocates. Progress in elections is one condition for continued Millennium Challenge Account assistance (MCA; set up in 2004 to support countries that are dedicated to democratization and the creation of market economies). When Armenia and the United States concluded a "compact" for $235.65 million in MCA assistance in March 2006, Armenia's low standing on "political rights" as scored by the MCA was raised as a problem that needed to be addressed. Following the latest election, Armenia's previous "failing" score on political rights may be higher (if initial election assessments do not fundamentally change), bolstering its qualifications as an MCA "co-partner in development," according to some observers. <5.1. Congressional Concerns> Many in Congress have supported democratization efforts in Armenia as indicated by hearings and legislation, including by backing $225 million in cumulative budgeted foreign assistance for democratization (about 13 percent of all aid to Armenia) from FY1992 through FY2006. After the most recent election, Representatives Frank Pallone and Joe Knollenberg co-chairs of the Congressional Armenia Caucus sent a letter on May 18, 2007, to President Kocharyan and Prime Minister Sargisyan congratulating Armenia on its "free and fair election cycle." On the House floor, Representative Pallone hailed the "first positive assessment of an election" in Armenia since its independence and stated that it would enhance U.S.-Armenia ties and Armenia's international reputation. He also stated that the election demonstrated the effectiveness of U.S. democratization aid and called on Millennium Challenge to "fully fund its compact with Armenia in an expeditious manner."

This report discusses the campaign and results of Armenia's May 12, 2007, legislative election and examines implications for Armenian and U.S. interests. Many observers viewed the election as marking some democratization progress. The Republican Party of Armenia increased its number of seats to a near-majority and termed the results as a mandate on its policies. The party leader, Prime Minister Serzh Sargisyan, was widely seen as gaining stature as a possible candidate in the upcoming 2008 presidential election. This report may be updated. Related reports include CRS Report RL33453, Armenia, Azerbaijan, and Georgia: Political Developments and Implications for U.S. Interests , by [author name scrubbed].

This report presents an analysis of the discretionary appropriations for the Department of Homeland Security (DHS) for fiscal year 2013 (FY2013). It compares the President's request for FY2013 funding for the Department of Homeland Security (DHS), the enacted FY2012 appropriations for DHS, the House-passed and Senate-reported DHS appropriations legislation for FY2013, and the final DHS appropriations legislation included in Division D of P.L. 113-6 . It tracks legislative action and congressional issues related to these bills with particular attention paid to discretionary funding amounts. The report does not provide in-depth analysis of specific issues related to mandatory funding such as retirement pay nor does the report systematically follow any other legislation related to the authorization or amendment of DHS programs, activities, or fee revenues. <1. Most Recent Developments> <1.1. February 13, 2012 President's FY2013 Budget Request Submitted> For FY2013, the Administration requested $39.510 billion in adjusted net discretionary budget authority for DHS, as part of an overall budget request of $59.032 billion (including fees, trust funds and other funding that is not appropriated or does not score against the budget caps). This request amounts to a $90 million (0.2%) decrease below the $39.600 billion enacted for FY2012. The overall estimated size of the DHS budget for FY2013 is $681 million (1.1%) below the budget of $59.713 billion estimated for FY2012. <1.2. May 22, 2012 Senate Committee Approves S. 3216> The Senate Committee on Appropriations reported its version of the FY2013 DHS Appropriations bill on May 22, 2012 by a vote of 27-3. This report uses Senate-reported S. 3216 and the accompanying report ( S.Rept. 112-169 ) as the source for Senate-reported appropriations numbers. The Senate bill as approved by the committee would have provided a net discretionary appropriation of $39,514 million for DHS for FY2013, not including $254 million for overseas contingency operations and $5,481 million for disaster relief that would be paid for by adjustments to the discretionary spending cap under the BCA. With those exclusions, the Senate-reported bill would have provided less than $4 million above the Administration's request, and $87 million (0.2%) below the amount provided under P.L. 112-74 . <1.3. June 7, 2012 House Passes H.R. 5855> On June 7, 2012, the House passed H.R. 5855 with several amendments. This report uses House-passed H.R. 5855 and the accompanying report ( H.Rept. 112-492 ) as the source for House-passed appropriations numbers. After floor action the House bill carried a net discretionary appropriation of $39,114 million for DHS for FY2013. Several floor amendments used management accounts as offsets, leaving funding for those activities 27% below the requested level. Increases proposed above the committee-recommended level for DHS activities included Customs and Border Protection's Border Security Fencing, Infrastructure, and Technology account, Coast Guard's Operating Expenses account, the Federal Emergency Management Agency's Urban Search and Rescue Response activities and grant programs. <1.4. September 28, 2012 President Signs Six-Month CR> The President signed H.J.Res. 117 into law as P.L. 112-175 on September 28, 2012. This public law was a continuing resolution (CR) that allowed for the federal government to continue operations in absence of regular appropriations through March 27, 2013, at an annualized rate of $1.047 trillion. It passed the House by a vote of 329-91 on September 13, 2012, and the Senate by a vote of 62-30 on September 22, 2012. <1.5. March 26, 2013 President Signs the FY2013 Consolidated and Further Continuing Appropriations Act> On March 26, 2013, the President signed H.R. 933 into law as P.L. 113-6 , the FY2013 Consolidated and Further Continuing Appropriations Act. Division D of that act is the Department of Homeland Security Appropriations Act, 2013, which includes $39.646 billion in adjusted net discretionary budget authority for DHS. According to Office of Management and Budget calculations, two across-the-board cuts unrelated to the March 1 sequestration that were included in the final legislation to ensure the bill complies with discretionary budget caps reduced the thet discretionary budget authority by $52.4 million. $38.348 billion in adjusted net discretionary budget authority from P.L. 113-6 was available for DHS to use after the impact of sequestration, according to the U.S. Department of Homeland Security Fiscal Year 2013 Post-Sequestration Operating Plan. <1.6. Note on Most Recent Data> Data used in this report for FY2012 amounts are taken from the President's Budget Documents, as well as H.Rept. 112-492 and S.Rept. 112-169 from the 112 th Congress. Information on the FY2013 request is from the President's Budget Documents, the FY2013 DHS Congressional Budget Justifications , and the FY2013 DHS Budget in Brief. Information on the House-passed FY2013 DHS Appropriations bill is from H.R. 5855 and H.Rept. 112-492 , while information on the Senate-reported version of the same is from S. 2316 and S.Rept. 112-169 . Information on the continuing resolution is from H.J.Res. 117 . Information on the final resolution of FY2013 appropriations for the department comes from P.L. 113-6 and the accompanying Senate explanatory statement. Post-sequester funding levels are drawn from the U.S. Department of Homeland Se curity Fiscal Year 2013 Post-Sequestration Operating Plan dated April 26, 2013. Historical funding data used in the appendices are taken from the Analytical Perspectives volume of the FY2006-FY2014 President's Budget request documents. Except when discussing total amounts for the bill as a whole, all amounts contained in this report are in budget authority and rounded to the nearest million. <2. Background> <2.1. Department of Homeland Security> The Homeland Security Act of 2002 ( P.L. 107-296 ) transferred the functions, relevant funding, and most of the personnel of 22 agencies and offices to the new Department of Homeland Security created by the act. Appropriations measures for DHS have generally been organized into five titles: Title I contains appropriations for the Office of Secretary and Executive Management (OSEM), the Office of the Under Secretary for Management (USM), the Office of the Chief Financial Officer, the Office of the Chief Information Officer (CIO), Analysis and Operations (A&O), and the Office of the Inspector General (OIG). Title II contains appropriations for Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), the Transportation Security Administration (TSA), the Coast Guard (USCG), and the Secret Service. Title III contains appropriations for the National Protection and Programs Directorate (NPPD), Office of Health Affairs (OHA) Federal Emergency Management Agency (FEMA). Title IV contains appropriations for U.S. Citizenship and Immigration Services (USCIS), the Science and Technology Directorate (S&T), and the Federal Law Enforcement Training Center (FLETC). Title V contains general provisions providing various types of congressional direction to the department. The structure of the bill is not automatically symmetrical between House and Senate versions. Additional titles are sometimes added to address special issues: For example, the FY2012 House full committee mark-up added a sixth title to carry a $1 billion emergency appropriation for the Disaster Relief Fund (DRF). The Senate version carried no additional titles beyond what is described above. Although the structure of the components in the proposed FY2013 appropriations bills were largely parallel, there were some differences in the structure of subcomponents and accounts which is noted throughout the body of the report. <2.2. 302(a) and 302(b) Allocations> In general practice, the maximum budget authority for annual appropriations (including DHS) is determined through a two-stage congressional budget process. In the first stage, Congress sets overall spending totals in the annual concurrent resolution on the budget. Subsequently, these amounts are allocated among the appropriations committees, usually through the statement of managers for the conference report on the budget resolution. These amounts are known as the 302(a) allocations. They include discretionary totals available to the House and Senate Committees on Appropriations for enactment in annual appropriations bills through the subcommittees responsible for the development of the bills. In the second stage of the process, the appropriations committees allocate the 302(a) discretionary funds among their subcommittees for each of the appropriations bills. These amounts are known as the 302(b) allocations. These allocations must add up to no more than the 302(a) discretionary allocation and form the basis for enforcing budget discipline, since any bill reported with a total above the ceiling is subject to a point of order. 302(b) allocations may be adjusted during the year by the Appropriations Committee by issuing a report delineating the revised suballocations as the various appropriations bills progress towards final enactment. The FY2012 appropriations bills were the first appropriations bills that were affected by the Budget Control Act (BCA), which established discretionary security and nonsecurity spending caps for FY2012 and FY2013, and overall caps that will govern the actions of appropriations committees in both houses. For FY2013, the BCA had set a separate cap of $686 billion for security spending, defined to include the Departments of Defense and Veterans Affairs, Budget Function 150 for all international affairs programs, the National Nuclear Security Administration, and the Intelligence Community Management Account that funds the offices of the Director of National Intelligence. All other spending was capped at $361 billion out of the total of $1.047 trillion. In addition, the BCA allows for adjustments that would raise the statutory caps to cover funding for overseas contingency operations/Global War on Terror, emergency spending, and, to a limited extent, disaster relief and appropriations for continuing disability reviews and for controlling health care fraud and abuse. In the absence of a budget resolution for FY2013, these levels became the basis for enforcement in the Senate. In the House, the lower levels agreed to in the House-passed budget resolution ( H.Con.Res. 112 ) were made effective for purposes of enforcement in the House by H.Res. 614 and H.Res. 643 . <2.3. Reductions from the Stated Funding Levels in P.L. 113-6 and the Accompanying Senate Explanatory Statement> <2.3.1. Sequestration> The Budget Control Act (BCA) 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 after enactment, under terms specified in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA), 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), enacted on January 2, 2013, made a number of significant changes to the procedures in the BCA that will take 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. The accompanying OMB report indicated a dollar amount of budget authority to be canceled to each account containing non-exempt funds. Sequestration was applied at the program, project, and activity (PPA) level within each account. Because sequestration was implemented at the time that a temporary continuing resolution was in force, the reductions were calculated on an annualized basis and will be apportioned throughout the remainder of the fiscal year. The post-sequestration numbers in this report are derived from the FY2013 DHS operating plan, which only includes a breakdown of resources provided through P.L. 113-6 . It does not calculate and this report does not speak to the sequestration of resources provided in P.L. 113-2 , the FY2013 supplemental appropriation for disaster relief. <2.3.2. Across-the-Board Cuts> Taken together, sections 3001 and 3004 of P.L. 113-6 are intended to eliminate any amount by which the new budget authority provided in the act exceeds the FY2013 discretionary spending limits in section 251(c)(2) of the Balanced Budget and Emergency Deficit Control Act, as amended by the Budget Control Act of 2011 and the American Taxpayer Relief Act of 2012. As enacted, Section 3001 provides two separate across-the-board rescissions one for "nonsecurity" budget authority and one for "security" budget authority to be applied at the program, project, and activity level. DHS falls under the "security" category, and therefore receives a 0.1% across-the-board cut. This across-the-board cut was made to bring the bill's budget authority as calculated by the Congressional Budget Office in line with the FY2013 discretionary spending limits. However, the Office of Management and Budget is the final arbiter of whether those spending limits have been exceeded. Therefore, Section 3004 provides two other separate across-the-board rescissions again, one for nonsecurity budget authority and one for security budget authority to be applied at the program, project, and activity level. The section requires the percentages to be increased if OMB estimates that additional rescissions are needed to avoid exceeding the limits. Subsequent to the enactment of P.L. 113-6 , OMB calculated that additional rescissions of 0.032% of "security" budget authority (which would apply to DHS) and 0.2% of "nonsecurity" budget authority would be required. Since these cuts were intended to reduce the amount of discretionary budget authority in the bill, funding that is not included in that total specifically funding for Overseas Contingency Operations/Global War on Terror and funding designated as being for disaster relief under the Budget Control Act are not subject to the across-the-board cuts. All tables and references to funding levels in this report include CRS calculations of the effect of both these across-the-board cuts. Table 2 shows DHS's initial 302(b) allocations for FY2013, and comparable figures for FY2012 and the President's request for FY2013. <2.3.3. Adjustments to the Caps Under BCA> Three of the four justifications outlined in the BCA for adjusting the caps on discretionary budget authority have played a role in DHS's appropriations process. Two of these emergency spending and overseas contingency operations/Global War on Terror are not limited. No adjustment was madefor emergencies for FY2012 for DHS, and $258 million was provided for Coast Guard overseas contingency operations under P.L. 112-331 . The third justification disaster relief is limited. Under the BCA, the allowable adjustment for disaster relief is determined by the Office of Management and Budget (OMB), using the following formula: Limit on disaster relief cap adjustment for the fiscal year = Rolling average of the disaster relief spending over the last ten fiscal years (throwing out the high and low years) + the unused amount of the potential adjustment for disaster relief from the previous fiscal year. For FY2013, OMB determined the allowable adjustment for disaster relief to be $11,779 million, which was fully exercised, including $6,400 million in pre-sequestration resources through the FEMA Disaster Relief Fund in P.L. 113-6 . <3. Appropriations for the Department of Homeland Security> <3.1. Summary of DHS Appropriations> Table 3 includes a summary of funding included in the FY2012 regular DHS appropriations bill, the Administration's FY2013 appropriations request, the House-passed and Senate-reported versions of the FY2013 appropriations bill broken down by title, and the final DHS appropriations legislation included in Division D of P.L. 113-6 , prior to the impact of sequestration. The final column indicates the post-sequester level reported by DHS. <3.1.1. Federal Civilian Employee Pay Raise> The Administration proposed a 0.5% pay increase for all civilian federal employees in its budget request. Almost all DHS employees are considered civilians, with the significant exception of Coast Guard military personnel. The House rejected the proposed civilian pay raise, and that decision is reflected in a slight reduction in all appropriations that fund civilian salaries. The Senate Appropriations Committee, recommended funding the pay raise. Neither the part-year continuing resolution ( P.L. 112-175 ) nor P.L. 113-6 provides the resources for a civilian pay raise. <3.2. DHS Appropriations: Comparing the Components> Unlike some other appropriations bills, breaking down the DHS bill by title does not provide a great deal of transparency into where DHS's appropriated resources are going. The various components of DHS vary widely in the size of their appropriated budgets. Table 4 and Figure 1 show DHS's pre-sequester discretionary budget authority for FY 2013 broken down by component, from largest to smallest. Table 4 presents the raw numbers, while Figure 1 presents the same data in a graphic format, with additional information on the disaster relief and overseas contingency operations adjustments to the allocation allowed under the Budget Control Act ( P.L. 112-25 ). While they are reflected in the second to last line of Table 4 , Figure 1 does not include the impact of the bill's general provisions. These provisions include rescissions of prior-year budget authority, which reduced the net budget authority in the act to the totals discussed earlier in this report. The left column shows discretionary budget authority provided in P.L. 113-6 as scored against the bill's budget allocation, while the right column shows that plus resources available under the adjustments to the discretionary budget cap available under the BCA, including additional resources for DHS provided in P.L. 113-2 , the Supplemental Disaster Relief Appropriations Act, 2013. For the purposes of this report, funding provided under these adjustments is not treated as appropriations. <3.3. DHS Appropriations Compared to the Total DHS Budget> It is important to note that Figure 1 , even with its accounting for discretionary cap adjustments, does not tell the whole story about the resources available to individual DHS components. Much of DHS's budget is not derived from discretionary appropriations. Some components, such as TSA, rely on fee income or offsetting collections to support a significant amount of their activities. Less than 4% of the budget for CIS is provided through direct appropriations the rest relies on fee income. Figure 2 highlights how much of the DHS budget is not funded through discretionary appropriations. It presents a comparison of the Administration's FY2013 budget request and the enacted budget for FY2013 prior to the impact of sequestration, showing the discretionary appropriations, mandatory appropriations, and adjustments under the Budget Control Act, in the context of the total amount of budgetary resources available to DHS, as well as other non-appropriated resources. The graphic reflecting FY2013 enacted funding includes funding provided through P.L. 113-2 , the Disaster Relief Appropriations Act, 2013. Some of the amounts shown in these graphs are derived from the Administration's budget request documents, and therefore do not exactly mirror the data presented in congressional documents, which are the source for the other data presented in the report. <3.4. DHS Appropriations Trends: Size> Table 5 presents DHS appropriations, as enacted, for FY2003 through FY2013. The appropriation amounts are presented in current dollars and are not adjusted for inflation or sequestration. The amounts shown in Table 5 represent enacted amounts at the time of the start of the next fiscal year's appropriation cycle (with the exception of FY2009 and FY2011) defined as the filing of the first committee report to accompany a version of a DHS appropriations bill. In instances which a previous year's data are not reflected in the report, as was the case for data for FY2011, the alternative source is noted. <3.5. DHS Appropriations Trends: Timing> The House Appropriations Committee's full committee markup of H.R. 5855 on May 16, 2012, was the second earliest in the history of the DHS appropriations bill. The Senate Appropriations Committee's full committee markup of S. 3216 on May 22, 2012 was the earliest the Senate has ever marked up the DHS appropriations bill. Nevertheless, P.L. 113-6 represented the second-latest enactment of finalized annual appropriations for the department. Figure 3 shows the history of the timing of the DHS appropriations bills as they have moved through various stages of the legislative process. <4. Title I: Departmental Management and Operations> Title I of the DHS appropriations bill provides funding for the department's management activities, Analysis and Operations (A&O) account, and the Office of the Inspector General (OIG). The Administration requested $1,279 million for these accounts in FY2013, an increase of $147 million above the enacted level. The House-passed bill would have provided $1,020 million, a decrease of 20.2% from the requested level and 9.9% below FY2012. The Senate-reported bill would have provided $1,102 million, 13.8% below the request and 2.7% below FY2012. After the across-the-board cuts made under Division G of P.L. 113-6 , the act provides $1,086 million in appropriations for Title I, a decrease of 15.1% from the requested level and 4.1% below FY2012. The operating plan for DHS for FY2013 indicates sequestration reduced this to $1,026 million, prior to any transfers or reprogrammings that might mitigate the impact of sequestration in some areas and exacerbate it in others. Table 6 lists the enacted amounts for the individual components of Title I for FY2012, the Administration's request for these components for FY2013, the House-passed and Senate-reported appropriations for the same, the enacted level in P.L. 113-6 and the post-sequester level of available resources from P.L. 113-6 reported by DHS. <4.1. Departmental Management17> The departmental management accounts cover the general administrative expenses of DHS. They include the Office of the Secretary and Executive Management (OSEM), which is comprised of the Immediate Office of the Secretary and 12 entities that report directly to the Secretary; the Under Secretary for Management (USM) and its components the offices of the Chief Administrative Officer (OCAO), Chief Human Capital Officer (OCHCO), Chief Procurement Officer (OCPO), and Chief Security Officer (OCSO); the Office of the Chief Financial Officer (OCFO); and the Office of the Chief Information Officer (OCIO). The Administration has usually requested funding for the consolidation of its headquarters here as well. In this section and in each section hereafter, a graphic follows that provides a numeric and graphic representation of the discretionary appropriation provided to each element of DHS described in the report. This graphic provides a quick reference to the relative size of the component to others in DHS as well as to the previous year's enacted level, the FY2013 request, the enacted level in P.L. 113-6 , and DHS-reported post-sequester level for FY2013. <4.1.1. FY2013 Request> The FY2013 request compared to the FY2012 enacted appropriations as follows: OSEM, $134 million, an increase of $1 million (0.7%); USM, $222 million, a decrease of $14 million (5.9%); OCFO, $55 million, an increase of $5 million (9.0%); and OCIO, $313 million, an increase of $55 million (21.5%). The total request for departmental management activities in Title I for FY2012 was $724 million, not including the $89 million for the consolidation of DHS headquarters on the campus of St. Elizabeths, an effort discussed elsewhere in the report. See Table 7 for additional detail. <4.1.1.1. Office of the Secretary and Executive Management (OSEM)> The Administration requested $134 million for OSEM. The Administration's budget proposed separate line items for three offices the Office of International Affairs, the Office of State and Local Law Enforcement, and the Private Sector Office that are currently funded under the Office of Policy. Two program changes funded through this request were for the Citizenship and Immigration Services Ombudsman: $135,000 to continue the training program "Counter Violent Extremism Through Community Partnerships" for state, local, and federal law enforcement personnel; and more than a million dollars to allow the office "to further provide policy advice, investigations, and training" related to ICE Secure Communities and 287(g) programs. <4.1.1.2. Under Secretary for Management (USM)> The Administration requested $222 million for the USM and 902 full-time employee equivalents (FTEs). Several program changes were proposed under this appropriation: The Immediate Office of the Under Secretary for Management (OUSM) includes an increase of $441,000 for the transfer of the Directives function from the Office of the Chief Administrative Officer to the OUSM; The OCHCO includes $26 million for salaries and expenses and $10 million for Human Resources Information Technology, including a requested increase of almost $2 million to realign the Safety function from the OCAO to the OCHCO; and The USM includes $5 million for continued improvements to the Nebraska Avenue Complex. <4.1.1.3. Office of the Chief Financial Officer (OCFO)> The Administration requested $55 million for the OCFO, including $6.7 million for the Financial Systems Modernization effort. According to the OCFO justification, the money will be used to complete the implementation of "a new core financial system at the Federal Emergency Management Agency" in FY2013. The "new financial system is needed ... to accurately account for, track, and report on FEMA resources, and meet minimum federal financial system processing requirements." <4.1.1.4. Office of the Chief Information Officer (OCIO)> The Administration requested $313 million for the OCIO. Within the OCIO account, Infrastructure and Security Activities requested $122 million, including $65 million "to fully complete the data center migration activities for CBP, TSA, and USCIS." The justification stated that "execution of the planned timeline" for the migration "will enable continued closures of the major Component data centers and achieve the Secretary's goal of the Department's consolidation to two data centers across the enterprise." <4.1.2. House-Passed H.R. 5855> H.R. 5855 , as reported by the House Committee on Appropriations, would have provided the following appropriations as compared with the President's request: OSEM, $122 million ($12 million or 8.5% less); USM, $213 million ($9 million or 4% less); OCFO, $50 million ($5 million or 9% less); OCIO, $242 million ($71 million or 23% less). The total funding recommended by the House Appropriations committee for management activities under Title I was $627 million. This would have represented a decrease of $97 million, or 13.4%, from the President's request, not including the handling of the DHS Headquarters project. These reductions were justified by the committee not only on the basis of the need to cover the lack of revenue from unrealized funding proposals that were intended to offset the cost of the bill, but also due to failure to comply with several statutory requirements laid out in previous appropriations bills. On June 6, 2013, during floor consideration of the bill, a number of amendments were offered that used departmental management accounts as offsets. In total, the amendments that passed would have further reduced the budget for management by almost $33 million. The four largest were: H.Amdt. 1236 , to decrease funds for the Office of the Under Secretary for Management by $7,667,000 and increase funds for the Federal Emergency Management Agency Urban Search and Rescue Response System by $7,667,000, agreed to by voice vote; H.Amdt. 1237 , to reduce funds for the Office of the Under Secretary for Management by $10 million and increase funds for the Federal Emergency Management Agency State and Local Programs by $10 million, agreed to on a 211-202 vote (Roll No. 348); H.Amdt. 1238 , to reduce funds for the Office of the Under Secretary for Management by $10 million and increase funds for U.S. Customs and Border Protection Security Fencing, Infrastructure, and Technology by $10 million agreed to on a 302-113 vote (Roll No. 352); and H.Amdt. 1239 , to reduce funds for the Office of the Under Secretary for Management by $5 million and increase funds for Firefighter Assistance Grants by $5 million, agreed to by voice vote. These amendments would have left the USM with an appropriation of $180 million, $41 million (18.6%) less than the requested level. See Table 7 for additional detail. <4.1.2.1. Office of the Secretary and Executive Management (OSEM)> Within OSEM, funding of up to $45,000 was recommended for official reception and representation expenses, of which $17,000 was for international programs within the Office of Policy and activities related to the visa waiver program. These reception and representation expenses were the target of an amendment offered by Representative Flake, who proposed using the funds to increase U.S. Customs and Border Protection Salaries and Expenses by $43,000. The amendment was agreed to in the House by a voice vote on June 6, 2012. OSEM was also the target of significant provisions withholding appropriated funds from use. Some $71 million would have been withheld from obligation until all reports that were required, by statute, to be submitted with or in conjunction with the FY2014 budget request were received by the committee. A general provision (Section 549) went further, proposing to bar the use of Coast Guard-operated fixed wing aircraft by the Secretary of DHS, her deputy, the Commandant of the Coast Guard, or the Vice Commandant, except in case of emergency, until two key reports were submitted to the House and Senate appropriations committees. In addition, funding of $5 million was proposed to be withheld "from obligation for the Office of General Counsel until a final overseas aircraft repair station security regulation has been published." <4.1.2.2. Under Secretary for Management (USM)> Under the USM appropriation, more than $124 million would have been withheld from obligation until the Committee received all reports that were, by statute, required to be submitted with or in conjunction with the FY2014 budget request. The House Appropriations Committee recommended a reduction of $7 million (10%) from the requested level for OCPO for "failure to comply with the statutory requirement to submit on time a comprehensive acquisition report with quarterly updates." <4.1.2.3. Office of the Chief Financial Officer (OCFO)> Under the OCFO account, more than $29 million would have been withheld from obligation until the Committee received all reports and plans that were, by statute, required to be submitted with or in conjunction with the FY2014 budget request. The report also expressed the view that the House Appropriations Committee did not intend for the appropriations liaisons in OCFO which were established to ensure the Appropriations Committees have the necessary access to budgetary information to serve as intermediaries between the committees and department components. The report stated that "the Committee expects to hear from relevant components on their areas of responsibility directly." <4.1.2.4. Office of the Chief Information Officer (OCIO)> The House-recommended appropriation of $242 million for the Office of the Chief Information Officer would be allocated to two sub-appropriations: $117 million for salaries and expenses and $125 million for development and acquisition of information technology equipment, software, services, and related activities. The House-recommended appropriation also included $27 million for Information Technology Services and $55 million for Security Activities. The House report stated that the committee supported "the migration of component resources to the Department's two consolidated data centers," but would not have provided the proposed $65 million for the migration because of the significant shortfalls in the President's budget request mentioned above. <4.1.3. Senate-Reported S. 3216> S. 3216 , as reported by the Senate Committee on Appropriations, would have provided the following appropriations, as compared with the President's request: OSEM, $133 million ($1 million or 0.8% less); USM, $220 million ($2 million or 0.7% less); OCFO, $54 million ($2 million or 3.1% less); and OCIO, $248 million ($65 million or 20.7% less). The total funding provided by the Senate-reported bill for departmental management in Title I would have been $655 million. This would have represented a decrease of $69 million, or 9.5%, from the President's request, not including the funding for DHS headquarters consolidation at St. Elizabeths. See Table 7 for additional detail. <4.1.3.1. Office of the Secretary and Executive Management (OSEM)> The Senate committee report highlighted a requested programmatic increase for the Office for Civil Rights and Civil Liberties (OCRCL), "including $1,327,000 for OCRCL to ensure that the Department's immigration efforts comply with all applicable civil rights statutes and constitutional requirements." Even with this increase the Senate committee-recommended budget for OCRCL was down by roughly $1 million (3.5%) from FY2012 levels, although it would have matched the level requested for the office by the Administration. The committee report noted that DHS discontinued funding for its historian, who was tasked with maintaining the historical record of DHS, and encouraged the Secretary to fill the position again using funds provided in FY2013. The committee report also noted that funding for reception and representation expenses was reduced by 15% for FY2012 and was proposed to be further reduced by 10% for FY2013 "In recognition of a more constrained budget environment and to limit opportunities for waste and abuse." <4.1.3.2. Under Secretary for Management (USM)> According to the report, the committee's recommendation under the USM would have included "funding for robust oversight of major acquisitions, recruitment and development of a skilled workforce, and security measures to safeguard DHS personnel, property, facilities, and information." The report stated that reductions in funding for individual offices below the request, unless otherwise specifically addressed, were "due to a constrained budget environment and to focus limited resources on the Department's critical operational missions." For the OCHCO, an appropriation of $35 million was recommended by the Senate Appropriations Committee, $1 million below the request, with the reduction coming in the Salaries and Expenses account. <4.1.3.3. Office of the Chief Information Officer (OCIO)> For the OCIO, the Senate Appropriations Committee-recommended appropriation of $248 million would have included $121 million for salaries and expenses and $127 million to be available through FY2015 for technology investments across the department that are overseen by the OCIO, including $57 million for development and acquisition of information technology equipment, software, services, and related activities. $65 million for data center migration would have been carried in a general provision in Title V, bringing the total in the bill for the OCIO to the level of the Administration's request. The committee report noted that investment in data center consolidation is expected to result in savings of nearly $3 billion by 2030. <4.1.4. P.L. 113-6 and the DHS Operating Plan for FY2013> The law provides these appropriations (pre-sequester), as compared with the President's request: OSEM, $130 million ($4.3 million or 3.2% less); USM, $218 million ($3.5 million or 1.6% less); OCFO, $51 million ($4 million or 7.2% less); and OCIO, $243 million ($69 million or 22% less). The total funding provided by the law for departmental management in Title I is $643 million. This represents a decrease of $170 million or 21% from the President's request. According to the DHS Operating Plan, of the management accounts, only OCIO was subject to a funding reduction based on sequestration. This is in part because sequestration was calculated against the part-year appropriation provided under P.L. 112-175 . Under that particular circumstance, 2 USC 903 outlines a crediting mechanism that can be exercised that reduces the amount of sequestration applied to activities where the final FY2013 appropriation was below a baseline calculated by OMB. See Table 7 for additional detail on funding. Among the provisions and directives included in P.L. 113-6 was direction for the DHS CIO to submit to the appropriations committees, with the President's budget proposal for FY2014, a multi-year investment and management plan, to include each of fiscal years 2013 through 2016, for all information technology acquisition projects funded under the CIO or by multiple components through reimbursable agreements. The Senate's explanatory statement also directs: The Secretary to provide a report detailing all costs of official and nonofficial travel for each trip taken by the Secretary and the Deputy Secretary from FY2008 to the present, within all DHS appropriations; The Secretary to submit the contingency plan to address gaps between actual and budgeted collections of user fees mandated in the FY2010 DHS appropriations conference report as soon as possible, and a revised plan no later than 90 days after Act's enactment date, to the appropriations committees; The USM to submit, with the President's FY2014 budget proposal, a Comprehensive Acquisition Status Report (CASR) including the information specified in the FY2012 DHS appropriations joint explanatory statement, and to provide quarterly updates thereafter, within 45 days after the end of each quarter, to the appropriations committees. DHS to submit a detailed report on the implementation of the balanced workforce strategy to the appropriations committees, and to include, with the President's annual budget request, a detailed justification of any planned insourcing or outsourcing initiatives. The CFO to continue providing briefings, at least semiannually, on its financial systems modernization efforts. Table 7 outlines the funding levels for existing management accounts. Funding numbers for P.L. 113-6 reflect across-the-board spending cuts relative to FY2012 enacted amounts, but do not reflect the impact of sequestration. The "DHS Plan" column provides the department's assessment of budgetary resources available through P.L. 113-6 after sequestration was applied, as of April 26, 2013. It does not represent a final funding level as the department is likely to undertake transfers and reprogramming to mitigate the impact of sequestration in some areas. <4.1.5. Issues for Congress> The reports of the House and Senate Appropriations committees that accompany H.R. 5855 and S. 3216 identified several issues before the department, including the Administration's proposal to add separate line items under OSEM for three offices, new revenue assumptions underlying the department's budget, the department's chronic lateness in submitting plans and reports required by statute, and conference spending by the department. Brief discussions of each of these issues follow. <4.1.5.1. Proposed Separate Line Items> The Administration's budget proposed separate line items for three offices the Office of International Affairs (OIA), the Office of State and Local Law Enforcement (SLLE), and the Private Sector Office (PSO) that are currently funded under the Office of Policy. Under the proposal, each of the offices would have directly reported to the OSEM. This proposal was rejected at each stage of the legislative process, including P.L. 113-6 . The House committee noted that none of the offices are headed by individuals who are Senate-confirmed. Stating that the "proposal is inconsistent with the goal of a more streamlined department and of reducing administrative overhead" and that "international affairs policy formulation and coordination" is "an inherently appropriate function of the Office of Policy," the House committee report "directs the Department to report ... on the potential of establishing an external affairs office that might include, consolidate, and streamline the PSO and SLLE functions, and those of other existing external affairs offices (namely the Offices of Legislative Affairs, Intergovernmental Affairs, and Public Affairs) that currently report to the Secretary." The Senate committee report noted that DHS has not provided "a compelling rationale for why these offices need to be stand alone entities" and that "these functions have been performed adequately within the Office of Policy." <4.1.5.2. Revenue Assumptions> The Administration's budget included three legislative proposals that would increase the budgetary resources available to Department: an increase in the aviation security fee, authorization for the use of customs fee revenues, and authority for the CBP to enter into reimbursement agreements with outside parties to provide customs services. The House rejected all three proposals, while the Senate included all three. The House committee report noted in the Chief Financial Officer's section that "the President's budget once again assumes that new revenue will be realized in the coming fiscal year," and that in the case of the new aviation security fee increase, the Congressional Budget Office estimates "a shortfall of $115 million" in the DHS budget because the assumptions are dependent "on enactment of new legislative authority that is outside the jurisdiction of the Committee." According to the report: As this Committee has underscored repeatedly over the past several Congresses, such an approach to budgeting is unrealistic and requires this Committee to take drastic measures to offset the unnecessary gap. The Committee reiterates its message it rejects such budgetary legerdemain. The consequences, in terms of additional reductions to Department requests, are evident throughout this bill. If and when such proposals are enacted into law, the Committee will take them into account as it drafts legislation, and the Department should keep the Committee informed of any progress in this regard. However, until that occurs, such proposals will not be treated as relevant to its appropriations work. P.L. 113-6 included a general provision allowing CBP to initiate pilot projects for entering into reimbursable agreements to provide customs services. It did not include either other revenue provision. <4.1.5.3. Plans and Reports Required by Statute> The House committee report expressed concern about the late submission of plans and reports and plans that are required by statute to be transmitted to Congress and, therefore, withheld a portion of funding from departmental management accounts as detailed in the section on FY2013 House-reported actions. According to the report: The Department has been egregiously late in responding to Congressional direction, including failing to submit the majority of statutorily required reports on time. This failure to comply with the law is wholly unacceptable.... The investment plans, expenditure plans, reports, and justifications outlined by the Committee are essential if it is to help DHS better protect the American people and live up to exacting standards of fiscal responsibility. Such plans are vital to the Committee's oversight work, yet in far too many instances such plans which should reflect decisions already made by the Department to align current program priorities with resources have been inexcusably late, incomplete, or have not yet been submitted at all. In some cases, expenditure plans that should have been submitted at the beginning of a fiscal year to show how the Department planned to expend its funding, instead have been submitted well after the end of the fiscal year. The Committee expects the Department to comply with these statutory requirements, with regard to both content and schedule. The Committee notes that the majority of statutorily required reports and plans are presently more than three months late.... The Senate-reported bill proposed withholding 59% of the budgets of OSEM, USM and CFO though a general provision "until all statutorily required expenditure reports are submitted on time." This generally would have had the same effect as the House provision (the House withholdings, proposed as fixed numbers, were roughly 58% of the committee recommended levels), but House floor action reduced the USM budget to the point that if its provisions were to become law for FY2013, 70% of the USM budget would have been withheld. Section 562 of P.L. 113-6 withholds 20% of the budgets of OSEM, USM, and CFO until the all the reports and plans due by May 1 under the bill have been submitted. <4.1.5.4. Conference Spending> The House committee report, noting the findings of the General Services Administration (GSA) inspector general with regard to GSA conference spending and the necessity for better "oversight of expenditures during the current fiscal climate," would require the department's Office of Inspector General to report on "whether the Department has effective procedures in place to ensure compliance with all applicable Federal laws and regulations on travel, conferences, and employee awards programs." The report would be submitted to the Committee within 30 days after the act's enactment. New general provisions related to conference spending were also included in the House and Senate bills. Both bills included a provision requiring a quarterly report to the DHS OIG on every "conference, ceremony or similar event" that costs the government more than $20,000. The OIG would then report to the committee after the end of FY2013 on the department's spending on these events. The Senate provision went on to restrict the use of grants or contracts funded by the department to fund conferences unrelated to the original purpose of the grant or contract award, and bars the use of funds for travel or conference activities that do not comply with OMB Memorandum M-12-12, which provides government-wide direction on spending on travel, conferences, real property, and fleet management. Section 3003 of Division G of P.L. 113-6 requires government-wide reporting on conference costs to departmental inspectors general or senior ethics officials, and mirrors the Senate's additional provisions on the subject. Both bills also would have limited the number of employees that can attend an overseas conference. The House would have limited attendance to 50 employees of DHS at any single conference outside the United States, unless the conference is a training or operation conference for law enforcement, and the majority of federal attendees are law enforcement officers. The Senate would have capped attendance at 50 employees per DHS component, unless the Secretary notified the Appropriations committees in advance that attendance is important to the national interest. Section 569 of P.L. 113-6 mirrors the Senate language. <4.2. DHS Headquarters Consolidation42> The Department of Homeland Security's headquarters footprint occupies more than 7 million square feet of office space in about 45 separate locations in the greater Washington, DC, area. This is largely a legacy of how the department was assembled in a short period of time from 22 separate federal agencies that were themselves spread across the National Capital region. The fragmentation of headquarters is cited by the department as a major contributor to inefficiencies, including time lost shuttling staff between headquarters elements; additional security, real estate, and administrative costs; and reduced cohesion among the components that make up the department. To unify the department's headquarters functions, the department and General Services Administration (GSA) approved a $3.4 billion master plan to create a new DHS headquarters on the grounds of St Elizabeths in Anacostia. According to GSA, this would be the largest federal office construction since the Pentagon was built during World War II. $1.4 billion of this project was to be funded through the DHS budget, and $2 billion through the GSA. According to DHS, $1,366 million has been invested in the project so far through FY2012 $434 million through DHS and $933 million through GSA. Phase 1A of the project a new Coast Guard headquarters facility is nearing operational status with the funding already provided by Congress. Not all DHS functions in the greater Washington, DC, area are slated to move to the new facility. The Administration has sought funding several times in recent years for consolidation of some of those other offices to fewer locations to save money on lease costs. <4.2.1. FY2013 Request> The Administration requested $89 million for the activities related to the St. Elizabeths DHS headquarters project as part of the budget for departmental operations. The funding was requested for a highway interchange that would handle some of the increased traffic generated by the consolidated headquarters facility. This is an element that would support the project, but that has not traditionally been funded through the Homeland Security appropriations bill. Usually these types of infrastructure elements would have been funded through the budgets of the General Services Administration or Department of Transportation. The Administration also requested $24.5 million under the Coast Guard operating expenses budget for the cost of moving the Coast Guard into its new facility in the third quarter of FY2013. No other requests for funding for the DHS consolidated headquarters project were included in the budget submission to Congress. <4.2.2. House-Passed H.R. 5855> The House Appropriations Committee recommended no funding for the highway interchange or any part of the St. Elizabeths project through the management accounts, noting the irregularity of funding a highway interchange through the Homeland Security bill. The bill would have provided the Administration's requested funding for the Coast Guard to move to the new facility. In addition, $10 million would have been provided through the Coast Guard's construction budget to provide additional support for the project. In the report accompanying H.R. 5855 , the committee noted the following: The Committee recommends no new construction funding in the bill for new Departmental Headquarters Consolidation expansion. This is $89,000,000 below the request. Funding is included, as requested, as part of the Coast Guard appropriation to cover the costs associated with completing the move of the Coast Guard headquarters to St. Elizabeths. Associated with this, as described below, is additional funding under Coast Guard construction to ensure completion of the current project, improve site access, and support analysis for follow on work and any necessary planning adjustments for schedule, scope, and cost. The Committee understands that the Department, through USM, is actively exploring options to creatively modify or consolidate current leases, in the expectation that a permanent headquarters construction site will be significantly delayed or amended. The Committee encourages the Department to continue this effort and to inform the Committee of its progress in consolidation no later than 90 days after the date of enactment of this Act, including a revised schedule and cost estimates. Further, as noted above, the Committee includes $10,000,000 under the Coast Guard Acquisition, Construction, and Improvements account to complete Phase 1 of construction, ensure Coast Guard will be able to move in 2013 and that there will be no obstacles to access and transportation into the site, and to support orderly planning and analysis for the overall project. In the minority views accompanying the report, the ranking members of the subcommittee and full committee noted the following: The bill also fails to provide the $89 million for site access, including necessary road and interchange improvements, for DHS personnel to access the new DHS headquarters. The new DHS headquarters project has been shortchanged over the past few years, causing repeated schedule delays and increasing the costs from $3.4 billion to just over $4 billion if all three phases are constructed. In the interim, the Coast Guard may be the only tenant at this new facility for the next 3 5 years, as the bill funds only this relocation in 2013. The bill does not include any funding for Phase 2, which was to begin construction for DHS central headquarters and FEMA. No amendments were considered on the House floor addressing DHS headquarters consolidation. <4.2.3. Senate-Reported S. 3216> The Senate Appropriations Committee recommended $89 million for the highway interchange, although it was funded as a part of the Under Secretary for Management's office through a general provision rather than as a stand-alone appropriation in departmental operations as it was requested. The committee also recommended full funding for the Coast Guard's move under Coast Guard operating expenses. No funding was provided for the project through the Coast Guard construction budget. An attempt was made to use the $89 million for the highway interchange as an offset for an unrelated amendment in full committee markup of the bill. The amendment failed, and the funding remained in the reported version of the legislation. In the report accompanying S. 3216 , the committee noted the following: Pursuant to section 549, a total of $89,000,000 is provided for ''Office of the Under Secretary for Management'' for costs associated with headquarters consolidation and mission support consolidation. The Under Secretary shall submit an expenditure plan no later than 90 days after the date of enactment of this act detailing how these funds will be allocated, including a revised schedule and cost estimates for headquarters consolidation. Quarterly briefings are required on headquarters and mission support consolidation activities, including any deviation from the expenditure plan. According to the Department, an updated plan is being developed in coordination with the General Services Administration to complete the headquarters consolidation project in smaller, independent segments that are more fiscally manageable in the current budget environment. The Department expects this updated plan to be completed by the end of summer 2012 and it is to be submitted to the Committee upon its completion. The Committee expects the plan to identify the discrete construction segments, the associated resource requirements for each segment, and the proposed timeline for requesting funding to complete each segment. <4.2.4. P.L. 113-6 and the DHS Operating Plan for FY2013> P.L. 113-6 provided no funding for headquarters consolidation in Title I of the legislation. $29 million is provided in a general provision for "necessary expenses to plan, acquire, design, construct, renovate, remediate, equip, furnish, improve infrastructure, and occupy buildings and facilities for the department headquarters project and associated mission support consolidation." According to the DHS operating plan, this amount was not reduced through sequestration. <4.3. Analysis and Operations49> Funds included in the Analysis and Operations account support both the Office of Intelligence and Analysis (I&A) and the Office of Operations Coordination and Planning (OPS). I&A is responsible for managing the DHS intelligence enterprise and for collecting, analyzing, and sharing intelligence information for and among all components of DHS, and with the state, local, tribal, and private sector homeland security partners. Because I&A is a member of the intelligence community, its budget comes in part from the classified National Intelligence Program. OPS develops and coordinates departmental and interagency operations plans. It also manages the National Operations Center, the primary 24/7 national-level hub for domestic incident management, operations coordination, and situational awareness, fusing law enforcement, national intelligence, emergency response, and private sector information. <4.3.1. FY2013 Request> The FY2013 request for the Analysis and Operations account was $322 million, a decrease of $16 million (4.7%) from the enacted FY2012 level of $338 million. The account request included funding for 849 FTE, a decrease of 2 FTE from 2012. <4.3.2. House-Passed H.R. 5855> H.R. 5855 would have provided $317 million for the Analysis and Operations account, $4.5 million (1.4%) below the amount in the President's FY2013 request. The recommendation was $21 million (6.1%) less than the amount enacted in FY2012. According to H.Rept. 112-492 , the House Committee on Appropriations also recommended denying the proposed: increase in executive service salaries for the Office of Operations Coordination and Planning; increase in funding associated with the Air Domain Intelligence Integration Element; and decrease to Cybersecurity Analysis (thus restoring funding for this function). No changes to those positions were made in House floor action. <4.3.3. Senate-Reported S. 3216> The Senate Appropriations Committee recommended $324 million for the Analysis and Operations account. This would have been a decrease of $14 million (4.1%) below the enacted FY2012 amount of $338 million and an increase of $2 million (0.6%) from the President's FY2013 request. It would have been an increase of $7 million (2.2%) above the amount passed in the House. According to S.Rept. 112-169 , the Senate Committee on Appropriations required DHS's Chief Intelligence Officer to submit an expenditure plan for FY2013 no later than 60 days after the enactment of the appropriations bill. The Committee directed DHS to focus the plan on I&A's functions that provide unique expertise or serve intelligence customers who are not supported by other components of the intelligence community. The Committee also directed I&A to continue its semi-annual briefings on the State and Local Fusion Centers program. <4.3.4. P.L. 113-6 and the DHS Operating Plan for FY2013> P.L. 113-6 (pre-sequester) provides $322 million for the Analysis and Operations account and falls between the $317 million in H.R. 5855 and the $324 million in S. 3216 . The P.L. 113-6 figure is the same as the President's FY2013 request and 4.7% below FY2012. The explanatory statement reiterated the House's rejection of increases for executive service salaries and the Air Domain Intelligence Integration Element, as well as the Senate's direction regarding an expenditure plan and the semi-annual briefing on fusion centers. The operating plan for DHS for FY2013 indicates sequestration reduced this to $306 million, prior to any transfers and reprogrammings that might mitigate the impact of sequestration in some areas and exacerbate it in others. <4.3.5. Issues for Congress> Some Members of Congress have voiced concerns about I&A's mission. For example, in January 2012, Representative Sue Myrick stated that "I&A historically has suffered from a lack of focus in its mission. This challenge partially stems from vague or overlapping authorities in some areas." Representative Myrick made these comments in an opening statement for a House of Representatives Permanent Select Committee on Intelligence Subcommittee on Terrorism, Human Intelligence, Analysis, and Counterintelligence hearing about DHS's role in the intelligence community. The hearing centered on a report about DHS's intelligence mission issued by the Aspen Institute. While not specifically covering I&A, the report suggested that intelligence activities at DHS should avoid duplication of efforts such as general analysis of terrorist activities performed by other agencies. Rather, according to the Aspen Institute, DHS's mandate should allow for collection, dissemination, and analytic work that is focused on more specific homeward-focused areas. First, the intelligence mission could be directed toward areas where DHS has inherent strengths and unique value (e.g., where its personnel and data are centered) that overlap with its legislative mandate. Second, this mission direction should emphasize areas that are not served by other agencies, particularly state/local partners whose needs are not a primary focus for any other federal agency. The language in S.Rept. 112-169 requiring DHS to provide an expenditure plan centered around I&A's functions also highlighted concerns regarding I&A's mission, particularly its potential duplication of intelligence efforts by other federal agencies. <4.4. Office of the Inspector General56> The DHS Office of the Inspector General (OIG) is intended to be an independent, objective body that conducts audits and investigations of the department's activities to prevent waste, fraud and abuse; keeps Congress informed about problems within the department's programs and operations; ensures DHS information technology is secure pursuant to the Federal Information Security Management Act; and reviews and makes recommendations regarding existing and proposed legislation and regulations to the department. The OIG reports to Congress and the Secretary of DHS. <4.4.1. FY2013 Request> The OIG requested $144 million. New funding of $2.6 million was requested to fulfill the directive of the Implementing the Recommendations of the 9/11 Commission Act ( P.L. 110-53 ) "that the OIG conduct audits of all states that received FEMA grant funds to prevent, prepare for, protect against, or respond to natural disasters, acts of terrorism, and other disasters." According to the DHS justification, the new appropriation "will allow the OIG to conduct most of the remaining 23 audits in FY2013 and position the OIG to complete all 61 audits by the deadline." <4.4.2. House-Passed H.R. 5855> The House-passed bill included $109 million for the DHS OIG. Expressing "dissatisfaction with the quality of communication with the Committee with regard to border corruption investigations, and in particular, issues with coordinating these with ICE and CBP," the committee reduced the OIG appropriation by $10 million specifically for that reason. Furthermore, the Committee chose to fund $24 million of the OIG's budget through a transfer from FEMA's Disaster Relief Fund rather than through direct appropriations from the treasury specifically to pay for disaster-related audits and investigations. No changes were made to these provisions on the House floor. <4.4.3. Senate-Reported S. 3216> The Senate-reported bill included $123 million ($21 million less than the President's request) for the base appropriation for the DHS OIG. Like the House-passed bill, the Senate-reported bill expected $24 million to come from FEMA's Disaster Relief Fund (DRF), thus providing a net $3 million increase above the request. The Senate committee report indicated that the additional funding was to be used for investigating corruption and criminal conduct at CBP and ICE, and that the recommendation included the increase requested to complete all audits mandated under P.L. 110-53 of the State Homeland Security Program and grants under the Urban Area Security Initiative grants by the August 20, 2014, deadline. <4.4.4. P.L. 113-6 and the DHS Operating Plan for FY2013> After the across-the-board cuts but prior to applying sequestration, the Consolidated and Further Continuing Appropriations Act of 2013 ( P.L. 113-6 ) provides $121 million in net budget authority for the OIG for FY2013, an increase of $4 million (3.4%) from last year's appropriation and a decrease of $23 million (15.6%) from the President's request. However, the legislation also includes a $24 million transfer from the Disaster Relief Fund, which was not included in the request and roughly brings the gross budgetary resources available to the OIG in line with the request. Sequestration reduced OIG budget authority by roughly $7 million, according to the DHS FY2013 expenditure plan. The plan projected gross total resources for the OIG in FY2013 to be $138 million, $3 million less than the FY2012 enacted levels. <4.4.5. Issues for Congress> <4.4.5.1. OIG Mandates> Both House and Senate bills and reports required the OIG to conduct reviews and provide reports, briefings, or determinations to the Appropriations Committees on a variety of matters including An expenditure plan for its budget, and monthly reports on transfers from the DRF; Steps taken to ensure the integrity of CBP and ICE officers; DHS expenditures on special events; DHS non-competitive contract awards; and Reviews of the operations of local law enforcement under 287(g) agreements. In addition the House directed that the OIG: Report on whether DHS has effective procedures in place to ensure compliance with all applicable federal laws and regulations on travel, conferences, and employee awards programs; Continue to conduct "red team" inspections of TSA screening; Brief the Committee on its assessment of adjudication fraud detection reforms by United States Citizenship and Immigration Services; and Review excessive delays in determinations concerning FEMA's public assistance programs. The Senate did not include those provisions, but instead directed in a general provision that the OIG provide a review of FEMA's application of its own rules regarding awarding public assistance funds for debris removal. This was reiterated in Section 565 of Division D of P.L. 113-6 . While not all of these provisions were explicitly reiterated in the explanatory statement accompanying P.L. 113-6 , the explanatory statement notes that the language carried in the House and Senate reports "should be complied with and carry the same emphasis as the language included in the explanatory statement," unless the act or explanatory statement specifically negate that report language. No such negation was included. Although in many cases these tasks represent new work for the OIG, with the exception of integrity investigations of ICE and CBP officers in P.L. 113-6 , no additional funding is dedicated for this work. <4.4.5.2. OIG Organization> The Senate explanatory statement accompanying P.L. 113-6 expressed a shared concern of the House and Senate appropriations committees that the current organization of the OIG hinders its independence and ability to report its results in a timely fashion. The statement directs GAO to review the organizational structure of the OIG, how it is organized to report the results of its audits and investigations, and whether its reporting functions are improperly placed in the office to maintain its compliance with independence standards. The report also notes that the OIG has a large number of senior positions filled by officials in acting roles, which may hinder its ability to fulfill its duties. <5. Title II: Security, Enforcement, and Investigations> Title II of the DHS appropriations bill, which includes over three-quarters of the budget authority provided in the legislation, contains the appropriations for U.S. Customs and Border Protection (CBP), U.S. Immigration and Customs Enforcement (ICE), the Transportation Security Administration (TSA), the U.S. Coast Guard (USCG), and the U.S. Secret Service (USSS). The Administration requested $30,759 million for these accounts in FY2013, a decrease of $768 million (2.4%) below the enacted level. The House-passed bill would have provided $30,946 million, an increase of 0.6% from the requested level and 1.8% below FY2012. The Senate-reported bill would have provided $30,974 million, 0.7% above the request and 1.8% below FY2012. After the across-the-board cuts made under Division G of P.L. 113-6 , the act provides $31,267 million in appropriations for Title II, an increase of 1.7% from the requested level and 0.8% below FY2012. The operating plan for DHS for FY2013 indicates sequestration reduced this to $30,184 million, prior to any transfers or reprogrammings that might mitigate the impact of sequestration in some areas and exacerbate it in others. Table 8 lists the enacted amounts for the individual components of Title II for FY2012, the Administration's request for these components for FY2013, the House-passed and Senate-reported appropriations for the same, the enacted level in P.L. 113-6 , and the post-sequester level of available resources from P.L. 113-6 reported by DHS. <5.1. Customs and Border Protection60> CBP is responsible for security at and between ports of entry (POE) along the border, with a priority mission of preventing the entry of terrorists and instruments of terrorism. CBP officers inspect people (immigration enforcement) and goods (customs enforcement) at POEs to determine if they are authorized to enter the United States. CBP officers and U.S. Border Patrol (USBP) agents enforce more than 400 laws and regulations at the border to prevent illegal entries. CBP's major programs include Border Security Inspections and Trade Facilitation , which encompasses risk-based targeting and the inspection of travelers and goods at POEs; Border Security and Control between Ports of Entry , which includes the Border Patrol; Air and Marine Interdiction ; Automation Modernization , which includes customs and immigration information technology systems; Border Security Fencing, Infrastructure, and Technology (BSFIT); Facilities Management ; and a number of immigration and customs user Fee Accounts . See Table 8 for account-level detail for all of the agencies in Title II, and Table 9 for subaccount-level detail for CBP appropriations and funding for FY2012-FY2013. Funding numbers for P.L. 113-6 reflect across-the-board spending cuts relative to FY2012 enacted amounts (i.e., P.L. 112-74 and P.L. 112-77 ), but they do not reflect additional spending cuts required by sequestration pursuant to the Budget Control Act of 2011 ( P.L. 112-25 ). The "DHS Plan" column provides the department's assessment of post-sequester resources provided by P.L. 113-6 as of April 26, 2013. It does not represent a final funding level as the department is likely to undertake transfers and reprogramming to mitigate the impact of sequestration in some areas. <5.1.1. FY2013 Request> The Administration requested an appropriation of $10,345 million in net budget authority for CBP for FY2013, an increase of $190 million (1.9%) over the enacted FY2012 level of $10,155 million. The Administration's total request included $1,626 million in fees, mandatory spending, and trust funds, for a gross budget request of $11,971 million, which is a $320 million (2.8%) increase from the enacted FY2012 level of $11,651 million. The request included the following program changes from FY2012: Transfer of most of the U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) program from the National Protection Programs Directorate (NPPD) into CBP, with a $261.5 million increase to CBP; Increase of $31 million for the operation and maintenance of the Automated Targeting System (ATS), which screens incoming cargo and travelers, and of $38.7 million for the Office of Intelligence and Investigative Liaison and $8 million for the National Targeting Center, both of which work with the ATS to improve security-related targeting rules (see " Cargo Security " below); Increase of $13 million for the Container Security Initiative, which scans certain U.S.-bound cargo in foreign ports (see " Cargo Security " below); Increase of $10 million for intellectual property rights enforcement and of $3 million to expand CBP's Centers for Excellence and Expertise, which work with certain industries to facilitate the import process; Decrease of $68.2 million for the Office of Air and Marine Interdictions (OAM) from acquisition of fewer new aircraft than in the last two fiscal years, and a decrease of $7.1 million for Air and Marine salaries from fewer air missions; Decrease of $52.3 million in management and administration staffing and services from savings related to human resources activities and administrative staff and expenses within the Office of the Commissioner, the Office of Information Technology, the Office of Administration, and the Office of Public Affairs; Decrease of $41.2 million in fleet acquisition and management from deferring acquisition of new non-mission critical vehicles and reducing fuel and maintenance costs; Decrease of $36.8 million for information technology infrastructure and support by deferring replacement of equipment and technical upgrades; Decrease of $31 million for nonintrusive inspection (NII) operations and maintenance by relying exclusively on currently fielded NII equipment; Decrease of $21.1 million in CBP officer overtime expenses, $9.2 million in field support staff salaries and expenses from reductions in operational support, and $7 million in Air and Marine salaries and expenses from reducing low priority missions; Decrease of $14.7 million in training expenses by reducing certain specialized training programs; and Decrease of $12.3 million in CBP transportation program from lower workload requirements (due to fewer apprehensions) and cost reductions from a new transportation contract. <5.1.2. House-Passed H.R. 5855> The House approved $10,172 in net budget authority for CBP for FY2013, an increase of $17 million (0.2%) from last year's appropriation and a decrease of $173 million (1.7%) from the President's request. Under the House-passed bill, CBP would have received $11,689 in gross budget authority, which would have been a $37 million (0.3%) increase over last year's level and a $283 million (2.4%) decrease from the President's request. These numbers included several amendments to the House-reported version of the bill, including amendments to add $43,000 to CBP salaries and expenses to support completion of a staffing model; to add $10 million to the BSFIT account to fund communications infrastructure in border communities; and to cut $3 million from the BSFIT appropriation (a cut targeting environmental mitigation), with $624,000 added to the Office of Air and Marine Interdiction's Operations, Maintenance and Procurement account. <5.1.3. Senate-Reported S. 3216> The Senate Appropriations Committee proposed $10,454 million in net budget authority for CBP for FY2013, an increase of $299 million (3.0%) from last year's appropriation and of $109 million (1.1%) from the President's request. The Senate-reported bill included $11,971 in gross budget authority, which would have been a $319 million (2.7%) increase over last year's appropriation and a $0.6 million decrease from the President's request. <5.1.4. P.L. 113-6 and the DHS Operating Plan for FY2013> After the across-the-board cuts but prior to applying sequestration, the Consolidated and Further Continuing Appropriations Act of 2013 ( P.L. 113-6 ) provides $10,356 million in net budget authority for CBP for FY2013, an increase of $201 million (0.02%) from last year's appropriation and of $12 million (0.001%) from the President's request. P.L. 113-6 includes $11,872 million in gross budget authority, which is a $98 million (.01%) decrease below last year's appropriation and a $222 million increase (0.02%) over the President's request. Sequestration further reduced CBP budget authority by roughly an additional $575 million, according to the DHS FY2013 expenditure plan. The plan projected gross total spending in FY2013 for CBP to be $11,298 million, $353 million less than the FY2012 enacted levels. <5.1.5. Issues for Congress> A number of policy issues related to CBP came up during the FY2013 appropriations cycle, including questions about the U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) program, CBP staffing, reimbursement authority for CBP services, customs user fees, border surveillance technology (ground-based and aerial), and cargo security. <5.1.5.1. U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) Program> Congress first mandated that the former Immigration and Naturalization Service (INS) implement an automated entry and exit data system that would track the arrival and departure of every alien in 110 of the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 ( P.L. 104-208 ). The entry-exit system tracks the entry and exit and verifies the identity of foreign visitors to and from the United States by collecting and storing biographic (i.e., names, birthdates, and other identifying information) and biometric (i.e., fingerprints and digital photographs) identification information about them. Biographic entry-exit data are stored in DHS's Arrival and Departure Information System (ADIS) database, and biometric data are stored in the Automated Biometric Identification System (IDENT) database. This information is shared with a wide range of federal, state and local government agencies to help identify people who may pose a risk to the United States. The entry-exit system has been operational at almost all U.S. ports of entry since December 2006. DHS regulations issued in January 2009 require most non-citizens entering through air and seaports and most non-citizens subject to secondary inspection at land ports to provide biometric data when entering or re-entering the United States. The system does not collect biometric data from non-citizens exiting the United States, however. And while the system collects biographic data from passengers exiting through air and sea ports, no data are collected from most passengers exiting through land ports. The President's FY2013 budget request did not include funding for a biometric exit system. Instead, DHS has focused on an enhanced biographic exit program and an integrated U.S.-Canadian entry-exit system. Under the enhanced biographic exit program, air and sea carriers provide passenger manifest data to DHS, and the data are checked against entry records and against immigration, criminal, and national security databases. Overstays are identified, and high-priority overstays (i.e., persons with derogatory information in one of the database checks) are quickly flagged for follow-up investigations. Under the integrated U.S.-Canadian system, Citizenship and Immigration Canada (the Canadian immigration agency) provides DHS with biometric records of third country nationals entering Canada through land ports of entry on the Canadian border; and DHS treats these Canadian entry data as records of U.S. exits for purposes of the U.S. entry-exit system. Some Members of Congress have expressed frustration that a biometric exit system has not been implemented, and both chambers' appropriations reports directed DHS to report on the department's plans for a more comprehensive exit system. The entry-exit system's place in the DHS organizational structure has changed several times since it was created. The system was designated the U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) Program in 2003 and initially was coordinated out of DHS' Directorate of Border and Transportation Security (BTS), the directorate responsible at the time for CBP and ICE. Under the "second stage review" reorganization by former DHS Secretary Chertoff, DHS eliminated BTS and proposed placing US-VISIT within a new Screening Coordination Office (SCO) that would have included several DHS screening programs and reported directly to the Secretary. Funding for the SCO was never appropriated, however, and US-VISIT became a stand-alone office within Title II of the DHS appropriation in FY2006. In FY2008, DHS transferred US-VISIT into the new National Protection and Programs Directorate (NPPD). The FY2013 budget request proposed to move US-VISIT from NPPD and to divide its work between CBP and ICE in order to "identify potential operational and cost efficiencies" in "mission support and 'corporate' functions such as logistics and human resources." Neither chamber of Congress fully supported the proposed move, however. The House-passed bill would have transferred about $73 million to CBP and ICE offices involved with entry-exit policy and overstay analysis, but would have left the bulk of US-VISIT funding, about $191 million, within a new Office of Biometric Identity Management within NPPD. The Senate-reported bill would have transferred US-VISIT to CBP, but the committee recommended that US-VISIT be transferred as a stand-alone appropriation within CBP, rather than being incorporated within the existing CBP Salaries and Expenses account as the President had requested. Under P.L. 113-6 , the US-VISIT Program was replaced in its entirety by a new Office of Biometric Identity Management (OBIM) within NPPD. <5.1.5.2. CBP Staffing> The President's FY2013 budget requested funding for 21,186 CBP officers and 21,370 U.S. Border Patrol agents. While both chambers' budget proposals would have supported the requested staffing levels, they also raised questions about how DHS sets such levels. The Senate report warned of adverse long-term consequences if DHS preserves high staffing levels during a period of budget tightening by cutting its investments in infrastructure; and also expressed concern that inspection fees have not increased in about ten years, which limits funds available for CBP officer salaries. The House report encouraged CBP to consider a number of changes to reduce OFO staffing requirements at POEs, including by reengineering POE processes to make them more automated, by improving risk-based targeting, by better managing short-term staffing demand surges, by exploring public-private partnerships, by expanding trusted trade and traveler programs that facilitate low-risk entries, and by relying on technology to increase officer efficiency. The House report also would have directed CBP to provide a more specific staffing and deployment plan for border patrol agents; and the Senate report would have requested a plan for OFO staffing at Northern Border ports of entry. About 37% of CBP officer salaries are funded by user fees, and report language accompanying P.L. 113-6 directs CBP to refine its model for forecasting user fee revenues in order to insure adequate funds are budgeted for such salaries (also see " Customs User Fees "). Some Members may disagree with efforts to reduce CBP staffing (or slow its growth), however. While border patrol staffing has increased 90% since FY2005 (up from 11,264 agents that year), OFO staffing at POEs has increased only 18% (up from 17,881 officers in FY2005), even as OFO responsibilities have expanded to include biometric data collection and enhanced cargo security requirements. Some people argue that increased enforcement between ports of entry has encouraged illegal migrants and drug smugglers to enter through POEs. Some supporters of increased OFO staffing argue that officers increase security while also facilitating legal admissions, and that officers are more effective at identifying and apprehending bad actors than are automated targeting systems, trusted trade and travel programs, and other technology. With the implementation of sequestration on March 1, 2013, DHS officials warned that the automatic spending cuts could result in furloughs of up to 14 days for frontline CBP personnel; reduce overtime hours; and decrease hiring to backfill positions, with the lost work hours adding up to the equivalent of cuts to over 5,000 Border Patrol agents and 2,750 CBP officers. DHS reportedly intends to minimize the impact of the sequester on frontline operations, including by eliminating employee performance awards and incentive payments, reducing outside contracts, limiting administrative expenditures, and working with congressional appropriators to reprogram and transfer certain funds. CBP officials also have indicated that the agency intends to rely on reductions to overtime and hiring freezes in an effort to avoid or minimize employee furloughs. Nonetheless, with 72% of CBP's budget tied to salaries and benefits and with over 90% of the Border Security and Control between POEs Account going to salaries and benefits it appeared likely that CBP frontline staffing would be subject to some combination of reduced overtime hours and furlough days, though specific plans had not been announced at the time of this report. <5.1.5.3. Reimbursement Authority for CBP Services> One approach the administration has favored for leveraging current resources to provide enhanced services at ports of entry has been to rely on public-private partnerships as a source of funding for staffing and infrastructure. Yet U.S. customs law generally prohibits CBP from providing immigration or customs services on a fee-for-service basis, except under certain limited circumstances. Notwithstanding these restrictions, Section 560 of P.L. 113-6 incorporates language proposed by the administration to permit CBP to enter into up to five public-private partnerships during FY2013. The partnerships may permit persons to reimburse CBP for the costs of providing additional services at POEs (including by paying for officer overtime), for the provision of CBP services at new facilities, and for the expansion of CBP services at land ports of entry. <5.1.5.4. Customs User Fees> CBP collects several different types of user fees, including fees paid by passengers and by cargo carriers and importers for the provision of customs services. These fees are often referred to as COBRA fees because they were passed as part of the Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA, P.L. 99-272 ). Under 19 U.S.C. 58c(f)(1)-(3), a portion of these fees directly reimburses CBP (i.e., as mandatory spending not reliant on separate annual appropriations) for certain customs functions, including overtime compensation and certain benefits and premium pay for CBP officers, certain preclearance services, foreign language proficiency awards, and to the extent funds remain available certain officer salaries. Another portion of COBRA fees merchandise processing fees is deposited in CBP's Customs User Fee Account to pay for additional customs revenue functions but is only available to the extent provided for in appropriations acts (i.e., as discretionary appropriations). Certain COBRA passenger fees have been collected and deposited in the Customs User Fee Account without a corresponding appropriation to pay for customs functions. Two recent examples of this have drawn Congressional interest. Section 521 of the NAFTA Implementation Act of 1993 ( P.L. 103-182 ) temporarily increased fees for all passengers entering the United States, including passengers from Canada, Mexico, and the Caribbean islands, who previously had been exempted from such fees. According to the Government Accountability Office, this temporary increase resulted in the collection of about $639 million from FY1994-FY1997. Section 601 of the United States-Colombia Trade Promotion Agreement Implementation Act of 2011 ( P.L. 112-42 ) also eliminated a passenger fee exemption for travelers from Mexico, Canada, and certain other Western Hemisphere states, resulting in an estimated increase in COBRA fees of $83 million in FY2012 and $110 million in FY2013 and thereafter. In both these cases, funds were directed (and in the case of Section 601, still are being directed) to the Customs User Fee Account but have not yet been obligated for customs revenue collection, as the provisions that raised this revenue stated that the funds in contrast with other COBRA passenger fees are available only to the extent provided in appropriations Acts. Some Members of Congress have raised questions about the disposition of these fees. The House Appropriations Committee report directed CBP to report to the committee about whether the Department has access to the $639 million identified by GAO, and how the department will eliminate those funds from its books. With respect to fees collected pursuant to P.L. 112-42 , CBP's budget justification for FY2013 included these fees in its budget for CBP officer salaries and expenses, but neither chamber included language in its appropriation bill to make these funds available to CBP, resulting in a shortfall for the agency. The House would have addressed this shortfall by shifting $70 million from CBP headquarters to CBP officer salaries, and would have relied on other increasing fee revenues to fill the remaining gap. The Senate report awaited a resolution to the shortfall to be proposed by the department. P.L. 113-6 appropriates an additional $110 million to make up for the budget shortfall in CBP salaries, and directs CBP and OMB to include a means of access, with appropriate offsets, to these COBRA fees in future budget requests. <5.1.5.5. Southwest Border Surveillance> DHS' strategy for achieving and maintaining control of the Southwest Border includes the use of technology to monitor the border, to detect illegal entries, and to support efforts to target and interdict such entries. Since 1998, under a series of different initiatives, DHS and the former Immigration and Naturalization Service have attempted to develop a network of border cameras, radar, and sensors linked into an integrated computer system to provide "situational awareness" along key stretches of the border. To date, initiatives have failed to deliver the desired level of surveillance, however. The last two major surveillance programs, known as the America's Shield Initiative and SBI net (part of the Secure Border Initiative), both faced criticism for non-competitive contracting practices, inadequate oversight of contractors, and cost overruns. The Obama Administration cancelled SBI net in January 2011 and replaced it with the Arizona Border Technology Plan. The new plan calls for the rapid deployment of existing technology, including a mix of fixed and mobile video surveillance systems and existing SBI net integrated towers, and emphasizes the use of different technologies for different border regions. House and Senate appropriations reports expressed frustration with DHS' implementation of the new plan. The House report admonished CBP for not having procured and implemented new surveillance equipment during the first 16 months after announcing the plan. The Senate report described CBP's April 2012 call for proposals to use SBI net technology along certain stretches of the Arizona border premature given that existing SBI net towers have not yet proven successful. In light of these concerns, while both chambers recommended fully funding the President's request for the BSFIT account, indicating their overall support for the border surveillance mission, they each recommended rescinding unobligated balances from the account, with the House report calling for $40,412,000 in rescissions and the Senate calling for $92,000,000. P.L. 113-6 includes $73,232,000 in rescissions of prior year unobligated balances in the BSFIT account. CBP also relies on manned and unmanned aircraft to complement ground-based surveillance. The President's FY2013 budget request for the Office of Air and Marine Interdiction (OAM) supported 277 aircraft, which are involved in both drug interdiction and border surveillance activities, and included $3 million to support the "Big Pipe" project to transmit real time and near real time video and other data from aerial assets. OAM reported 81,045 flight hours in FY2012 and projected 65,000 hours in FY2013, down from 94,968 flight hours in FY2011 and 106,069 in FY2010. As of November 2012, CBP operated a total of 10 unmanned aerial systems (UAS), including two UAS on the Northern border, five on the Southwest border, and three in the Gulf of Mexico. UAS accounted for 5,737 flight hours in FY2012, up from 4,406 hours in FY2011. Some Members of Congress support the use of aircraft for border surveillance, including UAS in particular. On the other hand, the use of UASs in border security remains somewhat controversial because of concerns that UAS threaten people's privacy and because of questions about the cost effectiveness of UAS on the border. A May 2012 DHS Inspector General report also criticized CBP's unmanned aircraft systems program on the grounds that its planning process fails to provide UAS systems with adequate support resources and may result in under-utilization of UAS assets. Both appropriations committees recommended increases to the OAM budget over the President's request, with the House recommending an increase of $82,700,000 (partly funded by the BSFIT rescission) and the Senate recommending an increase of $70,997,000. Both increases would have been targeted toward upgrading the OAM fleet, increasing flight hours, and supporting UAS operations. P.L. 113-6 appropriated a total of about $799 million for Air and Marine Operations, including a shift of about $284 million from CBP's Salaries and Expenses account into a new Salaries and Expenses sub-account within the Air and Marine account. P.L. 113-6 report language directs CBP to restore overall and UAS flight hours to 2011 levels. <5.1.5.6. Cargo Security> CBP is responsible for screening cargo passing through U.S. ports of entry for contraband and dangerous materials. Under the Security and Accountability For Every Port Act of 2006 (SAFE Port Act, P.L. 109-347 ), as amended, CBP must ensure that all maritime cargo is scanned through radiation detection and nonintrusive inspection imaging scanners prior to being loaded on ships bound for the United States. Section 1701 of the Implementing Recommendations of the 9/11 Commission Act of 2007 (The 9/11 Act, P.L. 110-53 ) established a deadline of July 1, 2012, for DHS to begin excluding cargo that has not been scanned, though the law allows DHS to extend this deadline under certain circumstances; and in May 2012, Homeland Security Secretary Napolitano notified Congress that she would exercise her authority to extend the 100% scanning deadline. The 100% scanning requirement has raised questions about how to balance the security benefits of scanning more U.S.-bound cargo against the costs of such scans, including increased paperwork, the costs of maintaining scanning technology and personnel to operate scanners, and longer wait times for U.S. importers. DHS officials and some others have argued that the department should focus scanning on high-risk cargo, along with a random sample of lower-risk cargo, in order to cut costs, facilitate legal trade, and make the best use of existing resources. After requesting reductions to international cargo security screening programs in FY2011 and FY2012 with Congress providing funding levels above the President's request both years the FY2013 budget request included a $13 million increase to the Container Security Initiative (CSI), CBP's primary program for customs inspections abroad, along with a total of $78 million in proposed increases to the Automated Targeting System and related programs used to screen incoming goods and travelers for security threats. House and Senate Appropriations Committee reports both supported the President's request for these programs. The House report and the explanatory statement accompanying P.L. 113-6 also acknowledge DHS' concerns about the costs of implementing a 100% scanning program at foreign ports, and call on DHS to propose an alternative scanning plan. <5.2. Immigration and Customs Enforcement116> ICE focuses on enforcement of immigration and customs laws within the United States. ICE develops intelligence to reduce illegal entry into the United States and is responsible for investigating and enforcing violations of the immigration laws (e.g., alien smuggling, hiring unauthorized alien workers). ICE is also responsible for locating and removing aliens who have overstayed their visas, entered illegally, or have become deportable. In addition, ICE develops intelligence to combat terrorist financing and money laundering, and to enforce export laws against smuggling, fraud, forced labor, trade agreement noncompliance, and vehicle and cargo theft. See Table 8 for account-level detail for all of the agencies in Title II. For ICE sub-account level detail, including appropriations and funding for FY2012 and FY2013, see Table 10 . Funding numbers for the Consolidated and Further Continuing Appropriations Act, 2013 ( P.L. 113-6 ) reflect across-the-board spending cuts relative to FY2012 enacted amounts (i.e., P.L. 112-74 and P.L. 112-77 ), but they do not reflect additional spending cuts required by sequestration pursuant to the Budget Control Act of 2011 ( P.L. 112-25 ). The tables also include account-level details from DHS's post-sequestration expenditure plan. <5.2.1. FY2013 Request> For FY2013 for ICE, the Administration requested $5,332 million in net budget authority, which represents a decrease of $218 million (3.9%) from the enacted FY2012 level of $5,551 million. Overall, the Administration requested $5,644 million in gross budget authority for ICE in FY2013, a decrease of $218 (3.7%) from the FY2012 enacted amount. The budget request included the following changes: Increase of $40 million to expand the Alternatives to Detention (ATD) program; Increase of $6 million for ICE to consolidate personnel and operations (i.e., co-location strategy); Increase of $7 million for video conferencing expansion in detention facilities and Executive Office of Immigration Review (EOIR) courtrooms and offices; Increase of $18 million to transfer the U.S. Visitor and Immigrant Status Indicator Technology (US-VISIT) Program overstay analysis function from National Protection and Programs Directorate (NPPD) to ICE; Reduction of $17 million for the 287(g) program; Reduction of $5 million for the Office of Principle Legal Advisor (OPLA); Reduction of $53 million for detention beds; and Reduction of $41 million for Secure Communities. <5.2.2. House-Passed H.R. 5855> The House-passed H.R. 5855 would have given $5,474 million in net budget authority for FY2013, a figure which would have represented a decrease of $77 million (1.4%) from the FY2012 enacted level and an increase of $142 million (2.7%) over the Administration's request. House-passed H.R. 5855 would have provided ICE with total funding authority of $5,786 million, representing a decrease of $77 million (1.3%) from the FY2012 enacted level and an increase of $142 million (2.5%) over the Administration's request. Senate-Reported S. 3216 The Senate Appropriations Committee would have recommended that ICE receive $5,330 million in net budget authority for FY2013, a figure which would have represented a decrease of $2 million (less than 0.1%) from the Administration's request, and a decrease of $220 million (4.0%) from the FY2012 enacted amount. Senate-reported S. 3216 would have provided ICE with gross funding authority of $5,642 million, which would have represented a $2 million (less than 0.1%) decrease from the Administration's request, and a decrease of $220 million (3.8%) from the FY2012 enacted level. <5.2.3. P.L. 113-6 and the DHS Operating Plan for FY2013> After the across-the-board cuts but prior to applying sequestration, the Consolidated and Further Continuing Appropriations Act of 2013 ( P.L. 113-6 ) provides $5,426 million in net budget authority for ICE for FY2013, a decrease of $125 million (2.3%) from last year's appropriation and an increase of $94 million (1.8%) from the President's request. P.L. 113-6 includes $5,738 million in gross budget authority, which is a $125 million (2.1%) decrease below last year's appropriation and a $94 million increase (1.5%) over the President's request. Sequestration further reduced ICE budget authority by roughly an additional $200 million, according to the DHS FY2013 expenditure plan. The plan projected gross total spending in FY2013 for ICE to be $5,442 million, $420 million less than the FY2012 enacted levels. Issues for Congress ICE is responsible for many divergent activities due to the breadth of the civil and criminal violations of law that fall under its jurisdiction. As a result, how ICE resources are allocated in order to best achieve its mission is a continuously debated issue. The FY2013 appropriations process has involved discussions about ICE's role in detaining and removing (deporting) aliens and on the role of state and local law enforcement agencies in immigration enforcement. Enforcement and Removal Operations Part of ICE's mission includes locating and removing deportable aliens, which involves determining the appropriate amount of detention space as well as which aliens should be detained. There are an estimated 10.8 million unauthorized aliens in the United States. In addition, there are an estimated 1.9 million aliens in the United States who have committed a crime. According to ICE, they have the capacity to remove 400,000 aliens a year. As a result, there has been ongoing debate about how ICE should prioritize the removal of removable aliens. During the floor debate of House-passed H.R. 5855 , several amendments were accepted that attempted to direct the Agency's immigration enforcement priorities. P.L. 113-6 states that of the appropriated funds, $1,600 million shall be available to identify aliens convicted of a crime who may be removable from the United States and to remove such aliens once ordered removed. The act also states that the Secretary of DHS shall prioritize the identification and removal of aliens convicted of a crime by the severity of the crime. ICE's Office of Enforcement and Removal Operations (ERO) provides custody management of the aliens who are in removal proceedings or who have been ordered removed from the United States. ERO also is responsible for ensuring that aliens ordered removed actually depart from the United States. Some contend that ERO does not have enough detention space to house all those who should be detained. Concerns have been raised that decisions regarding which aliens to release and when to release them may be based on the amount of detention space, not on the merits of individual cases, and that detention conditions may vary by area of the country leading to inequities. Some policymakers have advocated for the increased use of alternatives to detention programs for noncriminal alien detainees, citing these programs as a lower cost option than detention and a more proportional treatment relative to the violation. The number of detention beds maintained by ICE has been an issue. ICE maintained 34,000 detention bed spaces in FY2012, and the President's FY2013 budget requested a reduction in bed space to 32,800 beds. In the beginning of calendar year 2013, ICE released 2,228 detainees, maintaining that the release was necessary due to the fact that ICE was operating under a continuing resolution (CR) and the upcoming reductions were required by sequestration. At a hearing on the issue, ICE Director John Morton stated that although the CR had funded 34,000 beds, ICE's average daily detention population exceeded 35,000 individuals, including many who were not required to be detained under law. However, critics responded that the release was purely political and a way to pressure Congress to make a deal with the President to avert the sequestration reductions. P.L. 113-6 requires that ICE maintain 34,000 detention beds for FY2013. Due to the cost of detaining aliens, and the fact that many non-detained aliens with final orders of removal do not leave the country, there has been interest in developing alternatives to detention for certain types of aliens who do not require a secure detention setting. ICE's Alternatives to Detention (ATD) provides less restrictive alternatives to detention, using such tools as electronic monitoring devices (e.g., ankle bracelets), home visits, work visits, and reporting by telephone, to monitor aliens who are out on bond while awaiting hearings during removal proceedings or the appeals process. 91 The Administration had requested a decrease in detention bed space in conjunction with a request of an additional $40 million to expand the ATD program. H.R. 5855 , as passed by the House, would have maintained the current amount of beds, and increased funding for the ATD program by $20 million. Senate-reported S. 3216 would have decreased detention space by 600 beds, and increased funding for the ATD program by $24 million. P.L. 113-6 funds 34,000 detention beds and increases funding for the ATD program by $19 million (27%). Immigration Enforcement in State and Local Jails The Administration's request included $139 million (a $50 million decrease from FY2012 since most of the deployment has been completed) for Secure Communities, an information sharing program between DHS and the Department of Justice to check the fingerprints of arrestees against DHS immigration records. ICE has already deployed Secure Communities to 89% of all jurisdictions nationally, and is requesting the resources needed to finish expanding the system nationwide by the end of FY2013. ICE has the resources to confirm the identification of an estimated 282,000 more removable aliens in FY2012 than in FY2010, including an estimated 73,000 Level 1 offenders. House and Senate appropriators both expressed strong support for the continued expansion of Secure Communities and would have appropriated approximately the same amount as the Administration requested in their draft bills for FY2013. The enforcement of immigration laws by state and local law enforcement agents through agreements pursuant to 287(g) of the INA (the 287(g) program) and through screening for immigration violations in state and local jails through the 287(g) program and Secure Communities has sparked debate about the proper role of state and local law enforcement officials in this area. Many have expressed concern over proper training, finite resources at the local level, possible civil rights violations, and the overall impact on communities. Nonetheless, some observers contend that the federal government has scarce resources to enforce immigration law and that state and local law enforcement entities should be used. The Administration requested $51 million for 287(g) agreements, a decrease of $17 million from the FY2012 enacted level . The Administration contends that the Secure Communities screening process is more efficient and cost effective than 287(g) agreements in identifying and removing criminal and other priority aliens. ICE plans to discontinue the least productive 287(g) task force agreements in jurisdictions where Secure Communities is active and will not consider any requests for new 287(g) task forces. Senate-reported S. 3216 would have appropriated $51 million for 287(g) agreements while H.R. 5855 , as passed by the House, would have funded the 287(g) program at the FY2012 level of $68 million. During floor action, the House adopted an amendment to H.R. 5855 that would have also prohibited any funds under the act from being used to terminate a 287(g) agreement that is in existence on the date of enactment of the act. P.L. 113-6 funds the 287(g) program at the FY2012 level of $68 million. ICE Public Advocate In 2012, ICE created the Public Advocate Office "to assist individuals and representatives who have concerns about ICE operations and policies in the field." The office was created in response to critiques that the agency was unresponsive to the complaints of those who were detained or investigated. However, some contend that the program is not productive and is not a proper use of ICE resources. P.L. 113-6 states that no funds under the act may be used to fund the position of Public Advocate within ICE. <5.3. Transportation Security Administration140> TSA, created in 2001 by the Aviation and Transportation Security Act (ATSA, P.L. 107-71 ), is charged with protecting air, land, and rail transportation systems within the United States to ensure the freedom of movement for people and goods. In 2002, TSA was transferred from the Department of Transportation to DHS with the passage of the Homeland Security Act ( P.L. 107-296 ). TSA's responsibilities include protecting the aviation system against terrorist threats, sabotage, and other acts of violence through the deployment of passenger and baggage screeners; detection systems for explosives, weapons, and other contraband; and other security technologies. TSA also has certain responsibilities for marine and land modes of transportation including assessing the risk of terrorist attacks to all non-aviation transportation assets, including seaports; issuing regulations to improve security; and enforcing these regulations to ensure the protection of these transportation systems. TSA is further charged with serving as the primary liaison for transportation security to the law enforcement and intelligence communities. The TSA budget is one of the most complex components of the DHS Appropriations bill. The graphic above reflects net direct discretionary appropriations for the TSA, but that represents only a portion of the budgetary resources it has available. An airline security fee collection offsets a portion of aviation security costs, including $250 million dedicated for capital investments in screening technology. Other fees offset the costs of transportation threat assessment and credentialing. Since these amounts are not set through traditional appropriations provisions, they are not reflected in the above graphic. Table 11 presents a breakdown of TSA's total additional budgetary resources from all non-appropriated sources and those provided through direct appropriations. <5.3.1. FY2013 Request> The President's request included gross budget authority of $7,645 million for TSA, offset by $2,515 million in proposed collections and fees, for a net direct discretionary appropriation of $5,130 million. This represents roughly a 2.5% decrease from the gross funding provided in FY2012, but a 7.1% drop in net appropriations. Of this request, $5,099 million in gross budget authority was for aviation security, a decrease of $155 million (3.0%) compared to FY2012. However, due to proposed increases in offsetting passenger security fees (discussed in more detail below), only $2,914 million in net appropriations would have been provided, a decrease of $310 million (9.6%) from FY2012 levels. The President's request proposed $124 million for Surface Transportation Security, a decrease of $10 million (7.8%) from FY2012. Requested decreases in funding amounts reflected planned reductions in procurement for both checked baggage and passenger checkpoint technologies, a reduction in screening technology maintenance costs, a 50% reduction in the Federal Flight Deck Officer (FFDO) program and flight crew training, and miscellaneous improvements in management efficiencies, such as reduced travel, training, and overtime costs. Funding for transportation threat assessment and credentialing (TTAC) would increase by $68 million (33%) under the request to $272 million. This includes a one-time increase of $30 million for TTAC infrastructure modernization (TIM) and adjustments to the fee-based Transportation Worker Identification Credential (TWIC) based on higher-than-anticipated worker turnover in the maritime industry. The requested funding level for Transportation Security Support was set at $970 million, a decrease of $62 million (6%) from FY2012 levels, and requested funding for the Federal Air Marshals Service (FAMS) specified $930 million, a decrease of $36 million (3.8%). See Table 8 for account level detail for all agencies in Title II and Table 12 for amounts specified for TSA budget activities. <5.3.2. House-Passed H.R. 5855> House-passed H.R. 5855 included gross budget authority of $7,498 million for TSA, offset by $2,400 million in collections and fees, for a net direct discretionary appropriation of $5,098 million. This represents a $147 million (1.9%) decrease from the gross funding requested by the administration, and a 0.6% drop in net appropriations from the request. The House-passed bill specified $5,041 million in gross budget authority for aviation security, $57 million (1.1%) less than requested. The House rejected the Administration's proposed increases in offsetting passenger security fees. Therefore, with a smaller offset, the appropriations for aviation security proposed in the bill actually rose $58 million (2.0%) above the Administration's request. The House report recommended additional cuts to screening operations including reductions in screener workforce costs and additional reductions in checked baggage explosives detection equipment procurement. The House-passed bill specified $126 million for surface transportation security, $2 million (1.7%) above the request, but $8 million (6.2%) less than the FY2012 enacted amount. The bill specified $193 million in direct appropriations and $80 million in fee collections for TTAC, roughly in line with the request. The House-passed bill, however, specified $929 million for transportation security support, $41 million (4.2%) below the request, and $880 million for FAMS, $50 million (5.4%) below the request. The House committee noted that many of these reductions to the request were made to offset a budget shortfall created by the administration's reliance on passenger security fee increases that have not been enacted. <5.3.3. Senate-Reported S. 3216> The Senate-reported bill specified gross budget authority of $7,633 million for TSA, offset by $2,715 million in collections and fees, for a net discretionary appropriation of $4,919 million. This amounted to an $11 million (0.2%) decrease from the gross funding requested by the Administration, and a $211 million (4%) reduction in net appropriations. This amount included $5,087 million in gross budget authority for aviation security, $11 million (0.2%) less than requested. The Senate accepted the Administration's proposed increases in offsetting passenger security fees, incorporating the full $315 million in revenue projections into the offset. Therefore, with a larger offset, the appropriations proposed in the bill for aviation security dropped $211 million (7.3%) from the Administration's request. These cuts reflected a $5 million (4.2%) reduction to checkpoint equipment procurement and a $10 million (8.5%) reduction for explosives detection systems procurement. In both cases, the Appropriations Committee report cited large unobligated prior-year balances in explaining the reductions. The amount also included an $8 million (0.3%) reduction to screener staffing due to delayed fielding of checkpoint body scanners. The committee specified $24 million for the FFDO program, $12 million (92%) above the request. The Senate Appropriations Committee recommended funding surface transportation security, TTAC, transportation security support, and FAMS at requested levels. <5.3.4. P.L. 113-6 and the DHS Operating Plan for FY2013> P.L. 113-6 provided TSA with $7,551million in total gross budget authority, $290 million less than the FY2012 enacted level. Sequestration further reduced TSA budget authority by roughly an additional $339 million, according to the DHS FY2013 expenditure plan. The plan projected gross total spending in FY2013 for TSA to be $7,212 million, $629 million less than the FY2012 enacted levels. Table 12 outlines the funding levels for existing TSA program functions. The "DHS Plan" column provides the department's assessment of post-sequester resources provided by P.L. 113-6 as of April 26, 2013. It does not represent a final funding level as the department is likely to undertake transfers and reprogramming to mitigate the impact of sequestration in some areas. <5.3.5. Issues for Congress> <5.3.5.1. Passenger Security Fees> Under ATSA, passenger security fees are set at $2.50 per flight segment, not to exceed $5.00 per one-way trip. The fee has not been increased since 2001, and concerns have been raised that the per-segment application does not accurately reflect passenger usage, as in many cases individuals are screened only at the initial departure airport and do not need to be screened again upon changing planes. Airlines have argued against fee increases, raising concerns over their potential impact on passenger air travel. In the FY2013 budget submission, the Administration proposed changing the fee structure to apply a flat fee of $5.00 per one-way trip. This would, in effect, double the fee on direct flights, but would not change the fee currently paid by customers taking connecting flights. The Administration estimated that this change would increase revenue collections by $317 million. It proposed to apply $117 million of this amount as offsetting collections for aviation security costs and credit the additional $200 million toward deficit reduction. Both the George W. Bush and Obama administrations have previously submitted proposals to increase passenger security fees. While these past efforts garnered little congressional support, the current proposal was supported by the Senate Appropriations Committee, which included a provision to increase FY2013 fee collections to $5.00 per one-way trip. However, whereas the request sought to apply a portion of the increased revenue toward deficit reduction, the Senate committee measure would apply all passenger security fees as offsetting collections assigned to aviation security. While the Senate committee approved the proposal for FY2013, it noted that it lacked jurisdiction to provide permanent authority for the fee increase. The House Appropriations Committee, on the other hand, did not include the proposal, noting that it lacked jurisdiction over fees. The committee instead commented that it "was forced to find $115,000,000 in offsets to make up for the budget request's persistent and flawed assumption of increased aviation passenger fee collections." Ultimately, P.L. 113-6 did not change passenger security fees. <5.3.5.2. Management Efficiencies> TSA congressional justifications identify over $100 million in savings from improved management efficiencies compared to FY2012. This includes almost $99 million for aviation security programs, $9 million for surface transportation, more than $2 million for TTAC, and over $7 million for FAMS. Management efficiencies include reductions in items such as travel, conferences, miscellaneous purchasing, use of support contracts, and overtime pay. The identified savings through management efficiencies raised oversight questions as to why inefficiencies were not corrected sooner, and additional questions regarding procedures and policies established to ensure that FY2013 efficiency goals can be met. Efficiency improvements have been viewed as a key component of addressing budget sequestration impacts at TSA. <5.3.5.3. Risk-Based Screening Initiatives> TSA has initiated a number of risk-based screening initiatives to focus its resources based on intelligence-driven assessments of security risk. Initiatives include a new trusted traveler trial program called PreCheck, modified screening procedures for children 12 and under, and a trial program for screening known flight crew members using modified procedures. Trial programs are also underway for modified screening of elderly passengers similar to those procedures put in place for children. These various trial programs may allow for improved screening efficiencies and potential savings, which TSA indicates will be identified in future budgets. A cornerstone of TSA's risk-based initiatives is the PreCheck program. PreCheck is TSA's latest version of a trusted traveler program and is modeled on similar CBP programs including Global Entry, SENTRI, and NEXUS. It is currently available on a trial basis to members of those programs, frequent flyer program members of three major airlines, and, in some cases, to military service members, at a limited number of airports. TSA has planned further expansion of the PreCheck program in FY2013. The House committee cited the PreCheck program as an example of a more rational risk-based approach to screening that can help increase screening efficiency and reduce screener workforce requirements. The Senate committee also expressed support for TSA plans to expand the PreCheck program. It directed TSA to report on its expansion plans for PreCheck, including statistics on expansion of the eligible population, success indicators such as passenger satisfaction, efforts to raise public awareness of the program, time savings derived from PreCheck screening procedures, and security measures to ensure that PreCheck enrollees are verified to be low-risk. The Senate committee also expressed specific concern that TSA's known crew member pilot program is currently limited only to pilots, and included bill language to require TSA to expand the program to include flight attendants. While TSA's risk-based screening pilot programs have been viewed positively, its efforts to conduct behavioral-based observation and screening of passengers continue to come under scrutiny and criticism. While TSA proposed to increase the numbers of Behavior Detection Officers (BDOs) by 72 to 3,131, the House committee report did not support this increase, citing TSA's lack of clear evidence that BDOs provide protection against potential aviation security threats. The committee called for a formal cost-benefit analysis of the BDO program along with a robust risk-based strategy for BDO deployment. The explanatory statement accompanying P.L. 113-6 requires TSA to brief the appropriations committees on a semiannual basis on "progress in developing or applying trusted traveler approaches and any legal or budgetary impediments to their implementation." <5.3.5.4. Armed Pilots and Crew Member Self-Defense Training> The budget justification specified a $13 million reduction (roughly a 50% cut) in funds for the Federal Flight Deck Officer (FFDO) program, which trains and deputizes armed airline pilots, and for the crew member self-defense training program. Neither the House nor the Senate Appropriations Committee have adopted this proposal. In addition to the House Appropriations Committee recommending to keep the FFDO program at FY2012 level, the House passed an amendment to increase FFDO funding by an additional $10 million to $36 million, $23 million above the request. The additional $10 million for the FFDO program is offset by reductions of $5 million each for Screener Payroll, Compensation, and Benefits (PC&B) and Screening Technology Maintenance. The House also included report language directing the TSA to revisit the use of FFDOs and other federal law enforcement assets that fly on commercial aircraft to serve as a force multiplier to complement the presence of air marshals through better coordinated scheduling, communications, and training. The Senate Appropriations Committee similarly disagreed with the request to reduce FFDO funding. It recommended $24 million for FFDO and crew member training programs, noting that the slight decrease compared to FY2012 reflects the constrained budget environment. The FFDO and crew member training programs were fully funded at $25 million under P.L. 113-6 , but were subject to sequestration cuts reducing projected spending on the programs in FY2013 to $23 million. <5.4. U.S. Coast Guard153> The Coast Guard is the lead federal agency for the maritime component of homeland security. As such, it is the lead agency responsible for the security of U.S. ports, coastal and inland waterways, and territorial waters. The Coast Guard also performs missions that are not related to homeland security, such as maritime search and rescue, marine environmental protection, fisheries enforcement, and aids to navigation. The Coast Guard was transferred from the Department of Transportation to the DHS on March 1, 2003. <5.4.1. FY2013 Request> The President requested a total of $8,377 million in discretionary appropriations for the Coast Guard, $257 million less than FY2012's enacted amount. This amount includes $6,791 million in operating expenses and $1,217 million in capital acquisitions. <5.4.2. House-Passed H.R. 5855> The House would have provided $212 million more than the President requested. Most of the difference is for the capital account which includes acquisition of vessels, aircraft, and improvements to shore facilities, as discussed further below. <5.4.3. Senate-Reported S. 3216> The Senate Appropriations Committee recommended about $282 million more than the President requested. Much of the difference was due to the Senate funding overseas contingency operations directly under the Coast Guard rather than transferring this amount from the DOD budget as the President requested. The largest differences with the President's request had to do with vessel procurement as shown in the following table and discussed further below. <5.4.4. P.L. 113-6 and the DHS Operating Plan for FY2013> P.L. 113-6 provided USCG with $10,400 million in total gross budget authority after taking into account the across-the-board cuts in Division G of the law, $68 million more than the FY2012 enacted level. Sequestration reduced USCG budget authority by roughly an additional $268 million, according to the DHS FY2013 expenditure plan. The plan projected gross total spending in FY2013 for USCG to be $10,132 million, $200 million less than the FY2012 enacted levels. Table 13 outlines the funding levels for the USCG operating expenses and acquisition and construction functions for FY2013. The "DHS Plan" column provides the department's assessment of budgetary resources available through P.L. 113-6 after sequestration was applied, as of April 26, 2013. It does not represent a final funding level as the department is likely to undertake transfers and reprogramming to mitigate the impact of sequestration in some areas. <5.4.5. Issues for Congress> <5.4.5.1. Vessels and Aircraft> The largest differences in FY2013 funding recommendations between the President's request and House and Senate bills concerned vessel and aircraft acquisition. The President requested $139 million for two new fast response cutters. The House bill funded four ($224 million), and the Senate bill funded six ($335 million). The President requested no funds for additional Response Boat Medium vessels. The House bill also would have provided no funds for the vessels but the Senate requested $8 million to build four more. Regarding aircraft, the House provided $90 million for one long-range fixed wing aircraft, and $28 million for two MH-60 helicopters. The President requested $64 million for the long-range aircraft, but made this request in the DOD's budget (to be transferred to the Coast Guard) and requested no funds for MH-60 helicopters. The Senate did not request funds for either of these aircraft under the Coast Guard's appropriation. P.L. 113-6 requires that a future-years capital investment plan for FY2014 through FY2018 be submitted to the appropriations committees at the same time as the President's budget request. DHS's sequestration operating plan indicates that $1,030 million is provided for vessel acquisitions, including $646 million for one national security cutter, $319 million for six fast response cutters, and $8 million to begin development of a new icebreaker. For aircraft, the DHS sequestration plan indicates a reduction from $191 million to $181 million for all aircraft acquisitions and provides $86 million specifically for long-range aircraft. The Coast Guard's effort to replace or modernize its fleet of vessels has been a major issue for Congress over the last several years. <5.4.5.2. Shore Facilities> The House bill would have provided $56 million for Coast Guard housing and aids to navigation, which is about $41 million more than the $15 million requested by the President and recommended by the Senate committee. The $41 million recommended by the House included $31 million to address a shore facilities backlog list produced by the Coast Guard (the list was requested by Congress in FY2012 appropriations) and $10 million for the Coast Guard's new headquarters building on the St. Elizabeths campus in Washington, DC. P.L. 113-6 provided $30 million for housing and aids to navigation, which was reduced to $29 million according to DHS's sequestration plan. <5.4.5.3. Maritime Security> The House Appropriations Committee Report called on the Coast Guard to issue a final rule for implementing card readers at ports and on vessels for the Transportation Worker Identification Credential (TWIC), a biometric security card that port and vessel workers must have to access security sensitive areas. The Senate Committee on Appropriations requested a Coast Guard briefing on actions taken regarding Interagency Operations Centers at ports in light of a GAO report critical of the agency's development of these centers. The explanatory statement accompanying P.L. 113-6 directs "[t]he Coast Guard, the Department, and TSA ... to take all necessary action to expedite the completion and publication of a final TWIC reader rule." No further direction is provided on Interagency Operations Centers, which means that the Senate's direction stands as written. <5.5. U.S. Secret Service160> The U.S. Secret Service (USSS) has two broad missions, criminal investigations and protection. Criminal investigation activities encompass financial crimes, identity theft, counterfeiting, computer fraud, and computer-based attacks on the nation's financial, banking, and telecommunications infrastructure, among other areas. The protection mission is the most prominent, covering the President, Vice President, their families, and candidates for those offices, along with the White House and Vice President's residence, through the Service's Uniformed Division. Protective duties also extend to foreign missions in the District of Columbia and to designated individuals, such as the DHS Secretary and visiting foreign dignitaries. Aside from these specific mandated assignments, USSS is responsible for security activities at National Special Security Events (NSSE), which include the major party quadrennial national conventions as well as international conferences and events held in the United States. The NSSE designation by the President gives the USSS authority to organize and coordinate security arrangements involving various law enforcement units from other federal agencies and state and local governments, as well as from the National Guard. <5.5.1. FY2013 Request> For FY2013, the Administration requested an appropriation of $1,601 million for the USSS. The Administration's request is $66 million (4%) less than was appropriated for the USSS in FY2012. The Administration requested approximately $988 million for its protection mission, $324 million for its investigation mission, and total of 7,061 FTE to meet its personnel needs. <5.5.2. House-Passed H.R. 5855> For FY2013, the House-passed version of the DHS appropriations bill recommended an appropriation of $1,613 million. This amount would have represented a decrease of $54 million (3.2%) from the FY2012 USSS appropriation. However, it was $12 million (0.8%) more than the Administration's FY2013 request. The decrease compared to FY2012 reflected the anticipated conclusion of the 2012 Presidential campaign season and the reduced demand for major presidential candidate protection. The reduction to the USSS budget would have been partially offset by restoration of $8 million in specific funding for USSS support for the Center for Missing and Exploited Children, which had been zeroed out in the Administration's request, and an $8 million increase for Electronic Crimes Special Agent Program and Electronic Crimes Task Forces. <5.5.3. Senate-Passed S. 3216> For FY2013, the Senate-reported version of the DHS appropriations bill recommended an appropriation of $1,613 million. This amount would have reflected a total decrease of $54 million (3.2%) from the FY2012 USSS appropriation. However, it was $12 million (0.8%) above the Administration's FY2013 request. Although the structure was different for two programs, the Senate also would have restored $8 million in specific funding for USSS support for the Center for Missing and Exploited Children, and would have provided $4 million above the request for unspecified priority domestic investigations. Additionally, in their report, the Senate Committee noted and approved of the USSS Director's actions to address the "improper behavior involving 12 Secret Service agents and officers in Cartagena, Colombia, on April 12, 2012." <5.5.4. P.L. 113-6 and the DHS Operating Plan for FY2013> For FY2013, Congress appropriated $1.611 billion for USSS. This was $56 million less than the $1.667 billion appropriated in FY2012. Following the sequester, the Service plans to expend $1.527 billion, which is $84 million less than what was appropriated in P.L. 113-6 . This $84 million was reduced primarily from the Service's appropriations for its protection and investigation mission. Table 14 outlines in detail the funding levels for the Secret Service for FY2013. The "DHS Plan" column provides the department's assessment of budgetary resources available through P.L. 113-6 after sequestration was applied, as of April 26, 2013. It does not represent a final funding level as the department is likely to undertake transfers and reprogramming to mitigate the impact of sequestration in some areas. <5.5.5. Issue for Congress> One potential ongoing issue for Congress concerning the USSS is the balancing of the investigative and protective missions of the Service, and how executing both missions affects overall USSS operations. <5.5.5.1. Protection and Investigation Missions Funding and Activities> USSS's protection mission, as opposed to its investigative mission, employs the majority of the Service's agents and receives a larger share of the agency's resources. Additionally, the majority of congressional action concerning USSS has been related to its protection mission and recent USSS agent misconduct. While Congress has maintained the Service's role in investigating financial crimes, such as combating counterfeiting, congressional action has primarily addressed, and continues to address, the Service's protection mission. Potential terrorist attacks and potential threats to the President have resulted in an increase in the need for the Service's protection activities. Advocates for expansion of the investigation mission, however, may contend that protection is enhanced through better threat investigation efforts. <6. Title III: Protection, Preparedness, Response, and Recovery> Title III of the DHS appropriations bill contains the appropriations for the National Protection and Programs Directorate (NPPD), the Office of Health Affairs (OHA), and the Federal Emergency Management Agency (FEMA). The Administration requested $5,911 million for these accounts in FY2013, an increase of $231 million above the enacted level. The House-passed bill would have provided $5,930 million, an increase of 0.3% above the requested level and 4.4% above FY2012. The Senate-reported bill would have provided $5,971 million, 1% above the request and 5.1% above FY2012. In addition, both House-passed and Senate-reported versions of this title also would have included a requested $5,481 million for disaster relief that is offset by an adjustment under the Budget Control Act (BCA). The adjustment would have been $919 million smaller than the adjustment provided in the FY2012 Disaster Relief Appropriations Act ( P.L. 112-77 ). After the across-the-board cuts but prior to applying sequestration, P.L. 113-6 provides $5,920 million, an increase of 0.2% from the requested level and 4.3% above FY2012. The act also included $6,400 million for disaster relief that is offset by an adjustment under the (BCA). Table 15 lists the enacted amounts for the individual components of Title III for FY2012, the Administration's request for these components for FY2013, the House-passed and Senate-reported appropriations for the same, the enacted level in P.L. 113-6 and the post-sequester level of available resources from P.L. 113-6 reported by DHS. <6.1. National Protection and Programs Directorate171> The National Protection and Programs Directorate (NPPD) was formed by the Secretary for Homeland Security in response to the Post-Katrina Emergency Management Reform Act of 2006. The Directorate includes the Office of the Under Secretary for NPPD and accompanying administrative support functions (budget, communications, etc.), the Office of Infrastructure Protection and the Office of Cybersecurity and Communications, the latter including the National Cyber Security Division, the National Communications System and the Office of Emergency Communications. The Administration has proposed moving the activities of the US-VISIT program from NPPD to other locations within the Department. The House has proposed keeping some of those functions within the Directorate in a newly established Office of Biometric Identify Management. FY2013 Request The activities of the Office of the Under Secretary are supported by the Management and Administration Program. The activities of the Office of Infrastructure Protection and the Office of Cybersecurity and Communications are supported by the Infrastructure Protection and Information Security Program (IPIS). The IPIS program can be further broken down into projects related to infrastructure protection, cybersecurity, and communications. The Administration requested $1,217 million for NPPD activities in FY2013, $29 million (2.3%) less than what was appropriated for FY2012. The FY2013 Management and Administration budget request was $50 million (roughly even with the FY2012 level) and represents a current services budget request. It also reflects the transfer of functions previously performed by the Directorate's Office of Risk Management and Analysis to the DHS Office of Policy. The FY2013 request for IPIS was $1,167 million, an increase of $278 million (31.3%) above the FY2012 appropriation. A large share of the increase in the IPIS budget request was directed toward securing the federal government's information systems. The request included two major program increases. The first, a new $202 million initiative within the Federal Network Security project, would directly facilitate other federal agencies' compliance with Federal Information Security Management (FISMA) requirements, including development of continuous monitoring capabilities. The second is a $116 million (50.7%) increase to expand the Network Security Deployment project. The Network Security Deployment project supports deployment of the National Cybersecurity Protection System (NCPS, also known as the EINSTEIN project). The NCPS is an intrusion detection system that uses digital signatures developed by the National Security Agency. The extra funding would expand deployment of the 3.0 version of the system (which allows for active defenses against an intrusion) and development of version 2.2 (which would augment threat visualization and information sharing capabilities) across federal agencies. Other programmatic increases of note included $15 million for US-CERT to support analysis of the additional data being generated by the NCPS and $5 million in additional support for the Multi-State Information Security and Analysis Center (MS-ISAC) to assist state, local, territorial and tribal governments in their cybersecurity efforts and to integrate them with NPPD's national efforts. The FY2013 request decreased funding in other areas of the IPIS budget. Infrastructure protection funding was reduced $40 million (13.7%) below the FY2012 appropriation and activities in communications were reduced $7 million (4.7%) below FY2012 appropriated levels. Most of the reduction in infrastructure protection was due to a $19 million (20.1%) reduction in the budget requested for the Infrastructure Security Compliance project. This project supports activities to ensure compliance with Chemical Facility Anti-Terrorism Standards (CFATS) at covered facilities. The Administration considered the reduction a baseline adjustment, with $16 million of the adjustment attributed to the ability of NPPD to obligated funds. Another $8 million in reductions was associated with elimination of contract support for incident planning exercises. Incident planning exercise activities would continue as those activities, and the federal personnel associated with them, were transferred to other infrastructure protection projects. <6.1.1. House-Passed H.R. 5855> The House would have provided $1,347 million for NPPD: $45 million for Management and Administration, $1,110 million for IPIS, and $191 million for the Office of Biometric Identity Management (OBIM is discussed elsewhere in this report). The House would have provided $5 million (10%) less than requested for Management and Administration citing the Administration's use of unauthorized TSA fee increases, flaws in the treatment of CBP fee revenues, and the department's poor compliance with statutory requirements. Much of the reduction in the IPIS request was made in the Security Compliance project. Based on an internal review of the program which revealed major problems with the program's implementation, and the existence of unobligated funds, the House would have provided $29 million less than requested. The House also reduced by $17 million the funding requested for deployment of the NCPS, noting concern about NPPD's ability to obligate the funds. The House also would have directed the NPPD to work with the Coast Guard on program implementation, personnel management, and inspector training, and to consider the potential for using alternative security programs developed by the private sector for approving security plans under CFATS. Other reductions made by the House included $3 million in the Global Cybersecurity Management project (due to lack of sufficient justification) and $7 million in the Programs to Study and Enhance Telecommunications project. The House would have provided the full $202 million increase for the Federal Network Security project initiative. However, rather than transferring those funds to other agencies to develop continuous monitoring capabilities, the House would have directed NPPD to use the funds to develop security capabilities, including continuous monitoring, that other agencies could use. <6.1.2. Senate-Reported S. 3216> The Senate Appropriations Committee recommended $1,220 million for NPPD. The Committee recommended the requested amount for Management and Administration, but required an expenditure plan. The Committee recommended $1,170 million for IPIS. This included amounts above those requested for bombing prevention and vulnerability assessments. It also included $12 million more in funding than requested for the Security Compliance project. Acknowledging the existence of unobligated funds for the project and the Directorate's continuing internal deliberation on planning its way forward, the Committee stated that funds above those requested would be needed to implement any subsequent implementation plan later in the fiscal year. The Committee would have provided $18 million less than requested for the initiative within the Federal Network Security project to support the development of continuing monitoring capability and other security measures. In addition, the Committee recommended withholding $120 million of the $184 million proposed by the Senate for this effort until NPPD produces an expenditure plan for the initiative. Noting that NPPD had originally proposed a federated effort, but had restructured the project to a more unified project managed by DHS, the Committee also recommended that the expenditure plan explain how this new centralized structure will work. The Committee also recommended funding above that requested for the Global Cybersecurity Management project (setting aside $17 million for cybersecurity education) and the Critical Infrastructure Cybersecurity and Awareness project (citing the importance the Committee placed on improving the cybersecurity posture of state, local, territorial, tribal governments). On a related topic, the Committee cited the first National Cyber Security Review conducted by NPPD which assessed the cybersecurity capabilities of states, local, territorial, and tribal governments, and expressed its expectation that the review would be conducted annually to chart progress. The Committee also recommended increases for the Office of Emergency Communications and to other emergency communication-related projects, including the Next Generation Telecommunications project (which it increased $5 million above the requested level). <6.1.3. P.L. 113-6 and the DHS Operating Plan for FY2013> After the across-the-board cuts by prior to applying sequestration, P.L. 113-6 provides $1,439 million for NPPD/IPIS and OBIM. This includes $50 million for Management and Administration, $1,157 million for the IPIS program, and $232 for Biometric Identity Management. According to information provided to Congress through its FY2013 operating plan, after sequestration, NPPD/IPIS and OBIM would receive $1,337 million, before the impact of transfers or reprogrammings that might ameliorate or exacerbate the impacts of sequestration. The operating plan indicates $48 million for Management and Administration, $1,065 million for IPIS, and $224 million for Biometric Identity Management for FY2014. Items of interest for IPIS specifically mentioned in the explanatory statement included $13.5 million for the Office of Bombing Prevention; $20.6 million for vulnerability assessments, and a briefing to the Committees on implementing recommendations recently made by GAO on how to better manage vulnerability assessments (Government Accountability Office, 2012); $16.9 million for cybersecurity education; $77.9 million for CFATS, with $20.0 million of that put on hold until Congress receives an expenditure plan for the program; and $202 million of the Federal Network Security program to be made available to assist the efforts of individual federal agencies to acquire and operate continuous monitoring and diagnostic equipment and software. These latter funds are not to supplant agency funds budgeted for this purpose. Additional instructions related to CFATS were provided in the Consolidated and Further Continuing Appropriations Act. GAO, in conjunction with the Coast Guard, is to continue to examine DHS progress in developing the CFATS program. In addition, once DHS has completed a sufficient number of inspections, GAO is to review how CFAT inspections were conducted, if the inspectors were adequately trained, and to identify any other barriers to managing compliance. NPPD was directed to provide semiannual reports on the compliance program and to provide a briefing on alternative security programs that might be used as models for the CFATS program. Additional instructions in the Consolidated and Further Continuing Appropriations Act related to cybersecurity included expenditure plans from each federal agency identifying the agency's efforts to improve cybersecurity. Agencies were further instructed to send quarterly reports on the execution of those plans to the Office of Management and Budget (OMB). OMB was instructed to provide a summary of these execution reports annually to Congress. Table 16 outlines the FY2012 and FY2013 funding levels for the for each PPA within the IPIS program. The "DHS Plan" column provides the department's assessment of post-sequester resources provided by P.L. 113-6 as of April 26, 2013. It does not represent a final funding level as the department is likely to undertake transfers and reprogramming to mitigate the impact of sequestration in some areas. Issues for Congress CFATS Compliance An internal review by NPPD at the end of last calendar year identified some major problems with implementing the CFATS compliance program. The Directorate is continuing to review the program and to develop ways to mitigate the problems identified. Congress, which has shown a continued interest in developing and ensuring compliance with CFATS, will likely be interested in oversight of this issue. Cybersecurity Congress has focused a fair amount of attention on cybersecurity during the 112 th Congress, including consideration of a number of bills addressing various aspects of the issue; e.g., information sharing, education and workforce development, clarifying roles and responsibilities in protecting federal information systems, and protecting information systems of critical infrastructure assets, including those owned and operated by the private sector. These bills and issues are beyond the scope of this report. However, any legislation expanding DHS's role in protecting the information systems of critical infrastructure may require DHS, presumably NPPD, to assume additional duties, which would likely require additional resources. <6.2. Federal Protective Service186> The Federal Protective Service (FPS), within the National Protection and Programs Directorate (NPPD), is responsible for the protection and security of federal property, personnel, and federally owned and leased buildings. In general, FPS operations focus on security and law enforcement activities that reduce vulnerability to criminal and terrorist threats. FPS protection and security operations include all-hazards based risk assessments; emplacement of criminal and terrorist countermeasures, such as vehicle barriers and closed-circuit cameras; law enforcement response; assistance to federal agencies through Facility Security Committees; and emergency and safety education programs. FPS also assists other federal agencies, such as the U.S. Secret Service (USSS) at National Special Security Events (NSSE), with additional security. FPS is the lead "Government Facilities Sector Agency" for the National Infrastructure Protection Plan (NIPP). Currently, FPS employs approximately 1,225 law enforcement officers, investigators, and administrative personnel, and administers the services of approximately 13,000 contract security guards. <6.2.1. President's FY2013 Request> The President's FY2013 budget request included 1,279 FTEs and $1,302 million for FPS. This was $40 million (3%) more than FPS received in FY2012. FPS does not receive a typical appropriation, but instead has a budget wholly offset by security fees charged to GSA building tenants in FPS-protected buildings and facilities. Of the total funding projected in the request, $272 million in fees would be collected for basic security operations, $509 million for building-specific security operations, and $521 million for Security Work Authorizations. <6.2.2. House-Passed H.R. 5855> For FY2013, House-passed H.R. 5855 projected no specific changes to the FPS budget and provided no additional direction for the service. <6.2.3. Senate-Reported S. 3216> The Senate Appropriations Committee recommended no specific changes to the FPS budget. However, the Senate Appropriations Committee report required the Office of Under Secretary for NPPD, in conjunction with the FPS Director, to brief the committee on FPS management and budget improvement efforts. <6.2.4. P.L. 113-6 and the DHS Operating Plan for FY2013> No specific changes to the FPS budget were recommended in P.L. 113-6 or the accompanying explanatory statement. FPS was directed to brief the appropriations committees, however, on their progress in implementing recommendations made in GAO report GAO-12-852, "DHS Needs to Refocus Its Efforts to Lead the Government Facilities Sector." Due to the structure of the FPS budget, which is derived from fees collected from other federal entities, its overall resource levels were unaffected by sequestration. <6.2.5. Issues for Congress> Congress continues to express concern over certain aspects of the FPS mission and how FPS is funded. Appropriators have expressed an interest in improving training of contract guards, federalizing contract guards, developing standards for checkpoint detection technologies for explosives and other dangerous items at federal facilities, and coordinating DHS efforts with the Interagency Security Committee for building security standards. Several pieces of legislation were introduced in the House and Senate in the 112 th Congress including H.R. 176 , H.R. 2658 and S. 772 to improve federal building security and strengthen the ability of FPS to protect the buildings, the federal employees who work in them, and the visiting public. None of this legislation was enacted prior to the end of the 112 th Congress. In the 113 th Congress, H.R. 735 , the Federal Protective Service Improvement and Accountability Act of 2013 has been introduced, which would set staffing levels in the FPS inspector force and create a pilot to expand the use of federal employees in place of contract guards. <6.3. Office of Health Affairs195> The Office of Health Affairs (OHA) has operational responsibility for several programs, including the BioWatch program, the National Biosurveillance Integration Center (NBIC), and the department's occupational health and safety programs. OHA also coordinates or consults on DHS programs that have a public health or medical component; these include several of the homeland security grant programs, and medical care provided at ICE detention facilities. OHA received $167 million in FY2012 appropriations. <6.3.1. FY2013 Request> The Administration requested $166 million for OHA for FY2013, $1 million (0.6%) less than was appropriated for FY2012. The requested funding level would support 101 FTEs, 2 more than in FY2012. The proposed allocation is: $125 million for the BioWatch program; $8 million for NBIC; $1 million for the Chemical Defense Program; $5 million for Planning and Coordination (under which numerous leadership and coordination activities are implemented); and $28 million for Salaries and Expenses. (See Table 17 .) <6.3.2. House-Passed H.R. 5855> The House-passed bill would have provided $132 million for FY2013, $35 million (21.2%) less than for FY2012, and $34 million (20.7%) less than the President's request. The decrease largely reflected a decrease for the BioWatch program (discussed further below): $29 million below the FY2012 amount, and $40 million below the President's request. (See Table 17 .) <6.3.3. Senate-Reported S. 3216> The Senate-reported bill would have provided $168 million for FY2013, $1 million (0.5%) more than for FY2012 and $2 million (1.1%) more than the President's request. The Senate committee recommended the amounts requested by the Administration for BioWatch. The committee also recommended small increases for Planning and Coordination and Salaries and Expenses; and $2 million for the Chemical Defense Program, to support additional pilot programs. (See Table 17 .) <6.3.4. P.L. 113-6 and the DHS Operating Plan for FY2013> After the across-the-board cuts, P.L. 113-6 provides $132 million for OHA, $35 million (21.0%) less than for FY2012, and $34 million (20.5%) less than the President's request. Because of the size of reduction in the OHA budget from FY2012, OHA did not face a further reduction in FY2013 as a result of sequestration. Reductions in total enacted budget authority for FY2013 largely reflect decreased funding for BioWatch, as recommended by the House. Table 17 presents the enacted funding amounts for OHA components for FY2012, and the following amounts for FY2013: the Administration's request; the House-passed and Senate-reported amounts; and the enacted amounts under P.L. 113-6 , reflecting across-the-board cuts. The "DHS Plan" column provides the department's assessment of post-sequester resources provided by P.L. 113-6 as of April 26, 2013. It does not represent a final funding level as the department is likely to undertake transfers and reprogramming to mitigate the impact of sequestration in some areas. <6.3.5. Issues for Congress> <6.3.5.1. Consolidation of DHS WMD Defense Programs> In its report on FY2013 funding recommendations for DHS, the House Appropriations Committee noted the separation of the department's activities to monitor threats posed by weapons of mass destruction (WMD), in particular, the separation of the Domestic Nuclear Detection Office (DNDO), responsible for monitoring radiological and nuclear threats, and OHA, responsible for monitoring chemical and biological threats. The Committee directed the Secretary to submit to Congress a consolidation plan to merge DNDO and OHA into an Office of Weapons of Mass Destruction Defense for FY2014, and directed GAO to review the consolidation plan. Neither the Senate report nor the House explanatory statement carries a parallel directive. However, the Senate explanatory statement reiterates the House Committee's comments about coordination of WMD activities, and calls on the Secretary to submit a comprehensive review of its WMD operations, to include possible performance improvements and cost savings that could accompany an OHA/DNDO merger. This review is to be submitted to Congress in lieu of the report requested by the House, by September 1, 2013. <6.3.5.2. BioWatch: Effectiveness and Deployment> The BioWatch program deploys sensors in more than 30 large U.S. cities to detect the possible aerosol release of a bioterrorism pathogen, in order that medications could be distributed before exposed individuals became ill. Operation of BioWatch accounts for the lion's share of OHA's budget. The program has sought for several years to deploy more sophisticated sensors (so-called "Generation-3" or "Gen-3" sensors) that could detect airborne pathogens in a few hours, rather than the day or more that is currently required. However, according to GAO, "BioWatch Gen-3 has a history of technical and management challenges." In particular, "Gen-3's estimated life cycle cost, some $5.8 billion, makes it one of the largest DHS acquisitions. And the question is, whether it justifies that level of investment." BioWatch performance has attracted the attention of Members of Congress since its inception. Congressional appropriators have at times sought to limit funding for program expansion and/or called for program reviews. The decreased amount provided for FY2013 effectively precludes continued development and deployment of Gen-3 capability for the remainder of the fiscal year. <6.4. Federal Emergency Management Agency> The primary mission of the Federal Emergency Management Agency (FEMA) is to reduce the loss of life and property, and protect the nation from all hazards. It is responsible for leading and supporting the nation's preparedness for manmade and natural disasters through a risk-based and comprehensive emergency management system of preparedness, protection, response, recovery, and mitigation. FEMA executes its mission through a number of activities. It provides incident response, recovery, and mitigation assistance to state and local governments, primarily appropriated through the Disaster Relief Fund (DRF) and the Pre-Disaster Mitigation Fund. It also supports disaster preparedness through a series of homeland security and emergency management grant programs. <6.4.1. FY2013 Request> The Administration requested a total discretionary appropriation of $4,528 million in net budget authority for FEMA for FY2013, an increase of $261 million (6.1%) over the enacted FY2012 level of $4,267 million. In addition, the Administration requested an additional $5,481 million for the DRF, paid for by an adjustment to the discretionary budget cap under a mechanism established by the Budget Control Act. This adjustment, which is $919 million below the additional funding provided for the DRF in FY2012, is discussed more in detail below and earlier in the report. <6.4.2. House-Passed H.R. 5855> House-passed H.R. 5855 would have provided a total discretionary appropriation of $4,451 million for FEMA for FY2013, a decrease of $76 million (1.7%) from the President's request and an increase of 185 million (4.3%) from FY2012. This would have included $23 million added to FEMA's budget through floor amendments. The House also included the requested funding for the DRF. <6.4.3. Senate-Reported S. 3216> Senate-reported S. 3216 would have provided a total discretionary appropriation of $4,582 million for FEMA for FY2013, an increase of $55 million (1.2%) from the President's request and an increase of $316 million (7.4%) from FY2012. The Senate Appropriations Committee also included the requested funding for the DRF. <6.4.4. P.L. 113-6 and the DHS Operating Plan for FY2013> After the across-the-board cuts by prior to applying sequestration, P.L. 113-6 provides $4,351 million for FEMA, $84 million (2%) more than for FY2012, and $177 million (4%) less than the President's request. This included $1 million less than requested for the DRF, due to the impacts of the across-the-board cuts. In addition, the bill includes $6,400 (pre-sequestration) for the DRF for the costs of major disaster under the Stafford Act, paid for by the disaster relief cap adjustment under the BCA. According to information provided to Congress through its FY2013 operating plan, after sequestration, FEMA would receive $4,150 million from the provisions in Title III, plus $6,076 million paid for by the disaster relief cap adjustment under the BCA. This is an assessment made before the impact of transfers or reprogrammings that might ameliorate or exacerbate the impacts of the sequester. These numbers do not represent the full range of appropriated resources available to FEMA, as the DRF received a significant infusion of capital from P.L. 113-2 . However, neither DHS nor the Administration has released an authoritative statement on the post-sequester funding levels provided by P.L. 113-2 . <6.5. DHS State and Local Preparedness Grants208> State and local governments have primary responsibility for most domestic public safety functions. When facing difficult fiscal conditions, state and local governments may reduce resources allocated to public safety and, consequently, homeland security preparedness, due to increasing pressure to address tight budgetary constraints and fund competing priorities. Since state and local governments fund the largest percentage of public safety expenditures, this may have a significant impact on the national preparedness level. On March 30, 2011, President Obama issued a presidential policy directive that directed the Secretary of DHS to develop and submit to the President a national preparedness goal. Presidential Policy Directive 8 (PPD 8) directed the Secretary to develop a national preparedness goal in coordination with federal, state, local, tribal, and territorial governments: The national preparedness goal shall be informed by the risk of specific threats and vulnerabilities taking into account regional variations and include concrete, measurable, and prioritized objectives to mitigate that risk. The national preparedness goal shall define the core capabilities necessary to prepare for the specific types of incidents that pose the greatest risk to the security of the Nation. This presidential policy directive supersedes a previous national preparedness homeland security directive (HSPD-8) issued after 9/11, which initiated the following national preparedness goal: Strengthen the preparedness of the United States to prevent and respond to threatened or actual domestic terrorist attacks, major disasters, and other emergencies by requiring a national domestic all-hazards preparedness goal. On October 7, 2011, The Secretary of DHS released the first National Preparedness Goal (NPG) developed under the provisions of PPD 8. The preparedness goal was a document that identified core capabilities and targets for which measures would be developed using an integrated, layered, and all-of-nation approach. The NPG defined success as: A secure and resilient Nation with the capabilities required across the whole community to prevent, protect against, mitigate, respond to, and recover from the threats and hazards that pose the greatest risk. Prior to 9/11, there were only three federal grant programs available to state and local governments to address homeland security: the State Domestic Preparedness Program administered by the Department of Justice, the Emergency Management Performance Grant (EMPG) administered by the Federal Emergency Management Agency (FEMA), and the Metropolitan Medical Response System (MMRS) administered by the Department of Health and Human Services. Since that time, several additional homeland security grant programs were added to ensure state and local preparedness, including the State Homeland Security Grant Program (SHSGP), Citizen Corps Program (CCP), Urban Area Security Initiative (UASI), Driver's License Security Grants Program (REAL ID), Operation Stonegarden grant program (Stonegarden), Regional Catastrophic Preparedness Grant Program (RCPG), Public Transportation Security Assistance and Rail Security Assistance grant program (Transit Grants), Port Security Grants (Port Security), Over-the-Road Bus Security Assistance (Over-the-Road), Buffer Zone Protection Program (BZPP), Interoperable Emergency Communications Grant Program (IECGP), and Emergency Operations Center Grant Program (EOC). While state and local governments receive federal assistance for preparedness activities, this federal assistance accounts for only a small percentage of overall state and local spending for public safety. On average, total expenditures for all state and local governments for public safety is $218 billion annually. Public safety expenditures include costs associated with the functions of police protection, fire protection, correction, and protective inspections and regulations. Federal grant programs for state and local preparedness account for less than one percent of state and local government public safety expenditures. The President requested $1.8 billion in federal grants for state and local government homeland security preparedness for FY2013, $400 million more than was appropriated for FY2012. The requested funding level would include funding to support the establishment of a National Preparedness Grant Program (NPGP), which was proposed as a means to consolidate the activities previously funded under a number of state and local preparedness grant programs. In its report on FY2013 funding recommendations for DHS, the House Appropriations Committee denied a request by the Administration to consolidate several state and local preparedness grant program activities under a National Preparedness Grant Program because it had not been authorized by Congress, lacked sufficient details regarding the implementation of the program, and lacked sufficient stakeholder participation in the development of the proposal. The Senate Appropriations Committee also expressed concern with the proposal to consolidate the state and local preparedness grants because it was unclear how risk assessments would be used and how funding would be allocated. The Senate Committee also noted its concern over the uncertainty surrounding the allocation of funding to individual grant programs. The House recommended $1.7 billion for State and Local Programs, approximately $300 million more than for FY2012, and $100 million less than the President's request. As mentioned above, the House Appropriations Committee rejected the consolidation proposal, recommending that the grant structure enacted in FY2012 for state and local programs be continued in FY2013. Grant funding would have been distributed at the discretion of the Secretary of Homeland Security under the authorities provided by the State Homeland Security Grant Program, Urban Area Security Initiative, Metropolitan Medical Response System, Citizen Corps Program, Public Transportation Security Assistance and Railroad Security Assistance, Over-the-Road Bus Security Assistance, Port Security Grants, Driver's License Security Grants Program, Interoperable Emergency Communications Grant Program, Emergency Operations Centers, Buffer Zone Protection Program, and high-risk non-profit organizations described under Section 501(c)(3) of the Internal Revenue Code. Of the $1.7 billion, the House provided $55 million to Operation Stonegarden, $150 million for the highest risk areas, and $232 million for education, training, and exercises. The Senate Appropriations Committee recommended $1.6 billion for FY2013, $200 million more than appropriated in FY2012, and $200 million less than the President's request. Of the $1.6 billion, the committee recommended $470 million for the State Homeland Security Grant Program, of which $55 million was recommended for Operation Stonegarden; $676 million for Urban Area Security Initiative, of which $13 million was recommended for non-profit security grants; $132 million for Public Transportation Security/Bus Assistance, of which $13 million was recommended for Amtrak; $132 million for Port Security Grants; and $234 million for education, training, and exercises. After the across-the-board cuts but prior to applying sequestration, P.L. 113-6 provides $1,467 million for state and local programs, a decrease of 20.3% from the requested level and 8.6% above FY2012. Sequestration further reduced budget authority for FEMA's state and local grants program by roughly an additional $77 million, according to the DHS FY2013 expenditure plan. The plan projected $1,400 million for state and local programs, roughly $50 million more than the FY2012 enacted levels. However, it is important to note that P.L. 113-6 removes a transfer from the grant programs that had paid FEMA's administrative costs, which means the actual funding available for grants as accounted for in the operating plan is $132 million higher in total than in FY2012. Table 18 outlines the funding levels for FEMA state and local programs. The "DHS Plan" column provides the department's assessment of post-sequester resources provided by P.L. 113-6 as of April 26, 2013. It does not represent a final funding level as the department is likely to undertake transfers and reprogramming to mitigate the impact of sequestration in some areas. <6.5.1. Assistance to Firefighters Grant Program (AFG)220> The Administration's FY2013 budget proposed $670 million for firefighter assistance, including $335 million for AFG and $335 million for SAFER. Under the Administration proposal, firefighter assistance grants would be categorized under First Responder Assistance Programs (FRAP), one of three activities under FEMA's State and Local Programs (SLP) appropriation. Historically, DHS has requested that a percentage of AFG funding (up to 5%) be set aside for management and administration of the grant program. Starting in FY2013, according to the Administration proposal, grant administration would be shifted to the SLP Management and Administration office. Regarding SAFER grants, the Administration requested that legislative language be provided to allow these grants to be used to maintain firefighter staffing level, not just increase them. This language has been carried in appropriations legislation since FY2009. The House-passed bill would have funded firefighter assistance at $675 million ($337.5 million AFG, $337.5 million SAFER), identical to the FY2012 level. The House-passed bill also would have denied the Administration's request to shift AFG and SAFER into the State and Local Programs account. Unlike the Administration request, the House-passed bill would have designated up to 4.7% of the amount appropriated to firefighter assistance for program administration. The Senate-reported bill would have proposed $675 million for firefighter assistance, including $337.5 million for AFG and $337.5 million for SAFER. Like the House-passed bill, the Senate Committee would have denied the Administration's request to shift AFG and SAFER into the State and Local Programs account. The Senate-reported bill also would have included the requested SAFER waiver authority language, and the Committee stated its expectation that DHS would take into consideration economic hardship when exercising the waiver authority. Post-sequestration, P.L. 113-6 funds firefighter assistance at $642 million (AFG and SAFER at $321 million each). P.L. 113-6 provides that administrative costs are to be derived from the FEMA Salaries and Expense account, rather than (as is typically the case) from a 5% carve-out from the firefighter assistance appropriations account. P.L. 113-6 also continues to grant DHS the requested SAFER waiver authority for FY2013. <6.5.2. Disaster Relief Fund222> The DRF is the main account used to fund a wide variety of programs, grants, and other forms of emergency and disaster assistance to states, local governments, certain nonprofit entities, and families and individuals affected by disasters. The DRF is funded yearly through regular appropriations; however, the account often is depleted before the end of the fiscal year due to accumulated need for disaster assistance. This is due in part to ongoing recovery efforts from major events such as the Gulf Coast hurricanes of 2005. However, in recent years it has been argued that the reliance on supplemental funding has primarily been due to underfunding the DRF. For example, between 2005 and 2011, the average regular appropriation for the DRF was $1,749 million. Yet, the average monthly expenditures for the DRF were $383 million (which would extrapolate to $4,596 million annually). The Administration requested $6,088 million for the DRF through the regular appropriations process for FY2013. This was a decrease of $1,011 million (14.2%) from the $7,100 million enacted for FY2012 however, that total included a $6,400 million supplemental. The request can be broken out into two categories. First, $608 million was requested for activities not directly tied to major disasters under the Stafford Act (including activities such as assistance provided to states for emergencies and fires). This is sometimes referred to as the DRF's "base" funding. The second (and significantly larger) category is for disaster relief costs for major disasters under the Stafford Act, for which the administration requested $5,481 million. This structure reflects the impact of the Budget Control Act, which allows these costs incurred by major disasters to be paid through an "allowable adjustment" to the discretionary spending caps, rather than having them count against the discretionary spending allocation for the bill. The FY2013 request was more than three times the size of the request from FY2012. The Administration requested funding for the DRF based on what FEMA planned to spend on all past declared catastrophic events, plus the 10-year average for non-catastrophic events, and a $500 million reserve to prevent shortfalls. This was adjusted downward by $1,200 million to account for projected recovery of funds not needed for past disasters. Both the House-passed bill and the Senate-reported bills carried the same level of funding for the DRF as the Administration requested for FY2013. Both pieces of legislation also contained an unrequested transfer of $24 million out of the DRF to the DHS Office of Inspector General to conduct audits and investigations on disaster-related spending. After the across-the-board cuts, but prior to applying sequestration, P.L. 113-6 funds the DRF at $7,007 million. $24 million of this amount is to be transferred to the DHS Office of Inspector General to carry out audits on public assistance projects that exceed $10 million as well as an examination of FEMA's debris removal decisions with regard to Hurricane Gustav in 2008. Notwithstanding the transfer to the Inspector General, P.L. 113-6 provides roughly $918 million more (15%) than the Administration's initial request of $6,088 for the DRF. The operating plan for DHS for FY2013 indicates sequestration reduced the $7,007 million by 5% (to $6,653 million). <6.5.2.1. The DRF, the Budget Control Act (BCA), and Hurricane Sandy> The Budget Control Act (BCA) included a series of provisions that directed the Office of Management and Budget (OMB) to annually calculate an "allowable adjustment" for disaster relief to the BCA's discretionary spending caps. That adjustment, if used, would make additional budget authority available for the federal costs incurred by major disasters declared under the Stafford Act beyond what is allowed in the regular discretionary budget allocation. Without an adjustment to the discretionary budget caps, federal spending over the allocation could trigger a sequestration. It is important to note that "disaster relief" funding under the BCA and the Disaster Relief Fund are not the same. The BCA defines funding for "disaster relief" as funding for activities carried out pursuant to a major disaster declaration under the Stafford Act. This funding comes not only from FEMA, but from accounts across the federal government. While a portion of funding for the DRF is eligible for the allowable adjustment under the BCA, the DRF is not wholly "disaster relief" by the BCA definition. When Hurricane Sandy struck the northeastern United States in October 2012, the DRF had access to roughly $7.3 billion, as a result of P.L. 112-175 , the six-month continuing resolution that the government was operating under at the time which carried over the $6,400 in supplemental disaster assistance provided to the DRF in FY2012, and used a portion of the $11,779 million allowable adjustment for disaster relief for FY2013. The anticipated demand on the DRF was high enough, however, that Congress approved $11,485 million in additional pre-sequester resources for the fund through P.L. 113-2 , the Disaster Relief Appropriations Act, 2013. If all of these resources were designated as being for a major disaster under the Stafford Act, in an effort to exercise the allowable adjustment for disaster relief for FY 2013, the total would have exceeded the remaining available allowable adjustment before even accounting for the tens of billions in other additional disaster assistance requested by the Administration. The Administration sought, and Congress provided, emergency funding designations to cover most of the relief that exceeded the allowable adjustment. As a result, FY2013 represented the first time the DRF received all of the funding available under the BCA's allowable adjustment for disaster relief. <6.5.3. Pre-Disaster Mitigation (PDM) Program230> The Administration's proposal for the PDM program suggested its eventual elimination. No additional funds were requested and it was suggested that the program duplicated the work of the Hazard Mitigation Grant Program (HMGP) which is Section 404 of the Robert T. Stafford Disaster Relief and Emergency Assistance Act and other mitigation programs funded by the National Flood Insurance Program. While the HMGP program and the PDM program fund similar projects, PDM is distinguished from HMGP by uniquely making such awards prior to disaster events. In addition, while programs under NFIP address similar projects, they only apply to flood hazards. PDM and HMGP on the other hand, apply to all types of hazards. The Administration noted that there was more than $174 million in unobligated balances that would permit the PDM program to continue awarding grants for several years as it was phased out. Neither the House-passed bill nor the Senate-reported bill included legislative language ending the program. However, the small amounts proposed to be appropriated, $14.3 million by the House-passed bill and $35 million by the Senate-reported bill, appeared to signal a concern with the slow pace of awards made by the program and the recognition of the large unobligated balance. In addition to the reduced awards from the $36 million level of FY2012, each chamber would have also rescinded some funding from the unobligated balance, specifically congressionally directed funding that local communities have not used. According to the DHS operating plan for FY2013, the post-sequester amount for PDM is just under $25 million. Funding at this level presents challenges to the administration of the program. For example, state minimum awards become difficult to fund. Also the reduced award amounts make a full, new round of applications (and assembling peer review panels to judge those applications) and awards impractical. Given these circumstances, FEMA may work from existing, unfunded applications to continue the program funding cycle. <6.5.4. Emergency Food and Shelter (EFS) Program235> For several years the Administration has proposed reduced funding for the EFS program. FY2013 continued that practice by again requesting $100 million for the program, a reduction of $20 million from the appropriated level of funding in FY2012. The program has historically received increased funding during times of high unemployment. In FY2012, Congress funded the program at $120 million, $20 million over the requested level. For FY2013, the House has placed the funding level again at $120 million while the Senate has suggested raising the amount to $150 million. According to the DHS operating plan for FY2013, the post-sequester funding level for FY2013 for the EFS program is just under $114 million. This represents the lowest funding total for the program since FY2000. In addition to reduced funding, there are also some concerns over the program's delayed distribution of funds during FY2012. FEMA and the National Board took nine months to begin distributing the EFS assistance, nearly double the amount of time directed in its authorizing legislation, the McKinney-Vento Homeless Assistance Act. <7. Title IV: Research and Development, Training, and Services> Title IV of the DHS appropriations bill contains the appropriations for U.S. Citizenship and Immigration Services (USCIS), the Federal Law Enforcement Training Center (FLETC), the Science and Technology directorate (S&T), and the Domestic Nuclear Detection Office. The Administration requested $1,561 million for these accounts in FY2013, a decrease of $229 million below the enacted level. The House-passed bill provides $1,510 million, a decrease of 3.3% from the requested level and 13.4% above FY2012. The Senate-reported bill provides $1,535 million, 1.7% below the request and 15.2% above FY2012. After the across-the-board cuts but prior to applying sequestration, P.L. 113-6 provides $1,520 million, a decrease of 0.5% from the requested level and 2.2% above FY2012. Table 19 lists the enacted amounts for the individual components of Title IV for FY2012, the Administration's request for these components for FY2013, the House-passed and Senate-reported appropriations for the same, the enacted level in P.L. 113-6 , and the post-sequester level of available resources from P.L. 113-6 reported by DHS. <7.1. U.S. Citizenship and Immigration Services240> Three major activities dominate the work of the U.S. Citizenship and Immigration Services (USCIS): (1) adjudication of all immigration petitions, including nonimmigrant change of status petitions, family-based petitions, employment-based petitions, work authorizations, and travel documents; (2) adjudication of naturalization petitions for legal permanent residents to become citizens; and (3) consideration of refugee and asylum claims, and related humanitarian and international concerns. The above graphic only indicates the amount of direct appropriations for USCIS. This does not include fee income, which, while referenced in the comparative statement of budget authority found in the back of the report, is not appropriated by this bill. USCIS funds the processing and adjudication of immigrant, nonimmigrant, refugee, asylum, and citizenship benefits largely through revenues generated by the Examinations Fee Account. As part of the former Immigration and Naturalization Service (INS), USCIS was directed to transform its revenue structure with the creation of the Examinations Fee Account. In the last decade, the agency has received annual direct appropriations that have been directed largely towards specific projects such as reducing petition processing backlogs and the E-verify program. The agency receives most of its revenue from adjudication fees of immigration benefit applications and petitions. <7.1.1. FY2013 Request> Table 20 , below, shows the requested USCIS gross budget authority for FY2013 at $3,005 million. This figure includes $143 million from direct appropriations and $2,862 million from fee collections. The requested direct appropriation of $143 million includes $112 million for the E-Verify program and $11 million for the Immigrant Integration Initiative. It also includes $20 million for the Systematic Alien Verification Entitlements (SAVE) Program to assist state, local, and federal agencies to determine individuals' eligibility for public benefits based on their immigration status. The remaining $2,862 million in gross budget authority in the request was expected to be funded by fee collections. Of this FY2013 amount, $2,391 million would fund USCIS adjudication services, $89 million would fund information and customer services, and $382 million would fund administration expenses. <7.1.2. House-Passed H.R. 5855> The House-passed H.R. 5855 would have proposed USCIS gross budget authority for FY2013 at $3,004 million, comprised of $112 million from direct appropriations and $2,892 million from fee collections. The proposed appropriations would have been $31 million less than the requested amount but $9.5 million above the amount provided in FY2012. The recommended level would not have included funds for the authorization's requested pay increase. The House Appropriations Committee continued to direct USCIS to use fee revenues for all its costs with the exception of E-Verify for which it recommended funding as requested. The Committee stressed the importance of monitoring USCIS' fee revenues and obligations against its fee collections. The Committee recommended that USCIS allocate $20 million of its user fee revenues for the Systematic Alien Verification for Entitlements (SAVE) program. The Committee also directed USCIS to allocate at least $29 million of fee revenues toward the digital conversion of immigration records. The Committee would not have provided funding for military naturalizations which it contended should be funded by the Department of Defense (DoD). It would have directed USCIS to codify this agreement in a memorandum of understanding with DoD. The House Committee expressed concerns about the findings of a 2012 OIG report on USCIS adjudication procedures and fraud detection. The Committee directed USCIS to provide a progress report on its corrective action plan and OIG to brief on its assessment of USCIS actions. <7.1.3. Senate-Reported S. 3216> The Senate-reported S. 3216 would have proposed USCIS gross budget authority for FY2013 at $2,999 million, comprised of $117 million from direct appropriations and $2,882 million from fee collections. The proposed appropriations would have been $26 million less than the requested amount but $14.5 million above the amount provided in FY2012. The Committee recommended no direct appropriations for the SAVE program, and instead directed USCIS to allocate $20 million of its user fee revenues for the program. The Senate Appropriations Committee recommended $112 million for the E-Verify program, as requested. The Senate Appropriations Committee recommended $5 million for Immigrant Integration grants in direct appropriations and directed that an additional $5 million be made available for these grants via fees. However, the Committee directed that no appropriations be used to operate the Office of Citizenship Services and that its operations continue to be fee-funded. Additionally, the Committee continued to express concern that costs to administer the Immigrant Integration grant program might have exceeded 11% of the grant award total, and therefore directed that no more than 5% of the grant funding level from either appropriated dollars or fees be used to administer the program in FY2013. <7.1.4. P. L. 113-6 and the DHS Operating Plan for FY2013> After the across-the-board cuts directed by P.L. 113-6 but prior to applying sequestration, the Consolidated and Further Continuing Appropriations Act of 2013 ( P.L. 113-6 ) provides $114 million, a decrease of $29 million or 20.3% from the requested level of $143 million but $12 million or 11.8% above the FY2012 enacted level of $102 million. The DHS FY2013 operating plan indicates sequestration would reduce this to $109 million prior to any transfers and reprogrammings that might mitigate the impact of sequestration in some areas and exacerbate it in others. Table 20 lists the enacted amounts for USCIS for FY2012, the Administration's request for USCIS for FY2013, the House-passed and Senate-reported appropriations for the same, the pre-sequester level of funding provided through P.L. 113-6 that includes across-the-board cuts enacted as part of that legislation, and the post-sequester level reported by DHS. <7.1.5. Issues for Congress> For the FY2013 budget cycle, potential issues for Congress included ongoing concerns about fee-generated funding of the agency, immigrant integration grants, the USCIS Transformation program to convert the immigration benefit application and petition process from a paper-based to a computerized online-based system, E-Verify operability, paper record digitization, and the administration of refugee and humanitarian processing. <7.1.5.1. Fee-Generated Funding> Because USCIS supports itself primarily through fee revenue, it must accurately monitor its fee revenues and obligations against its fee collections to avoid building backlogs or over-budgeting projects. The House Committee directed USCIS to include the costs of operations, such as asylum and refugee processing, as it assesses the need for future fee adjustments, and to continue to brief the Committee quarterly on fee revenues and obligations. <7.1.5.2. Immigrant Integration Grants> How immigrant integration grants should be funded continues to be an issue for Congress. While the Administration requested $11 million in appropriations in its FY2013 budget request, the House and Senate Committees both stated that program funding come from the fee revenue. Accordingly, Section 546 of P.L. 113-6 requires that USCIS allocate $7.5 million of Immigration Examinations Fee Account funds in FY2013 for its immigrant integration grants program. However, the bill also allocates $2.5 million in appropriations for such grants. As in the past, the act requires that none of the funds made available to USCIS for such grants be used to provide services to aliens who have not been lawfully admitted for permanent residence. <7.1.5.3. USCIS Transformation> The House Committee continued to express disappointment with the lack of progress on the USCIS Transformation program that will convert the application and petition process for immigration benefits from a paper-based system to a computerized online-based system. The Committee questioned whether continued investment in the current contract was justified given that the obligated $597 million from FY2006 to January 2012 had delivered little capability to USCIS customers. The Committee directed USCIS to provide regular updates on its efforts to deliver the first application form release and, if not successfully deployed, its decision regarding contract termination and other remediation. <7.1.5.4. E-Verify> Congress continues to be concerned about operability of the E-Verify program. The House bill extended the authorization of E-Verify for one year, as proposed by the President's budget request. To ensure no work-authorized individual is falsely identified as ineligible to work, the House Committee directed USCIS to create a review process for E-Verify final non-confirmations. The Senate Committee directed USCIS to report on the cost of expanding E-Verify generally and to brief it on recommendations regarding how the E-Verify system can be most effectively used in the agricultural industry. Implementation challenges commonly encountered in agriculture include non-office-based hiring, limited access to high-speed Internet, prevalence of seasonal employment, and high turnover. <7.1.5.5. Electronic Access to Immigration Information> The House Committee continued its support for efforts to increase efficiency, reduce expenses, ensure immediate access to information, and reduce the need to retain millions of paper files. The Committee deplored occurrences of the loss of personal documentation through shipping errors or waiting times for paper processing to move cases forward. In this regard, the Committee directed USCIS to continue its efforts to convert immigration records to digital format through the Enterprise Document Management System (EDMS). Similarly, it directed USCIS and CBP to brief Congress on progress toward eliminating the paper version of USCIS Form I 94, a process the agency has begun. <7.1.5.6. Refugee and Humanitarian Processing> The House Committee expressed concerns about detrimental impacts of inadequately coordinating security and non-security clearance procedures on processing vulnerable individuals in need of resettlement to the United States. The Committee urged DHS to work with other relevant Federal agencies to conduct a review of refugee processing, including security clearances, in order to streamline processing while maintaining security vetting, and to brief the Committee on the results of its review. The Senate Committee encouraged DHS to use its parole authority under Section 212(d)(5) of the Immigration and Nationality Act to address urgent humanitarian needs, particularly in the interest of family unity and to address medical emergencies, following exceptionally calamitous natural disasters such as the Haitian earthquake on January 2010. The Committee urged the Secretary to allocate sufficient resources for similar appropriate responsiveness to rare and exceptionally deadly and destructive natural disasters in the future. <7.2. Federal Law Enforcement Training Center250> The Federal Law Enforcement Training Center (FLETC) provides basic and advanced law enforcement instruction to 91 federal entities with law enforcement responsibilities. FLETC also provides specialized training to state and local law enforcement entities, campus police forces, law enforcement organizations of Native American tribes and international law enforcement agencies. By training officers in a multi-agency environment, FLETC intends to promote consistency and collaboration across its partner organizations. FLETC administers four training sites throughout the United States, but also uses online training and provides training at other locations when its specialized facilities are not needed. The Center employs approximately 1,100 personnel. <7.2.1. FY2013 Request> The Administration proposed a budget of $258 million for FLETC, a reduction of $13 million (4.8%) from FY2012's appropriation of $271 million. The FLETC budget in recent years has been made up of two appropriations Salaries and Expenses (proposed at $229 million, down $10 million from FY2012), and Acquisition, Construction, Improvements, and Related Expenses (proposed at $29 million, down $3 million from FY2012). Most of the reduction in the Salaries and Expenses appropriation was from efficiencies, along with a $4 million reduction in the budget for basic training. The proposed reduction in Acquisition, Construction, Improvements, and Related Expenses was the result of deferring construction work. <7.2.2. House-Passed H.R. 5855> House-passed H.R. 5855 included $256 million for FLETC, $16 million (5.7%) below last year's level and $2 million (1.0%) below the request. The House-passed bill would have cut less than $1 million (0.2%) from Salaries and Expenses and would have reduced the Acquisition, Construction, Improvements, and Related Expenses appropriation by $2 million (6.8%). The House Appropriations Committee report accompanying the bill cited the Administration's reliance on as-yet-unauthorized fee increases to fund parts of its budget as the reasoning behind the reductions to the acquisition budget. <7.2.3. Senate-Reported S. 3216> Senate-reported S. 3216 would have included $258 million for FLETC, the same level and distribution of funding as requested by the President. <7.2.4. P.L. 113-6 and the DHS Operating Plan for FY2013> After the across-the-board cuts directed by P.L. 113-6 but prior to applying sequestration, the Consolidated and Further Continuing Appropriations Act of 2013 ( P.L. 113-6 ) provides $257 million for FLETC, a decrease of $1 million from the requested level but $14 million (5.2%) below the FY2012 enacted level of $271 million. The DHS FY2013 operating plan indicates sequestration would reduce this to $245 million prior to any transfers and reprogrammings that might mitigate the impact of sequestration in some areas and exacerbate it in others. <7.3. Science and Technology Directorate251> The Directorate of Science and Technology (S&T) is the primary DHS organization for research and development (R&D). Headed by the Under Secretary for Science and Technology, it performs R&D in several laboratories of its own and funds R&D performed by the DOE national laboratories, industry, universities, and others. It also conducts testing and other technology-related activities in support of acquisitions by other DHS components. See Table 21 for a breakdown of S&T Directorate funding for FY2012 and FY2013. <7.3.1. FY2013 Request> The Administration requested $831 million for the S&T Directorate for FY2013. This was 25% more than the FY2012 appropriation of $668 million. The request for Research, Development, and Innovation (RDI) was an increase of $212 million (79.9%) above the FY2012 level. Of the six thrust areas within RDI, the largest requested increase (from $61 million in FY2012 to $144 million in FY2013) was for disaster resilience R&D. A reduction of $50 million in the request for Laboratory Facilities was due in part to the lack of a request for construction funding for the National Bio and Agro-Defense Facility (NBAF), a planned replacement for the Plum Island Animal Disease Center. The $50 million appropriated in FY2012 for the start of NBAF construction was one-third of what the Administration had requested. At the time of the FY2013 request, DHS had announced plans for an assessment of whether and for what purpose a facility like NBAF should be built. The assessment was to consider current threats and was to review cost, safety, and alternatives to the NBAF plan. <7.3.2. House-Passed H.R. 5855> The House-passed bill would have provided $826 million for the S&T Directorate, or $6 million less than the request. Within this total, it included $72 million less than the request for RDI. The House Appropriations Committee directed DHS to determine how to allocate that reduction across the six thrust areas. In Laboratory Facilities, the bill would have provided $75 million more than the request. The committee directed that this increase should be spent on NBAF construction. <7.3.3. Senate-Reported S. 3216> The Senate Appropriations Committee recommended S&T funding levels that were the same as the Administration's request. Within RDI, however, it specified separate amounts for each of the six thrust areas, rather than a single total. In recommending no funding for NBAF construction, the committee noted a total cost estimate for the facility of $1.138 billion. <7.3.4. P.L. 113-6 and the DHS Operating Plan for FY2013> After the across-the-board rescissions, but before applying sequestration, P.L. 113-6 provides $834 million for the S&T Directorate. The act includes $28 million less than the request for RDI. The explanatory statement directs DHS to submit a breakout of how it allocates RDI funding by thrust area. For Laboratory Facilities, the act provides $37 million more than the request, to be spent on NBAF construction. The post-sequester total for the S&T Directorate, as reported by DHS, is $801 million. Table 21 outlines the funding levels for existing S&T program functions. The "DHS Plan" column provides the department's assessment of post-sequester resources provided by P.L. 113-6 as of April 26, 2013. It does not represent a final funding level as the department is likely to undertake transfers and reprogramming to mitigate the impact of sequestration in some areas. <7.4. Domestic Nuclear Detection Office256> The Domestic Nuclear Detection Office (DNDO) is the primary DHS organization for combating the threat of nuclear attack. It is responsible for all DHS nuclear detection research, development, testing, evaluation, acquisition, and operational support. See Table 22 for a breakdown of DNDO funding for FY2012 through FY2013. <7.4.1. FY2013 Request> The Administration requested $328 million for DNDO for FY2013, an increase of 13% above the FY2012 appropriation of $290 million. The request included an increase of $44 million (109.7%) for Transformational R&D. The Administration no longer proposed transferring this program to S&T as it had in FY2011 and FY2012. The increase for Transformational R&D was partially offset by a reduction of $23 million (44.3%) for Systems Development. In the Systems Acquisition account, the request for human-portable radiation detectors was an increase of $20 million (251.3%), while the request for radiation portal monitors was a decrease to $1 million (80.6%) from $7 million in FY2012. <7.4.2. House-Passed H.R. 5855> The House-passed bill would have provided $316 million for DNDO, or $12 million (3.6%) less than the request. Most of the reduction would have been in the Transformational R&D program. The House-passed bill directed DHS to provide an updated implementation plan for its responsibilities under the domestic portion of the global nuclear detection architecture. The House Appropriations Committee stated in its report accompanying the bill that it intended this plan to be an annual requirement. The committee report also advocated consolidation of DNDO with the DHS Office of Health Affairs (OHA). It stated that consolidation could result in cost savings and "could provide greater awareness and coordination ... by creating a more visible focal point for ... coordination and strategic planning" of efforts against weapons of mass destruction (WMDs). The committee directed DHS to develop and submit a plan to merge DNDO and OHA into an Office of Weapons of Mass Destruction Defense for FY2014. <7.4.3. Senate-Reported S. 3216> The Senate Appropriations Committee recommended DNDO funding levels that were the same as the Administration's request. Like the House-passed bill, the Senate-reported bill directed DHS to provide an updated implementation plan for its responsibilities under the domestic portion of the global nuclear detection architecture. The accompanying report from the Senate Appropriations Committee lacked the House language about this plan being an annual requirement. The Senate committee report did not address the potential consolidation of DNDO and OHA. <7.4.4. P.L. 113-6 and the DHS Operating Plan for FY2013> After the across-the-board rescissions, but before applying sequestration, P.L. 113-6 provides $318 million for DNDO. The act includes $9 million less than the request for Transformational R&D. Like the House-passed and Senate-reported bills, the act directs DHS to provide an updated implementation plan for its responsibilities under the domestic portion of the global nuclear detection architecture. The explanatory statement does not address whether this should be an annual requirement. Regarding consolidation, the explanatory statement directs DHS to review its WMD programs and evaluate the potential advantages of consolidation, including the option of merging DNDO and OHA, but this review is in lieu of the House mandate for a DNDO-OHA consolidation plan in FY2014. The post-sequester total appropriation for DNDO, as reported by DHS, is $303 million. Table 22 outlines the funding levels for existing DNDO program functions. The "DHS Plan" column provides the department's assessment of post-sequester resources provided by P.L. 113-6 as of April 26, 2013. It does not represent a final funding level as the department is likely to undertake transfers and reprogramming to mitigate the impact of sequestration in some areas. <8. Title V: General Provisions> Title V of the DHS appropriations bill contains the general provisions for the bill. General provisions typically include rescissions of funding from previous years that partially offset the score of the bill. Occasionally appropriations for special initiatives are found here as well. This section of the report limits its discussion to new general provisions not mentioned elsewhere in the report and those with a direct impact on the budgetary scoring of the bill. <8.1. FY2013 Request> The Administration generally requests rescissions in the accounts where they are made, rather than in this title, and requested no direct funding through general provisions for FY2013. The Administration proposed not carrying forward 35 of the general provisions from the FY2012 DHS Appropriations bill (Division D of P.L. 112-74 ). Three of these were rescissions, which are one-time provisions. Eleven other provisions were viewed as one-time provisions, including two appropriations and one provision on fees. Five of the provisions the Administration suggested not carrying forward were permanent changes in the U.S. Code therefore not requiring repetition and one the Administration said was obsolete. The other fifteen were deemed by the Administration to be "restrictive" in one form or another and therefore a hindrance to the ability of the Department to manage its affairs or conduct its mission. The Administration also proposed adding five new general provisions: To add a new provision extending the termination deadline for E-Verify, which is still technically a pilot program, until the end of FY2013. To add a new provision allowing FEMA to use earmarked Predisaster Hazard Mitigation grant funds that have not or will not be applied for by their intended recipient. To add a new provision to establish an outreach program connected to FEMA's dam safety efforts. To add a new provision intended to make certain fees collected under the United States Colombia Trade Promotion Agreement available for pay for customs inspectors and equipment. To add a new provision that would allow CBP to enter into reimbursable fee agreements to provide services. <8.2. House-Passed H.R. 5855> House-passed H.R. 5855 includes $292 million in rescissions in Title V, all of which reduce the net scoring of the bill. Those are the only provisions in this title that impact the score of the bill. The House concurred with the Administration's request to drop 22 general provisions, although it did not concur with the Administration's position that 13 other provisions did not merit repetition or were no longer necessary. The House Appropriations Committee added one of the five general provisions requested by the Administration, extending the termination deadline for E-Verify. The House added 13 general provisions to the bill during floor action. These amendments prohibited the use of funds made available by the legislation to do the following: Contravene several key constitutional and legal protections against racial, ethnic or religious profiling; Finalize or enforce a proposed ICE rule that would allow undocumented aliens with children eligible for U.S. citizenship to stay in the country while seeking a waiver of a re-entry ban based on their illegal presence in the United States; Pay for the position of Public Advocate within ICE; Enforce a section of the Energy Independence and Security Act of 2007 ( P.L. 110-140 ) that prohibits the government from contracting for alternative transportation fuels (other than for research) that do not produce less greenhouse gases over their lifecycle than the equivalent conventional petroleum fuel; Implement, administer or enforce Section 1301(a) of title 31, United States Code (31 U.S.C. 1301(a)) with respect to the use of CBP funds, thereby allowing CBP to use its Salaries and Expenses appropriation to pay for CBP operations in Puerto Rico in the event of a shortfall in the Puerto Rico Trust Fund; Restrict a government official from sending or receiving information regarding an individual's immigration status to or from the Immigration and Naturalization Service, in violation of current law; Lease or buy new light duty vehicles except in accordance with the May 24, 2011, Presidential Memorandum on alternative-fuel vehicles; Contravene Title 8, Chapter 12 of the U.S. Code, and all laws, conventions, and treaties of the United States relating to the immigration, exclusion, deportation, expulsion, or removal of aliens; Buy, operate, or maintain armed unmanned aerial vehicles; Contravene Section 236(c) of the Immigration and Nationality Act (8 U.S.C. 1226(c)), which outlines the authority of the Attorney General to detain and release criminal aliens; Enforce an executive order requiring federal agencies to implement a system that allows people with limited English-language proficiency to meaningfully access their services without unduly burdening the fundamental mission of the agencies; Finalize, implement, administer, or enforce three policy memos issued by the director of ICE that establish priorities for civil immigration enforcement activities; and Terminate an existing agreement allowing local officials to act as immigration officers under Section 287(g) of the Immigration and Nationality Act (8 U.S.C. 1357(g)). <8.3. Senate-Reported S. 3216> Senate-reported S. 3216 includes $192 million in rescissions in Title V, as well as several other provisions that impact the scoring of the bill, including appropriations and changes in fee programs. Taken together, these Senate bill provisions offset its cost by $68 million. The Senate concurred with the Administration's request to drop 15 general provisions, although it did not agree that 17 other provisions did not merit repetition or were no longer necessary. In addition, three provisions providing funding to DHS initiatives were essentially modified to apply to FY2013, rather than being dropped as proposed by the Administration: Reimbursement of security costs to state and local governments for National Special Security Events ($8 million); migration and consolidation of DHS data centers ($65 million); and DHS headquarters consolidation ($89 million) were all funded in the general provisions of the Senate-reported bill. Like the House, the Senate Appropriations Committee added one of the five general provisions requested by the Administration, although they chose to add the provision allowing CBP to enter into reimbursable fee agreements for providing CBP services. <8.4. P.L. 113-6> P.L. 113-6 includes $307 million in rescissions in Title V, as well as several other provisions that impact the scoring of the bill, including appropriations. In total, these general provisions offset the cost of the act by $202 million, according to CBO. The enacted bill dropped ten general provisions the Administration sought to remove (not including rescissions), and included a modified form of one of the general provisions sought by the Administration. In addition, as was the case in the Senate bill, several provisions providing funding to DHS initiatives were included Immigrant integration grants ($10 million, of which $7.5 million is offset by fees); reimbursement of security costs to state and local governments for National Special Security Events ($5 million); migration and consolidation of DHS data centers ($55 million); and DHS headquarters consolidation ($29 million) were all funded in the general provisions of the Senate-reported bill. Appendix A. Appropriations Terms and Concepts Budget Authority, Obligations, and Outlays Federal government spending involves a multi-step process that begins with the enactment of budget authority by Congress. Federal agencies then obligate funds from the enacted budget authority to pay for their activities. Finally, payments are made to liquidate those obligations; the actual payment amounts are reflected in the budget as outlays. Budget authority is established through appropriations acts or direct spending legislation and determines the amounts that are available for federal agencies to spend. The Antideficiency Act prohibits federal agencies from obligating more funds than the budget authority that was enacted by Congress. Budget authority may also be indefinite, as when Congress enacts language providing "such sums as may be necessary" to complete a project or purpose. Budget authority may be available on a one-year, multi-year, or no-year basis. One-year budget authority is only available for obligation during a specific fiscal year; any unobligated funds at the end of that year are no longer available for spending. Multi-year budget authority specifies a range of time during which funds can be obligated for spending; no-year budget authority is available for obligation for an indefinite period of time. Obligations are incurred when federal agencies employ personnel, enter into contracts, receive services, and engage in similar transactions in a given fiscal year. Outlays are the funds that are actually spent during the fiscal year. Because multi-year and no-year budget authorities may be obligated over a number of years, outlays do not always match the budget authority enacted in a given year. Additionally, budget authority may be obligated in one fiscal year but spent in a future fiscal year, especially with certain contracts. In sum, budget authority allows federal agencies to incur obligations and authorizes payments, or outlays, to be made from the Treasury. Discretionary agencies and programs, and appropriated entitlement programs, are funded each year in appropriations acts. Discretionary and Mandatory Spending Gross budget authority, or the total funds available for spending by a federal agency, may be composed of discretionary and mandatory spending. Discretionary spending is not mandated by existing law and is thus appropriated yearly by Congress through appropriations acts. The Budget Enforcement Act of 1990 defines discretionary appropriations as budget authority provided in annual appropriation acts and the outlays derived from that authority, but it excludes appropriations for entitlements. Mandatory spending, also known as direct spending, consists of budget authority and resulting outlays provided in laws other than appropriation acts and is typically not appropriated each year. However, some mandatory entitlement programs must be appropriated each year and are included in the appropriations acts. Within DHS, the Coast Guard retirement pay is an example of appropriated mandatory spending. Offsetting Collections Offsetting funds are collected by the federal government, either from government accounts or the public, as part of a business-type transaction such as offsets to outlays or collection of a fee. These funds are not counted as revenue. Instead, they are counted as negative outlays. DHS net discretionary budget authority, or the total funds that are appropriated by Congress each year, is composed of discretionary spending minus any fee or fund collections that offset discretionary spending. Some collections offset a portion of an agency's discretionary budget authority. Other collections offset an agency's mandatory spending. These mandatory spending elements are typically entitlement programs under which individuals, businesses, or units of government that meet the requirements or qualifications established by law are entitled to receive certain payments if they establish eligibility. The DHS budget features two mandatory entitlement programs: the Secret Service and the Coast Guard retired pay accounts (pensions). Some entitlements are funded by permanent appropriations, others by annual appropriations. The Secret Service retirement pay is a permanent appropriation and as such is not annually appropriated, whereas the Coast Guard retirement pay is annually appropriated. In addition to these entitlements, the DHS budget contains offsetting Trust and Public Enterprise Funds. These funds are not appropriated by Congress. They are available for obligation and included in the President's budget to calculate the gross budget authority. Appendix B. DHS Appropriations in Context Federal Government-Wide Homeland Security Funding Since the terrorist attacks of September 11, 2001, there has been an increasing interest in the levels of funding available for homeland security efforts. The Office of Management and Budget, as originally directed by the FY1998 National Defense Authorization Act, has published an annual report to Congress on combating terrorism. Beginning with the June 24, 2002, edition of this report, homeland security was included as a part of the analysis. In subsequent years, this homeland security funding analysis has become more refined, as distinctions (and account lines) between homeland and non-homeland security activities have become more precise. This means that while Table B -1 is presented in such a way as to allow year-to-year comparisons, they may in fact not be strictly comparable due to the increasing specificity of the analysis, as outlined above. With regard to DHS funding, it is important to note that DHS funding does not comprise all federal spending on homeland security efforts. In fact, while the largest component of federal spending on homeland security is contained within DHS, the DHS homeland security budget for FY2012 accounted for nearly 52% of total federal funding for homeland security. The Department of Defense comprised the next highest proportion at nearly 26% of all federal spending on homeland security. The Department of Health and Human Services at 6%, the Department of Justice at nearly 6%, and the Department of State at more than 3% rounded out the top five agencies in spending on homeland security. These five agencies collectively accounted for approximately 93% of all federal spending on homeland security. It is also important to note that not all DHS funding is classified as pertaining to homeland security activities. The legacy agencies that became a part of DHS also conduct activities that are not homeland security related. Therefore, while the enacted FY2012 budget bills and existing law included total homeland security budget authority of $35.1 billion for DHS, the total budget authority for DHS was $52.5 billion. Moreover, the amounts shown in Table B -1 will not be consistent with total amounts shown elsewhere in the report. This same inconsistency between homeland security budget authority and requested total budget authority is also true for the budgets of the other agencies listed in the table. Due to the fact that the Administration's budget was released without an estimate for FY2013 that accounted for P.L. 113-6 or the impact of sequestration, no authoritative data for FY2013 is available as of the date of publication.

This report describes the FY2013 appropriations for the Department of Homeland Security (DHS). The Administration requested $39.510 billion in adjusted net discretionary budget authority for DHS for FY2013, as part of an overall budget of $59.501 billion (including fees, trust funds, and other funding that is not appropriated or does not score against the budget caps). The request amounted to a $90 million, or 0.2%, decrease from the $39.600 billion enacted for FY2012 through the consolidated appropriations act (P.L. 112-74). Congress did not enact final FY2013 appropriations legislation prior to the beginning of the new fiscal year. From October 1, 2012, through March 26, 2013, the federal government (including DHS) operated under the terms of P.L. 112-175, a part-year continuing resolution. While operating under this resolution, two major events impacted the DHS budget. First, Hurricane Sandy struck the east coast of the United States, which started a legislative process that resulted in enactment of legislation that provided $50.7 billion in disaster relief and emergency appropriations, including $12.072 billion for DHS, and $9.7 billion in additional borrowing authority for the National Flood Insurance Program. Weeks later, On March 1, 2013, an across-the-board reduction in budget authority, or sequestration, was ordered as required under the terms of the Budget Control Act (P.L. 112-25). The Office of Management and Budget's sequestration report indicated that DHS would lose $3.191 billion as a result of sequestration. On March 26, 2013, the President signed into law P.L. 113-6, the FY2013 Consolidated and Further Continuing Appropriations Act. Division D of that act is the Department of Homeland Security Appropriations Act, 2013, which includes $39.646 billion in adjusted net discretionary budget authority for DHS. Two across-the-board cuts unrelated to the March 1 sequestration that were included in the final legislation to ensure the bill complies with discretionary budget caps reduced this by $54 million to $39.592 billion. According to a DHS operating plan for FY2013, after the impact of sequestration, P.L. 113-6 provided $38.348 billion in adjusted net discretionary budget authority for DHS. This report will be updated as events warrant.

<1. Context> As public concern over rising spending on prescription drugs continues, Members of Congress have introduced legislation to amend the Federal Food, Drug, and Cosmetic Act (FFDCA) and permit the importation of FDA-approved drugs from lower-priced foreign sources. Lawmakers have also sought to use the appropriations process to counter administrative blocks to drug importation. Following discussions during Senate consideration of the Family Smoking Prevention and Tobacco Control, which has subsequently been sent to the President for signing, the Senate leadership agreed to bring up the drug importation provisions that Senator Dorgan has championed in the last few congressional sessions. On June 10, 2009, the Senator introduced S. 1232 , the Pharmaceutical Market Access and Drug Safety Act of 2009. The bill contains the same text as S. 525 and H.R. 1298 , which had been introduced earlier in this Congress. This report provides a brief look at the issues addressed in S. 1232 and compares its provisions to current law. The report concludes by listing other CRS reports on drug importation. <2. Background> Current law and the bills introduced over the past several years all seek to balance the availability of imported prescription drugs with the assurance that these imports would be safe and effective. Sponsors of drug importation legislation want to reduce or restrain the financial burden prescription drugs place on U.S. consumers Senator Dorgan's website description of his legislative proposal uses the title "Reducing the Cost of Prescription Drugs." Under current law, it is illegal for anyone to import a prescription drug other than its manufacturer. The law includes provisions for pharmacists and wholesalers to import, but provides that they not become effective until the Secretary of Health and Human Services (HHS) certifies that the importation program would be safe and offer cost savings to U.S. consumers. Secretaries in both the Clinton and Bush Administrations have declined to provide that certification, referring to safety and cost concerns. The requirement was first established by the Medicine Equity and Drug Safety (MEDS) Act of 2000, which added FFDCA Section 804, Importation of Prescription Drugs. Despite much debate to change that approach, Congress included importation provisions in the Medicare Prescription Drug, Improvement, and Modernization Act (MMA, P.L. 108-173 ) that retained the certification requirement. The Obama Administration, however, has indicated an openness to drug importation activities. The President's budget request for FY2010 contains "a proposal to allow Americans to buy safe and effective drugs from other countries," and includes money for FDA to "begin working with the various stakeholders to develop policy options related to drug importation." Current law does not permit individuals to import prescription drugs for their own use. It directs the Secretary to exercise discretion to permit importation by an individual for personal use, if such use does not appear to present an unreasonable risk to the individual. If a Secretary were to certify and allow the importation program, Section 804 still would not directly allow individual importation. It would authorize the Secretary to waive, under specific conditions, the provisions that prohibit importation by individuals. FDA has chosen to leniently enforce the current prohibition, and has allowed individuals to bring into the United States a small amount (i.e., a 90-day supply) of non-FDA-approved drugs for personal use. This FDA enforcement policy requires that those individuals affirm in writing that the drugs are for their own use, and provide the name and address of their treating physician. When FDA's personal use import policy began, it was not envisioned as a way for consumers to bring lower-priced prescription drugs into the United States. According to its policy statement on importing drugs for personal use, FDA intended this "enforcement discretion" to allow individuals to get treatments not otherwise available in the United States. S. 1232 , the Pharmaceutical Market Access and Drug Safety Act of 2009, would rewrite Section 804. It would eliminate the Secretary's certification requirement and allow pharmacists, wholesalers, and individuals to import prescription drugs under a program that would also include potential safeguards regarding drug safety and effectiveness. S. 1232 is similar to legislation introduced in the 109 th and 110 th Congresses. As discussed below, S. 1232 differs from current law in its approach to ensuring that imported drugs are safe and effective. The bill also includes provisions to influence industry behavior so that drugs available for import by U.S. consumers would result in cost savings relative to current domestic prices. Finally, it includes administrative arrangements, including financing. <3. Safe and Effective Drugs> <3.1. Relationship to FDA Approval> Current law explicitly requires that an imported drug be approved for U.S. sale by the FDA. S. 1232 would require that a manufacturer notify the HHS Secretary when a drug that could be imported differs from the version FDA has approved for sale in the United States (the "U.S. label drug"). The bill would require extensive information about whether the difference, if it were to be made to a U.S. label drug, would require a supplemental application to FDA, and whether FDA would require that the application be processed before the drug could be marketed. <3.2. Permitted Countries> Current law would allow the importation of prescription drugs from Canada, if the HHS Secretary were to certify that the program of importation would be safe and cost-effective to U.S. consumers. S. 1232 would permit prescription drug importation from Australia, Canada, Japan, New Zealand, Switzerland, and members of the European Union, except for the 10 countries admitted to membership in May 2004. The legislation includes criteria by which the Secretary could add other countries to this list. <3.3. Ensuring Drug Identity> To address the possibility that adulterated or counterfeit drugs could enter the U.S. market, S. 1232 calls for a variety of procedures regarding registration; monitoring, inspecting, and testing; packaging and labeling; and Internet pharmacies. <3.3.1. Registration> Current law requires that a Canadian establishment involved in the distribution of a prescription drug that is imported or offered for importation into the United States register with the Secretary its name and place of business and the name of its U.S. agent. S. 1232 would require all exporters from permitted countries and all commercial importers to register. <3.3.2. Monitoring, Inspecting, and Testing> While current law relies on laboratory testing of samples of every shipment of imported drugs to verify their content, potency, and labeling, S. 1232 would instead require documentation of a monitored, uninterrupted chain of custody from manufacturing facility to importer. The requirements related to registration would involve ongoing and onsite physical monitoring of the facilities of a drug's manufacturer, exporter, and importer. If the Secretary determined it were necessary, these would include the inspection of any facility (and its records) that handles the product along the chain of custody. <3.3.3. Packaging and Labeling> To ensure that a drug dispensed to individual consumers is the same product that was tested, monitored, or inspected at a specific manufacturing, shipping, or storage facility, S. 1232 would require that the packaging of all prescription drugs (not just those being imported) incorporate overt, optically variable, counterfeit-resistant technologies that provide visible identification of the product, and be similar to those used to secure U.S. currency. In addition, manufacturers must incorporate the technologies into elements of the packaging (including blister packs, shrink wrap, package labels, package seals, bottles, and boxes). The bill would require that the exporter and importer agree to mark each shipping container to identify its compliance with all registration conditions. The markings would have to include anti-counterfeiting or track-and-trace technology, taking into account their economic and technical feasibility, and would have to be designed to prevent unauthorized affixation. <3.3.4. Internet Pharmacies> S. 1232 would require that detailed information be accessible on an Internet pharmacy's website, covering pharmacist credentials, address and telephone contacts, and the name and professional licensure information of the person, if any, who provides for medical consultations through the site for purposes of providing prescriptions. The bill includes many restrictions, such as: no one could dispense or sell a drug if the purchaser or patient who communicated through the Internet did not have a valid U.S. prescription; and the dispenser of the prescription drug would be required to have a "qualifying medical relationship with the patient." The text of these Internet pharmacy provisions was written before the October 2008 passage of the Ryan Haight Online Pharmacy Consumer Protection Act of 2008 ( P.L. 110-425 ). Until that time, federal law did not address use of the Internet to sell or purchase imported prescription drugs. Because current law does now address issues such as valid prescriptions, Internet pharmacy site disclosure information, and physician-patient contact requirements, some of the provisions in S. 1232 may need technical revisions. <4. Cost Savings to U.S. Consumers> Anticipating manufacturers' resistance to practices that might limit the industry's revenue, S. 1232 contains specific provisions designed to influence industry behavior. <4.1. Discrimination and Unfair Acts> S. 1232 would make it "unlawful for a manufacturer, directly or indirectly (including being a party to a licensing or other agreement)," to discriminate or act unfairly against an exporter, importer, or person who distributes, sells, or uses an imported prescription drug by charging a higher price; denying, restricting, or delaying supplies; or refusing to do business. <4.2. Drug Differences> S. 1232 would make it unlawful for a manufacturer to make a drug for distribution in a permitted country so that it differs from the drug made for U.S. distribution "for the purpose of restricting importation of the drug.... " Enforcement would include the involvement of the Federal Trade Commission and the state attorneys general. <4.3. Patent Law> A recent federal court case has raised the prospect that a drug manufacturer could, under certain circumstances, sue a drug importer for patent infringement and block U.S. imports of drugs the company sells abroad. The court ruled that a U.S. patent is not exhausted by foreign sales, and, thus, a drug manufacturer could exercise its patent rights and block imports of its patented drug products into the United States. S. 1232 would insert a new subsection in the Patent and Trademark Act to reverse this judicial precedent. Under the provision, goods that were the subject of authorized foreign sales by a U.S. patent holder may be imported into the United States without regard to the U.S. patent. <5. Administration of Importation Provisions> S. 1232 would set up a fee mechanism to fund the administrative and regulatory tasks of the importation program. It also would set specific implementation dates. <5.1. Funding> Current law includes no explicit funding mechanism other than authorizing appropriations of such sums as necessary to implement the prescription drug importation provisions. S. 1232 provides for both exporter and commercial importer fees designed to cover all costs of the program. It links the aggregate total of all fees to the estimated costs of the importation program, setting a limit of 2.5% of the total price of drugs imported. The Secretary would collect from each exporter and importer both a flat registration fee and a proportional registration fee. Each individual importer or exporter would pay the latter fee. The amount of the fee would be based on the extent of the importer or exporter's own activity and calculated to estimate its proportion of the aggregate amount. S. 1232 would require that these fees be used only for the administration of the importation provisions that the bill would add. <5.2. Effective Dates> Current law does not specify when importation could begin, other than by linking it to required safety and cost certification by the Secretary. It directs the Secretary to exercise discretion to permit importation by an individual for personal use, if such use does not appear to present an unreasonable risk to the individual. S. 1232 would require that the Secretary promulgate a final rule for implementing the importation provisions not later than one year after promulgating an interim rule. It also states that the importation provisions shall "permit the importation of qualifying drugs ... without regard to the status of the issuance of implementing regulations" from registered exporters (to individuals in the United States) 90 days after enactment, and from permitted countries by registered importers (commercial) one year after enactment. <5.3. Severability> S. 1232 states that if any provision of the Pharmaceutical Market Access and Drug Safety Act of 2009 were to be held unconstitutional, the remainder of the act would not be affected. <6. CRS Reports On Prescription Drug Importation> Two CRS reports cover in greater depth the current legal issues surrounding the importation of prescription drugs: CRS Report RS21711, Legal Issues Related to Prescription Drug Sales on the Internet , and CRS Report RL32191, Prescription Drug Importation: A Legal Overview , both by [author name scrubbed]. Several archived CRS products such as CRS Report RL32511, Importing Prescription Drugs: Objectives, Options, and Outlook , by [author name scrubbed] provide additional policy analysis and historical detail.

Current law prohibits the importation of a prescription drug by anyone other than its manufacturer. S. 1232 would amend the Federal Food, Drug, and Cosmetic Act to change that. It would allow commercial and personal-use importation. The legislation would create a detailed set of procedures to address concerns relating to the safety and effectiveness of imported drugs, cost savings to U.S. consumers, and administration of the program. S. 1232 contains the same text as previously introduced S. 525 and H.R. 1298.

<1. Introduction> The federal government has a long history of involvement in water resource development and management to facilitate navigation, expand irrigated agriculture, reduce flood losses, and, more recently, restore aquatic ecosystems. Increasing pressures on the quality and quantity of available water supplies due to growing population and changing public interests have resulted in heightened water use conflicts throughout the country, particularly in the West. The late 1970s, 1980s, and 1990s, marked the end of expansionist federal policies of the early 20 th century that had led to widespread federal investment in dams, navigation locks, irrigation diversions, and levees and basin-wide planning and development efforts. Federal water resource construction waned during the last decades of the 20 th century in response to fiscal constraints, interest in more local control of water and land resources, and requirements to assess environmental impacts of federal actions and to protect fish and wildlife. Even so, demand continues for traditional water resource development projects, such as locks and dams, levees, and other flood damage reduction works. Water resources debates in the 111 th Congress likely will be dominated by different opinions of the desirability and need for changing the water resource agencies' policies, practices, and accountability, and for authorizing multi-billion dollar investments in ecosystem restoration, agricultural land drainage, navigation, and flood and storm damage reduction measures. A broad water resource issue significant to the water resources agencies and the nation is the changing federal role in water resources planning, development, and management, and changes in institutional structures to address an evolving federal role. Natural disasters such as the 2008 Midwest flooding, Hurricane Katrina, and Hurricane Ike, have raised questions about this role; in particular, these disasters bring attention to the trade-offs in benefits, costs, and risks of the current division of responsibilities among local, state, and federal entities for flood mitigation, preparedness, response, and recovery. The question of the federal role also is raised by the increasing competition over water supplies, not only in the West but also for urban centers in the Southeast (e.g., Atlanta), which has resulted in a growing number of communities seeking financial and other federal assistance related to water supply development (e.g., desalination and water reuse projects, reservoir expansions and changes in project operations). <2. Background> The 111 th Congress is faced with numerous water resource development and management issues: the federal role in the planning, construction, maintenance, inspection, and financing of water resource projects; federal investment in water resources research and data collection; management and operation of existing projects; environmental protection; and climate variability and change. Congress makes water resource decisions within the context of multiple and often conflicting laws and objectives, competing legal decisions, and entrenched institutional mechanisms, including century-old water rights and long-standing contractual obligations (i.e., long-term water delivery and power contracts). Although most water resource legislation typically addresses site-specific needs, certain themes and issues appear in many local and regional water resources conflicts. For example, demand for new project services (e.g., improved navigation, new water supply, improved or new flood facilities), protection of threatened and endangered species, and water quality concerns are common to many conflicts. The 111 th Congress is likely to consider authorizations and appropriations for numerous site-specific water resource development projects; management of existing projects and aging infrastructure; water resource protection and water rights issues; and regional aquatic ecosystem restoration programs (e.g., Great Lakes, San Joaquin River restoration, Everglades, and Chesapeake Bay). Site-specific restoration legislation enacted in the 110 th Congress included programs for coastal Louisiana, the Upper Mississippi River System, and Platte River. However, the more typical site-specific measures, on a smaller scale, are the hundreds of individual water resources projects authorized through occasional Water Resources Development Acts (e.g., WRDA 2000 and WRDA 2007) and stand-alone bills addressing new water supply technologies and augmentation of existing water supplies, rural water supply development, and Indian water rights settlements. Oversight of existing laws and projects (e.g., the Central Valley Project, flood protection in New Orleans and Sacramento) and project operations is also expected, especially where court decisions, agency actions, or other circumstances (such as drought) may affect project operations (e.g., federal projects on the Appalachicola-Chattahoochee-Flint (ACF), Colorado, Columbia, Klamath, Missouri, and San Joaquin rivers and pumps in the California Bay-Delta). It is not clear to what extent the 111 th Congress may consider broad water policy reform such as water supply or flood policy. Congress rarely chooses to pursue broad legislation on federal water resources policies for many reasons, including the challenge of enacting changes that affect such a wide breadth of constituencies. Another practical challenge is the fractured nature of congressional committee jurisdictions over water resources and water quality issues and activities. Consequently, Congress traditionally has pursued incremental changes through occasional Water Resources Development Act (WRDA) legislation for the U.S. Army Corps of Engineers in the Department of Defense (Corps) and project-specific legislation for the Bureau of Reclamation (Reclamation) in the Department of the Interior. <2.1. Western Water Resources> In the West, naturally scarce water supplies and increasing urban populations have exacerbated long-standing debates over water allocation particularly over water for threatened and endangered species and impacts on agricultural water supplies. Drought conditions in California, the Southwest, and the Southeast, continue to challenge federal, state, and local water managers. Nationwide, observed changes in the timing of snowmelt and runoff and the potential for further climate variability due to climate change has increased concerns about the reliability of developed water supplies and the flexibility of existing management mechanisms. Western water legislation during the 111 th Congress is likely to center on project authorization issues, such as authorization for San Joaquin River restoration settlement legislation, Reclamation's Title 16 water reclamation, reuse, and recycling projects, Indian water rights settlements, San Luis drainage, and various water supply and climate change initiatives. Oversight of Reclamation's Central Valley Project (e.g., Operations Criteria and Plan [OCAP], San Francisco Bay-San Joaquin/Sacramento Rivers Delta [Bay-Delta] management issues), Klamath project, and Colorado River operations also may continue. <2.2. Nationwide Flood Policy and Water Resource Protection> Congressional attention during the 111 th Congress may focus on the federal role in levee construction, maintenance, inspection and their effects on water resources management generally. Hurricane Katrina, Hurricane Ike, and 2008 Midwest flood oversight issues such as how to better coordinate federal activities and how to respond or rebuild in the wake of severe damages may be a particular focus, as might the examination of other areas of the country that may also be vulnerable. Also of concern nationwide is the status of threatened and endangered species and the health of the nation's rivers and riparian areas. Federal obligations to protect threatened and endangered species and other environmental quality requirements have resulted in increased attention to river and watershed restoration efforts. As noted earlier, the federal government is involved in several significant restoration initiatives ranging from the Florida Everglades to the California Bay-Delta. At the same time, the demand for traditional or new water supply projects, navigational improvements, flood control projects, and beach and shoreline protection continues. In fact, both the Everglades and Bay-Delta restoration efforts include significant water supply components. Controversy over how much water should be divided among recovering (threatened and endangered) species, protecting water quality, and supplying farms, cities, and other uses has been ongoing. Further, widespread drought throughout different parts of the country over the past several years has spurred new requests for developing and ensuring dwindling water supplies, and new security threats to water infrastructure have placed added pressures on budgetary resources. The 110 th Congress left pending several national water policy proposals, ranging from new water study commissions and assessments to climate change research and monitoring, some of which have been reintroduced in the 111 th Congress. The 111 th Congress also may address water resource issues during consideration of WRDA legislation and FY2010 appropriations for Reclamation and the Corps. Specific issues that are being or may be discussed during the 111 th Congress are treated below. Other general issues may include federal reserved water rights in relation to federal lands, transfer of water across federal lands and through federal facilities, Indian water rights settlements, licensing of nonfederal hydropower facilities (i.e., private dams regulated by the Federal Energy Regulatory Commission (FERC)), and whether to establish a national water commission to address federal water policy and coordination. <3. Water Resource Projects> Most of the large dams and water diversion structures in the United States were built by, or with the assistance of, Reclamation or the Corps. Traditionally, Reclamation projects were designed principally to provide reliable supplies of water for irrigation and some municipal and industrial uses; Corps projects were designed principally to reduce flooding, improve navigation, and generate power. Reclamation currently manages more than 600 dams and reservoirs in 17 western states, providing water to approximately 10 million acres of farmland and 31 million people, as well as 58 power plants capable of producing 40 billion kilowatt hours of electricity (enough to serve six million homes). The Corps' operations are much more widespread and diverse, and include several thousand flood damage reduction and navigation projects throughout the country, including nearly 12,000 miles of commercially active waterways, nearly 1,000 harbors, and 600 dam and reservoir projects (with 75 hydroelectric plants generating 68 billion kilowatt hours annually). Additionally, 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. <3.1. Corps of Engineers> Congress authorizes Corps water resources activities and makes changes to the agency's policies generally in Water Resources Development Acts. It typically appropriates funds for these activities in annual Energy and Water Development Appropriations acts. Corps project authorizations generally do not expire, so WRDA is not a reauthorization bill. Instead WRDAs add authorizations to the agency's existing authorities. Although WRDA enactment is usually attempted on a biennial schedule, it is not required and has not always happened. The most recent WRDAs were enacted in 2000 and 2007. Interest in authorizing new studies and projects is likely to prompt consideration of a WRDA bill in the 111 th Congress. However, the effect of additional authorizations on the agency and its existing "backlog" of projects may continue to be an issue. Debate over whether policy and program changes are needed to set priorities among the Corps' backlog of construction projects and maintenance activities may arise in the context of either WRDA deliberations or consideration of appropriations. Related to this discussion is past congressional concern over the Corps' financial management, particularly the reprogramming of funds across projects and the use of multiyear continuing contracts for projects. The economic stimulus discussions have included funding Corps water resources projects without identifying specific projects. 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 would be controversial. Without information on which Corps projects or project types would receive stimulus funding, 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 by 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. Implementation of numerous policy changes included in WRDA 2007 may be the subject of congressional oversight revision of Corps project planning guidelines, independent review requirements for Corps studies, and status of the national levee database, inventory, and inspections. WRDA 2007 called for numerous reports to be completed during the 111 th Congress. Results of the national flood risk assessment and the recommendations of the National Levee Safety Committee may also lead to congressional action or oversight. Hurricane Katrina in 2005 and Midwest flooding and Hurricane Ike in 2008 have raised many questions about the national flood risk and federal actions to reduce that risk. In particular, the disasters brought attention to the trade-offs between approaches to distributing federal appropriations among competing water resources projects, and the benefits, costs, and risks of the current division of responsibilities between local, state, and federal entities. For a discussion of flood policy issues, see CRS Report RL33129, Flood Risk Management and Levees: A Federal Primer , by [author name scrubbed] and [author name scrubbed]. The 111 th Congress also may provide oversight over certain Corps activities. For instance, the Corps is responsible for much of the repair and fortification of the hurricane protection system of coastal Louisiana, particularly in the greater New Orleans area. Since Hurricane Katrina, most of the Corps' work on the region's hurricane protection system has been funded through more than $14 billion in emergency supplemental appropriations. In addition to the post-hurricane emergency repairs, these funds are being used for construction of levees, floodwalls, storm surge barriers, and pump improvements to reduce the hurricane flooding risk to the New Orleans area to a 100-year level of protection (i.e., protection against a storm surge of an intensity that has 1% probability of occurring in a given year) and to restore and complete hurricane protection in surrounding areas to previously authorized levels of protection by 2011. Corps' river and reservoir management, in the context of drought conditions and climate change, may also receive congressional attention via WRDA legislation or other vehicles such as Energy and Water Resource Development acts. In many cases, Corps facilities and their operation are central to debates over multi-purpose river management. For example, water resources management by the Corps, such as in the Appalachicola-Chattahoochee-Flint basin (which provides much of the water supply for Atlanta (GA), can be controversial and is frequently challenged in the courts. <3.2. Reclamation> Since the early 1900s, Reclamation has constructed and operated many large, multi-purpose water projects, such as Hoover Dam on the Colorado River and Grand Coulee Dam on the Columbia River. Water supplies from these projects have been primarily for irrigation; however, some municipalities also receive water from Reclamation projects. Construction authorizations slowed during the 1970s and 1980s due to several factors. In 1987, the Bureau announced a new mission: environmentally sensitive water resources management. In the following decade, increased population, prolonged drought, fiscal constraints, and increased water demands for fish and wildlife, recreation, and scenic enjoyment resulted in increased pressure to alter operation of many Reclamation projects. Such changes have been controversial, however, as water rights, contractual obligations, and the potential economic effects of altering project operations complicate any change in water allocation or project operations. In contrast to the Corps, there is no tradition of a regularly scheduled authorization vehicle for Reclamation projects. Instead, Reclamation projects are generally considered individually; although, occasionally individual project authorizations are rolled into an omnibus bill such as S. 22 in the 111 th Congress. Reclamation-related water project and management issues that are under consideration or may be considered during the 111 th Congress include: passage and oversight of economic stimulus legislation; San Joaquin River restoration settlement legislation; authorization of Title 16 (recycling and reuse) projects; oversight of Central Valley Project (CA) operations (e.g. proposed OCAP changes, Bay-Delta Conservation Plan, impact on Delta Smelt, salmon, and water deliveries); oversight of, and appropriations for, Bay-Delta restoration initiatives; San Luis Unit drainage issues; emergency response to drought, and effects of climate variability on federal reservoirs; authorization and appropriations to address aging infrastructure; and Colorado River water management issues. A broader issue that could receive attention from Congress is oversight of Reclamation's mission and its future role in western water supply and water resource management generally. As public demands and concerns have changed, so has legislation affecting Reclamation. Further, many in Congress have questioned Reclamation's shift in focus from a water resources development agency to a water resource management agency. Some have also questioned the increasing number of proposals to fund new rural water supply projects with high federal cost-share ratios and grants for reclaiming and reusing water; others believe Reclamation is not doing enough to fund augmentation of water supplies in the West via new water reuse, recycling, and desalination technologies. If Congress addresses this broader issue, critical questions to address could include: What should be the future federal role in water resources development and management? What do western water managers need from the Bureau and how can the Bureau help with western water management? Should (or to what extent should) the federal government develop or augment new supply systems designed primarily to serve communities/municipalities, or is this a local/regional responsibility? Who should pay, and how much? Should the Bureau be involved in environmental mitigation or is this best handled through new institutional arrangements (e.g., CALFED, Delta Vision) or other existing agencies (e.g., Fish and Wildlife Service and/or the Environmental Protection Agency)? Should existing projects be revamped or "re-operated" to accommodate changing demands, and, if so, do new policies and institutions (state-federal roles) need to be addressed, and again, who should pay? Relatedly, the issue of whether there should be a National Water Commission or periodic water resource assessments received attention in the 110 th Congress, and at least one bill has been reintroduced in the 111 th Congress.

The federal government is involved in management of water resources throughout the country, primarily through construction, operation, and management of numerous infrastructure projects, such as dams, levees, and navigation works. Increasingly, the federal government is also involved in ecosystem restoration and protection of species and areas damaged by past construction and operations of federal projects, as well as restoration of other degraded ecosystems. This work involves restoration of some of the country's largest estuaries; for example, the California Bay-Delta and Chesapeake Bay. Management of federal water resource facilities often involves trade-offs among project purposes, as well as local, regional, and national interests. Water resources development is particularly controversial because of budgetary constraints, conflicting policy objectives, environmental impacts, and demands for local control. Hurricane Katrina, hurricane Ike, and the 2008 Midwest floods have brought to the forefront long-simmering policy disputes involving local control and federal financing of projects, environmental and social tradeoffs, and multi-level accountability and responsibility for flood damage reduction projects, such as levees. Construction, improvement, and management of other federal water resource projects face similar challenges. The 111th Congress faces numerous issues and trade-offs as it considers water resource development and protection legislation. These issues are likely to arise as Congress considers economic stimulus legislation, as well as other authorizations and appropriations for Bureau of Reclamation and Army Corps of Engineers projects. Some of these may be addressed as part of omnibus authorization bills such as S. 22 or potential Water Resources Development Act (WRDA) legislation), while others may be addressed via stand-alone legislation or as part of committee oversight of agency programs and policy changes. Congress will also likely play a role in overseeing federal responses to natural disasters such as droughts, hurricanes, and floods. Oversight issues related to the federal role in hurricane and flood protection, and levee construction and management, also are ongoing.

<1. Overview> <1.1. Define the Problem and Determine the Solution> Any legislative plan needs a thorough definition of the problem to be addressed and an explanation of what the appropriate solution might be. Solutions may include legislation, regulation, or media attention. A clearly defined issue makes the determination of the themes for developing the message and promoting the solution easier to explain to colleagues, supporters, opponents, constituents, and the press. Next, a time line for solving the problem should be determined. Is this a one-session, or one-Congress, or longer-term project? Is it one event or a coordinated series of events? Should the event(s) be held in the Member's district or state, in Washington, or throughout the country? <1.2. Research the Problem> Prior to beginning work on the solution, an in-depth determination of the extent of the problem needs to be undertaken. For example, is the problem limited to one district, state, or region, or is it nationwide? Should the solution address the specific issue or the policy in general? Consultation with local and state officials, community leaders, and constituents is integral at this stage. Discussions in Washington may include committee and subcommittee leaders, the party leadership, think tanks, and interest groups. <1.3. Determine Strategy> One of the most important decisions is whether to conduct an "inside" or "outside" strategy, or possibly a combination of the two. Inside strategy entails work within the legislative process only, that is, legislation, hearings, committee and floor amendments, floor debate, and conference consideration. Advocates may or may not be involved in any of this activity. An outside strategy calls for advocates to generate mail, press, and office visits, often to force an inside strategy to occur. A combined strategy includes using Dear Colleague letters, coordinated one-minute or special order speeches, Member-to-Member lobbying, and group press conferences. <2. Outline for Project> <2.1. Goal> What criteria are used to determine success? Political success? Press attention? Legislative success? Other? What is the duration of the project: one event, one session of Congress, two years, or longer? <2.2. Description of Project> Are there other projects on this topic already underway? If so, should the Member conduct an independent project, or join forces? Does the political party or state of other Members involved influence the decision? Should it? Has the project ever been tried in the past? If yes, what Members tried it? What was the result? Is the project still needed? Are there lessons to be learned from the earlier attempt? What other Members, committees, or party leaders should be involved? What advocates should be involved? Which advocates will support, and which will actively oppose, the initiative? <2.3. Legislative Strategy> Is legislation the appropriate remedy for the problem? Will a free-standing measure be necessary, or is there a vehicle to which an amendment can be offered? Should the Member introduce the legislation alone or seek original cosponsors? Should those cosponsors be bipartisan? Should they be of the same "type," for example, women, philosophy, state and region, or district demographics, serving on the same committee? Should a companion measure be introduced in the other chamber? Should Dear Colleague letters be sent prior to introduction? Should they be sent periodically throughout the process identifying status? When should the legislation be introduced, for example, opening day, first or second session, a specific time of year? What should the legislation be titled? Is there a useful acronym to be found to assist in publicizing the legislation? Should a particular number be reserved, for example, H.R. or S. 2020 relating to eye care? Should a working group be created? Staff only or Members only? What role should the party leadership play? What of committee leadership? What type of coalitions should be created? If legislation is being considered on the issue (not necessarily the Member's measure), should the Member testify at hearings? Are there others the Member would recommend as witnesses? If a measure is being marked up, should the Member offer an amendment, assuming the Member serves on the committee? If not, should an ally offer an amendment on the Member's behalf? Should one-minute speeches or special order speeches be made to keep pressure on the committee or chamber and to maintain press visibility? How often and who should be included? Should a Rules Committee (House only) strategy be devised? Should opponents' strategy be monitored? <2.4. Other than Legislative Strategy> If regulation is the appropriate solution, has the agency or executive branch been consulted? What is the appropriate timing? Should letters be written to the President? A Cabinet Secretary? <2.5. Outside Groups Strategy> Which advocates should be contacted? At what stage should they be included? What role should the advocates play research, letters to Members, media appearances, briefings? Should a coalition of several groups be created? <2.6. Press and Communications Strategy> <2.6.1. Inside Communications> Dear Colleague letters One-minute or special order speeches Staff working group Member working group Speak on floor during consideration of related measure <2.6.2. Outside Communications> Press conferences News releases Op-ed pieces Syndicated columnists Editorial support, local and national TV or radio interviews Blogs Social media <2.7. Time Line> Determine time line for target dates for all activities Determine periodic dates to review progress and reassess strategy <2.8. Political Opportunity> Meet with party campaign committees to discuss how project could help candidates. Can state or local officials be given a role in promoting the project? <3. Sample Action Plan for Legislative Project> Action plans embody the strategies employed to achieve goals. The office's strategic plan should not only identify specific steps, but also the person(s) (including the Member) responsible for each step. It is also useful to include deadlines for completing action on each step. Periodic meetings to review progress on the plan may prove useful in keeping the project on track. Usually each person in the office, whether they have specific responsibility for parts of the plan, should be provided a copy of the plan. Identify appropriate executive branch agency(s). Meet with agency staff to review present programs and discuss legislative options. Meet with advocates to discuss problem and possible solutions. Determine if other legislation has already been introduced. Work with legislative counsel to draft legislation (or amendments). Obtain CBO cost estimate. Send out draft for comment to advocates, district and state leaders, constituents, others. Send out Dear Colleague letters. Determine appropriate Members to cosponsor legislation. Work with other chamber for companion legislation. Create staff working group after identifying other Members to be involved. Meet with committee and party leadership. Hold briefings on issue, for staff and Members. Develop local and national press strategy. Develop social media strategy. Introduce legislation after determining most advantageous time. Hold field hearing. Hold town hall meetings in district/state. Seek opportunities, in committee, on floor, in district/state, in press, to publicize initiative.

The Congressional Research Service frequently receives inquiries about legislative planning. Legislative and office action plans are often used by congressional offices for almost every significant project, from organizing an extensive conference in the district or state to introducing and guiding legislation. A major action plan requires a firm understanding of the project's goal, a research strategy, and a time line for completing the project. This report presents some of the factors usually considered in preparing an action plan. The information is provided in three sections. The first provides an overview that lays out summary considerations. The second raises questions to consider in preparing an outline for a project. The third details a sample action plan.

<1. Energy's Water Use: A Policy Introduction> The nation's energy choices embody many tradeoffs. Water use is one of those tradeoffs. The energy sector is the fastest-growing water consumer in the United States. Projections attribute to the energy sector 85% of the growth in domestic water consumption between 2005 and 2030. This projected growth derives from anticipated demand for more energy, increased development of domestic energy sources, and greater use of water-intense energy alternatives. Much of the energy sector's growing water demand is concentrated in water-constrained regions. Affordable water supplies are limited, and competition for water is becoming more intense. Whether the energy sector helps exacerbate or alleviate future water tensions is influenced by current energy policy and investment choices. These choices also may determine whether water limits or harms the nation's ability to reliably meet energy demand. Water limitations may hinder some water-dependent energy activities in specific locations. Water already plays a significant role in the energy sector, and water use by the energy sector already shapes national water use. For example, more than 80% of U.S. electricity is generated at thermoelectric facilities. With few exceptions, these thermoelectric power plants are cooled with water. In 2005, withdrawal of water for cooling represented 41% of water withdrawn nationally, and 6% of the water consumed nationally. The more water used by the energy sector, the more vulnerable energy production and reliability are to competition with other water uses and water constraints such as droughts. Climate change impacts on water supplies in some regions may exacerbate this vulnerability. Water availability can affect both existing and new energy activities, as well as all those economic activities that depend on the fuels and electricity produced. The energy sector is changing. Paths chosen and capital investments made in the near term are likely to establish long-term trajectories for energy's water use. Trends indicate that energy's changing water use has national and regional significance for water consumption. A question for Congress is: what is the appropriate federal role in responding to energy's water demand? In the aggregate, current federal energy policies contribute to energy's rising water demand, while energy interests and the state and local governments are responsible for managing and meeting water demands and resolving competition over water resources. Questions for Congress include who is the most appropriate entity to respond to energy's growing water demand and water vulnerability and how to respond. At present, little direct federal action is aimed at managing the energy sector's water demand; instead, the current division of responsibilities relies on energy interests and state and local governments to meet and manage energy's water demand and resolve energy-water conflicts. The role of federal policies in contributing to rising water demand is bringing into question the future federal role in this policy arena. Local or regional competition for water with existing users is often what makes energy's water demand significant; at the same time, the regional and local scales of water resources availability and management complicate many federal water-related actions. Options for managing and meeting energy's water demand range from maintaining the current approach, with little federal action targeted at managing energy's water demand, to taking a variety of federal actions. One option is to minimize growth in energy's freshwater use. This could be accomplished through changes to broad policies (e.g., energy demand management) or legislation specifically targeted at water use (e.g., promotion of water-efficient energy alternatives). Another option is to improve the energy sector's access to water. Access is generally a responsibility of the state, but some limited federal actions are possible. An additional option is investing in data and research to inform decision-making and expand water-efficient energy technologies. These alternative policy approaches, which are not mutually exclusive, represent different potential roles and costs for the energy sector; energy consumers; and federal, state, and local governments. Legislation in the 111 th Congress proposed many of the above options; examples include H.R. 469 , H.R. 2454 , H.R. 3598 , H.R. 1145 , S. 1462 , S. 1733 , S. 3396 , and Subtitle IV of P.L. 111-11 ( H.R. 146 ), the Secure Water Act of 2009. During the 112 th Congress, energy's water use may arise in a variety of contexts, including during consideration of energy, agriculture, public land, and water legislation and oversight. While the water tradeoffs of energy choices may be raised in a variety of contexts, they are unlikely to be the focus of energy debates. Instead, the priority on and investments toward different policy goals low-cost reliable energy, energy independence and security, climate change mitigation, and job creation are likely to be more significant drivers in congressional energy deliberations. <1.1. Scope and Structure of This Report> This report focuses on the factors shaping the energy sector's water demand, how that demand fits into national water consumption, and options for managing and meeting water demand. The report first lays out the trends shaping energy's water use; second, it discusses energy's vulnerability to water constraints; and third, it discusses projections of energy's water use. It then explores three regional examples of energy's water use: shale gas in Texas, solar energy in the Southwest, and biofuels in the High Plains. Finally, it discusses policy options and legislative approaches for managing energy's water use. Several appendixes provide more detailed information on specific technologies, fuels, and trends. The report does not discuss in detail the energy sector's water quality impacts, although they represent their own challenges, as shown by concerns over the water quality effects of hydraulic fracturing, mountaintop mining, and the Deepwater Horizon oil spill. Energy use by the water sector also is not discussed in this report, although water conservation is one of many available means for reducing energy demand. <2. Energy Trends Shape Water Demand> Trends in national energy investments, domestic energy use, population, and climate change impacts and responses can affect how much and where the energy sector uses water. Increased emphasis on domestic energy production and efforts to meet increasing energy demand are expected to increase freshwater use by the energy sector. A shift in the electricity sector away from traditional coal power plants may result in either more or less water consumption, depending on alternative fuels or electricity technologies. Carbon capture and sequestration (CCS) by electric utilities has the potential to consume significant quantities of water. Actions such as substituting wind for thermoelectric electricity generation could potentially reduce energy's water demand, but may raise other challenges for energy reliability, dispatchability, and transmission. Other impacts, such as the movement of irrigated agriculture from food crops to energy crops, raise other concerns. These and other examples of energy trends and their effects on energy's water use are summarized in Table 1 . Appendix A has a more extensive list of trends. Whether and how much the energy sector's water demand grows in the next decades will be significantly influenced by whether energy demand increases. Projections of the size and mix of the future energy portfolio vary widely. These projections are highly uncertain and are sensitive to many factors, including market and economic conditions, energy and agricultural policies, resource availability, technology developments, and environmental regulations. By association, projections of energy's water demand also are highly uncertain. The Energy Information Administration (EIA) in the Department of Energy (DOE) projects that the United States will consume 22% more electricity and 12% more liquid fuel in 2030 than in 2010. Population growth and increased electricity use per capita are some drivers of increasing demand. Significant shifts to more water-intense electricity generation (e.g., concentrating solar power facilities using evaporative cooling) or more water-intense fuels (e.g., oil shale) could increase energy's water demand in locations with these energy resources. The significance of energy's water demand depends in part on local conditions how much water is locally available and what its alternative uses would be. The most growth in freshwater consumption by the energy sector is expected in the Southwest, the Northwest, and the High Plains that is, regions already experiencing intense competition over water and disputes over river and aquifer management. <3. Energy Sector's Vulnerability to Water Constraints> The more freshwater used by the energy sector, the more the sector is vulnerable to water constraints. However, as described above and in Appendix A , major energy trends are pushing the sector to become more water-intensive. Water availability problems, especially regional drought and low streamflow, can pose a risk to energy production and reliability. Electricity generation is particularly sensitive to low-flow conditions. More than 80% of U.S. electricity is generated at thermoelectric facilities that depend on access to cooling water. Low-flow conditions and water scarcity may constrain water-intense alternatives for thermoelectric cooling in counties across the country. Additional ways that water can constrain energy include a possible decrease in hydroelectric generation during drought. Bioenergy yields may be reduced by low precipitation, droughts, heat waves, or floods. Energy extraction, like coal mining, may be scaled back to avoid water quality impairments exacerbated by low water conditions. While water constraints are often perceived as an issue for the western United States, an increasing number of water bodies in the East are experiencing diminished stream flows. While multiple examples exist of water availability affecting siting and operations of thermoelectric facilities from New York to Arizona, generally there are ways to reduce the use of water and the risk posed by water constraints. Water supplies often are most constrained during summer, when the energy sector's water use is at its height in many regions. Approximately 24 of the nation's 104 nuclear reactors are situated in drought-prone regions. The Nuclear Regulatory Commission sets minimum source water elevation levels for each plant, so that a plant does not operate when source water levels drop below plant cooling water intakes. If cooling water sources fall below the established minimum water level, or if the maximum thermal threshold for the discharge of cooling water cannot be met, a facility is required to power down or go offline. A commonly cited example of this occurred on August 16, 2007, when a nuclear reactor owned by the Tennessee Valley Authority (TVA) at the Browns Ferry Nuclear Power Plant in Alabama shut down for a day. Its cooling water discharge exceeded temperature regulations that protect the environment and wildlife of the Tennessee River. In the summer of 2010, the same plant cut its electricity production to 45% of capacity when the cooling water temperature again exceeded discharge regulations. The reduced generation resulted in $50 million in higher cost to customers. TVA subsequently initiated a $160 million upgrade and expansion of its cooling system to avoid similar cooling constraints in the future. <3.1. Climate Change Could Increase Energy's Freshwater Vulnerability> Snowpack, precipitation, and runoff are strongly related to climate. Climate change researchers predict both water quantity and timing changes. That is, the research indicates more precipitation in the form of rain and less in the form of snow, and changes to seasonal water availability in some areas (e.g., low-flows during dry seasons). Additionally, climate models predict more frequent floods and droughts. These changes present challenges for hydroelectric dam operation. Changes in the availability and temperature of water resources also may affect operations of power plants that require water for cooling and that have thermal discharge limitations for cooling water. Climate change also may increase the demand for air conditioning, the electricity it consumes, and the water used to produce the electricity. The decreased runoff anticipated in the West, Southwest, California, and Pacific Northwest would decrease the amount of water available for all uses, including the energy sector. That is, the water resource impacts of a changing climate would likely exacerbate already projected thermoelectric cooling constraints. The energy sector also is vulnerable to potential increased flood and storm hazards associated with climate change. An example is the disrupting effects of floods on fuel transport. <4. How Much Water Does Energy Demand?> How much water will the energy sector use in the future? In part, interest in answering this question is rooted in other questions of national significance, such as: Will water limit U.S. capacity to meet the nation's energy demand? Will water constrain the transition to greater energy independence? Will water hamper adoption of some renewable energy alternatives? Quantification of energy's water demand and its significance is limited by significant gaps in available data and analyses. Water has no federal data agency comparable to the Energy Information Administration that projects alternative demand scenarios. There is no authoritative government source to cite for the level of water use by the energy sector or for projections of how that use may change in future decades. For example, there are no forecasts that use multiple scenarios to identify sensitivity of water demand to multiple factors and policies, or that analyze energy's water use and water vulnerability in the context of factors significant to energy choices and policies, such as energy and transmission costs, emissions, and reliability. For over 50 years, the U.S. Geological Survey (USGS) of the Department of the Interior has collected and published water use data every five years; however, the agency stopped collecting water consumption data after its 1995 survey due to funding constraints and data reliability problems. (USGS continues to collect water withdrawal data.) The 1995 USGS data are the basis of most projections of future water consumption in the United States. In the Secure Water Act of 2009, Congress authorized the USGS to perform a water use and availability assessment that includes water use trends in the energy sector; however, to date the agency had received no congressional appropriations for this program. Every 10 years the Forest Service forecasts water resources trends based largely on extrapolations of the USGS data and using the USGS data categories. The energy sector falls into a number of USGS water use categories, and it is impossible to disaggregate the categories to determine a value for the energy sector's water use. (Except for thermoelectric water withdrawals, the USGS water use data and Forest Service projections do not break out energy water use from other agricultural and industrial water uses.) Because of these limitations, the analysis herein relies on the most comprehensive projections available on the energy sector's water consumption, with the main source being a 2010 article by Deborah Elcock, an Argonne National Laboratory researcher, based on an updated and refined analysis from a report published by the lab in 2008. Although currently available data are limited, there are prospects for improved data and analysis in the future. The Secretary of the Interior announced in October 2010 that the USGS is undertaking a Colorado River Basin Geographic focus study as part of the department's WaterSMART Water Availability and Use Assessments initiative; this focus study may eventually comprise a component of the USGS water use and availability assessment Congress authorized in 2009, which would represent the first national water census since 1978. Additionally, regional efforts may inform future decision-making. For instance, the Western Governors' Association initiated in 2010 an energy-water nexus project, as part of its renewable energy transmission expansion effort, which includes a water availability assessment. The assessment is looking into projected water demands for large river basins and aquifer systems in the West and is expected to consider drought and potential climate change implications on the availability of river flows and water supply for energy development in the West. The effort is anticipated to conclude with policy recommendations available in late 2012, and is funded primarily by DOE. <4.1. Energy Leads Projections of Increasing U.S. Water Consumption> <4.1.1. Energy's Water Demand May Increase 50% from 2005 to 2030> During the 1980s and 1990s, as a result of improved water efficiencies, U.S. water consumption remained below the historic high level of 101 billion gallons per day (bgd) estimated for 1980. Estimates of recent consumption, however, put U.S. freshwater consumption above the previous high and predict it will increase further in the next decades. (See Figure 1 .) The projected rise is dominated by energy's water use. Nationally, energy's water consumption exceeds municipal and industrial use; it is currently second only to agriculture. By modeling current energy and water trends, available projections predict that water consumption by 2030 will increase by 7% above the level consumed in 2005, as shown in Figure 1 . Eighty-five percent of this growth is attributed to the energy sector, and an increase has already been observed between 2005 and 2010, with greater energy sector water use for irrigated biofuels. (See Appendix B .) Energy's water consumption (excluding hydropower) in 2005 was roughly 12 bgd, as shown in Figure 2 ; it is estimated to increase to 18 bgd by 2030. As shown by the data summarized in Figure 2 , roughly 60% of the anticipated expansion is associated with bioenergy, and 40% is associated with thermoelectric cooling and fossil fuel mining, production, and processing. The analyses behind these projections do not capture the effects on water consumption of various fuel and generation technology changes in the electricity sector and potential adoption of CCS, nor do they include hydropower's water consumption. Although the total national increase in Figure 1 may not appear large (7% over 25 years), multiple factors make this a significant increase for the water sector. First, growth in water consumption between 2005 and 2010 has put current water consumption above the previous high set in 1980. Second, water in many basins is largely allocated (or even over-allocated), with the water being delivered under legally binding agreements or withdrawn under issued permits. This means that making water available to the energy sector would likely decrease water use in another sector, such as agriculture. Third, Figure 1 represents national freshwater use; local proportions and increases in water demand from energy may be significantly higher. To illustrate the role that energy's water demand plays at the state level, roughly 16% of the water diverted in Kansas in 2008 went to biofuels; another 16% was used for electric power generation, while roughly 9% was used for municipal purposes. Fourth, in some regions, climate change is anticipated to decrease the quantity and reliability of water supplies. In particular, lower-altitude and drier areas are anticipated to become drier; some regions (e.g., the West) may experience more frequent or intense drought years punctuated by wet years. Lower precipitation in a portion of the Great Plains, and reduction in temperature-vulnerable snowpack in the western near-coastal mountains, are some of the anticipated changes to water supply. Therefore, energy's demand for more water use may coincide with a decreasing and less predictable water supply. Projections are based on assumptions that are subject to change; in particular, management of energy demand and wide deployment of water-efficient energy options may significantly lower water use below projected levels. A DOE Energy Efficiency and Renewable Energy (EERE) study found that expanding the nation's electricity portfolio to 20% wind by 2030 would reduce water consumption by 1.2 bgd compared to expanding the current electricity mix. The saved water would be 41% from the Midwest/Great Plains, 29% from the West, 16% from the Southeast, and 14% from the Northeast. Alternatively, the projections in Figure 1 could be underestimates. Some factors that may augment energy's water consumption are not accounted for in these projections. More water could be consumed if carbon capture and sequestration is widely employed (see discussion below), or if more water-intense energy is produced. For example, significant expansion of electricity from evaporative-cooled concentrating solar power (CSP), or new hydropower reservoirs in areas with high evaporation rates, could drive up energy's water consumption. Similarly, a significant increase in oil shale development could increase energy's water use in regions with those deposits. In summary, projections based on extrapolations of current trends can illustrate one potential path for water consumption, but many factors, such as the role of changing technologies and policies, can result in actual water consumption varying significantly from projections. <4.1.2. Carbon Capture May Create a New Energy Water Demand> The majority of current U.S. electric generation is from fossil fuels. The electric generation mix in 2009 was 45% coal, 23% natural gas, 20% nuclear, and 7% hydroelectric, less than 4% non-hydroelectric renewable generation, and less than 2% other sources. Carbon capture technologies in the fossil fuel industry may reduce carbon dioxide emission, but they come with investment and resource costs to manufacture and operate. Current carbon capture technologies consume energy and water. Water is used at two points in the carbon capture cycle: cooling water is required for capture and compression processes, and water generally is consumed for power plant cooling when generating power needed to perform CCS. A 2009 study by the National Energy Technology Laboratory found that by 2030, carbon capture and sequestration could increase water consumption for electric generation by anywhere from 0.9 bgd to 2.3 bgd, depending on the scenarios used for plant additions and for deploying carbon capture technologies. <4.1.3. Hydroelectric Water Consumption Is Poorly Documented> Although most hydropower generation represents an in-stream water use, dams built to generate hydropower and for other purposes consume water by increasing evaporation above free-flowing river conditions. That is, more evaporation occurs at the reservoir behind the dam than at the river without the dam. How much evaporation occurs at a reservoir with a hydroelectric generation depends on site, climate, and water conditions. CRS was unable to locate national data on existing or future projections for water consumption for hydroelectric generation. The currently available water consumption data from the USGS do not include hydropower evaporation. The agency states: "Although the quantity of water evaporated in the actual generation of hydropower (consumptive use) is small, considerable depletion of the available water supply for hydroelectric power generation occurs as an indirect result of evaporation from reservoirs and repeated reuse of water within pumped-storage power facilities." As noted in Figure 2 , a 2003 NREL report estimated evaporation at 120 reservoirs with hydroelectric facilities at 9 bgd. Because these reservoirs generally serve multiple purposes, this evaporation cannot be attributed to hydropower alone and is not shown in the figure. Moreover, many reservoirs enhance water availability for multiple functions by providing storage that regulates streamflow, at times minimizing the occurrence of naturally occurring low-flow levels. These benefits, however, often come with harm to aquatic ecosystems, species, and floodplains. The NREL data illustrate that evaporation at facilities with hydropower can vary widely based on geography and climate. Site-specific estimates of water consumption for new hydroelectric generation using new reservoirs (e.g., some pumped storage proposals), therefore, would be required to understand hydroelectric generation's impacts on water resources. That is, new hydropower reservoirs cannot be assumed to have minimal effect on water consumption. Efficiency improvements or additions of hydropower generation at existing facilities, however, have the potential to increase electricity generation without increasing water consumption from evaporation. <5. Regional Significance of Energy's Water Demand> Much of the anticipated growth in the energy sector's water demand is in water-constrained areas, potentially exacerbating competition and low flow condition for water during summer and droughts. That is, while energy's water demand is anticipated to rise across the United States, the West is likely to experience some of the more significant constraints and conflicts in meeting this demand. While local or regional competition for water is often what makes energy's water demand significant, the regional and local scales of water resources and how they are managed often complicate federal water-related actions. To illustrate one aspect of how energy's growing water demand varies across the country, Figure 3 shows projections for expanded electricity generation in many water-constrained states (e.g., California, Texas, Arizona), primarily owing to rising electricity demand. The following examples of regional water consumption concerns are discussed in more detail: shale gas production in Texas using hydraulic fracturing, solar electricity generation in the Southwest; and biofuel production in the High Plains. Technologies and management practices exist for reducing water use in each of these energy activities; however, these options generally come with energy cost, generation, and reliability penalties. Whether the benefits from the water savings of adopting these technologies and practices are viewed as outweighing these penalties often is a matter of perspective and is site specific. Moreover, little reliable and systematic data is available on the costs and benefits of adopting these measures in a variety of circumstances to better inform decision-making. <5.1. Energy Development: Shale Gas in Texas> Shale gas development has expanded in the last decade, in part because of technological advances in horizontal drilling and hydraulic fracturing. Fracturing involves the pressurized injection of water-based fluids (water, sand, and chemical mixtures) into a well to fracture a rock formation so that natural gas is released. (For more information on shale gas development, see CRS Report R40894, Unconventional Gas Shales: Development, Technology, and Policy Issues , coordinated by [author name scrubbed].) Shale gas formations occur in many areas of the United States. Exploiting this resource is bringing the oil and gas industry into communities unaccustomed to energy development. Water use is one of a number of issues being raised with the expansion of unconventional gas development. While technological developments allow for greater extraction of gas, these technologies result in an increasing average amount of water used per well. That is, the longer the well, the more water is needed to drill and stimulate gas production. Freshwater, rather than saline water, is preferred for drilling and fracturing. Water use is concentrated in the early stages of well development, usually in the first few months. Once the well is producing, little or no water is required, unless refracturing is necessary. Much shale gas development is on private lands, and no government agency requires operators to report water use. Some data on water use per well are available, such as data from a DOE report in 2009 for four shale gas formations, which show water use ranging from 2.7 million gallons to 3.9 million gallons of freshwater per well. Some limited data are available on the amount of water per unit of energy produced. Data from Chesapeake Energy shale gas wells indicate that drilling, fracturing, extraction, and processing use between 0.6 and 3.8 gallons of water per million British thermal units (MMBtu) produced, or 5 to 29 gallons per megawatt-hour (MWh), as fuel for a combined cycle natural gas facility (not including the power plant water use). This puts shale gas at the lower end of water use for transportation fuels such as domestic onshore oil and irrigated biofuels, and below the water use for most coal and nuclear fuel production for electricity, according to a 2006 DOE report. The water use issue for natural gas is often one of concentration. That is, if many wells are being developed in a limited geographic area, the cumulative water needs of multiple drilling and fracturing operations may be locally significant and constraining to expansion of energy development. This may be particularly the case in areas with water constraints and competing water demands for domestic, agricultural, and thermoelectric use or areas where water for new gas operations represents a substantial expansion in water use. Water quantity concerns have been raised for the Texas Barnett formation, particularly when drilling was using primarily fresh groundwater supplies and reached a peak of more than 3,000 new wells in 2008. With the subsequent decline in gas prices, the number of new wells drilled annually has dropped to 1,000, and increasingly the water is coming from surface supplies purchased from municipal water utilities where available, such as in the Fort Worth area. Based on available projections, the maximum use for natural gas production annually in the affected Texas counties may reach 7.5 billion gallons (0.021 bgd) under a high drilling scenario; this would represent 1.15% of local water consumption. While this shale gas use represents a modest share of local consumption, communities in this region of Texas have faced significant concerns about the sufficiency of available supplies during drought conditions for the region's growing population. This concern has brought scrutiny to all water uses, including shale gas. For most wells, the majority of the fluids injected into formation are not returned to the surface. In the Barnett formation, the water that is returned to the surface, known as flowback or produced water, is typically reinjected deep underground in a permitted disposal well. Texas A&M researcher C. J. Vavra estimates that more than half of the produced water could be reused in subsequent fracturing operations, and a quarter could be put to beneficial use. These actions could reduce the impact of shale gas development on local water supplies but could raise other concerns. Legislation was considered by the 111 th Congress to support research on this subject. For example, H.R. 469 , the Produced Water Utilization Act of 2009, would have directed the Secretary of Energy to carry out a program to demonstrate technologies for environmentally sustainable use of energy-related produced waters from underground sources. Water quantity concerns related to shale gas development are often overshadowed by interest in the economic benefits of the gas development and other local concerns with development. These other concerns include the risk that fracturing-related activities may contaminate freshwater supplies, community disruption and air pollution from truck traffic related to gas development (e.g., truck transport of drilling equipment and materials and fracturing additives and freshwater on and wastewater off the well site), and short-term and long-term changes to the local landscape and community. Although shale gas in Texas is discussed above, rising water demand for natural gas development is occurring or is anticipated in many other states and regions, such as the Northeast (Pennsylvania, New York), the South (e.g., Arkansas), and the upper Missouri River basin (Wyoming, South Dakota, North Dakota). <5.2. Electricity Generation: Solar in the Southwest> Another example of energy's regional water demand is concentrating solar power (CSP) in the Southwest. The region has abundant solar resources, but the region's water constraints can influence the attractiveness and feasibility of different solar technologies and the suitability of specific sites. Most concentrating solar power (CSP) consists of ground-based arrays of mirrors that concentrate the sun's heat, which is used in a thermoelectric process to generate electricity. The two primary technologies are solar troughs and solar towers. Although CSP does not emit greenhouse gases, its use of a thermoelectric process can raise water concerns, particularly if evaporative cooling is employed (that is, if water is evaporated to dissipate waste heat). Similar water concerns would be raised if new fossil-fuel thermoelectric power plants were to be similarly located in the Southwest. For some Southwest counties with relatively low water use, large-scale deployment of CSP or another thermoelectric facility (even with water-efficient cooling technologies) could significantly increase the current demand for water in the county. Some solar developers are using cooling alternatives that require less water (or have been encouraged or required to do so as part of state permitting or federal approval of facilities on federal lands). These alternatives include dry or hybrid cooling or use of impaired waters for cooling (see Appendix C ). These options generally come at a cost premium and with energy and cooling efficacy tradeoffs. Other solar developers have purchased water rights from willing sellers in states with active water markets. Still other solar developers are using solar technologies that require little or no water; these include photovoltaic solar, which uses panels of solar cells to convert sunlight directly into electricity, and dish engine CSP, which uses engines rather than a thermoelectric process to produce electricity. (See Appendix C .) While these technologies are water-efficient, they have other constraints (e.g., cost, land use, dispatchability). In summary, freshwater constraints like those in the Southwest do not preclude solar development, but access to water shapes the technologies and costs of solar development. <5.3. Energy Crops: Biofuels in the High Plains46> An additional example of energy's regional water demand is biofuels in the High Plains. The expansion of biofuel use through incentives and consumption mandates is an example of how federal energy policies can affect water use. The water quantity used for (and water quality impacts of) biofuels is particularly sensitive to biofuel feedstock, use of irrigation, and local climate and soil conditions at the growing site. Average water consumption by the dominant U.S. biofuel, corn-based ethanol, significantly exceeds the water intensity of other U.S. transportation fuels if the corn feedstock is irrigated. (See Appendix B .) Irrigation of only a small amount of biofuel feedstock in areas without sufficient rainfall to support feedstock growth without irrigation has the potential to substantially increase national water consumption for transportation fuels. The High Plains consisting of portions of Texas, New Mexico, Colorado, Kansas, Nebraska, Wyoming, and South Dakota is one example of a low-rainfall area. Much of the High Plains has faced water supply issues for decades, such as the declining level of portions of the Ogallala aquifer since the mid-1960s. Expansion of biofuels in this area is an additional demand exacerbating already competing water uses. For example, in Colorado in 2008, 16 times the annual quantity of treated water supplied to Fort Collins water customers was used to produce biofuels in the state, with the majority used in eastern Colorado. Of particular concern to the High Plains is expanded biofuels production on new or marginal lands, which could lead to additional irrigation demand and increased fertilizer application, causing both water quantity and quality concerns. Expansion of existing biofuel crops on land in current production raises water quality concerns because of the possible increased application of fertilizers and pesticides necessary to increase yields. Recognition of water, land, and other issues related to biofuels, particularly irrigated corn- and soybean-based biofuels, has led to a search for feedstocks and other organisms that use fewer resources to produce. Recent federal biofuels policies have attempted to assist this search by focusing on the development of a cellulosic biofuels industry. Dedicated biomass crops, such as switchgrass, hybrid poplars, and hybrid willows are considered by many to be more desirable crops because they have a short rotation (regrow quickly after each harvest) and use fewer resources, such as water and fertilizers, than traditional field crop production. Despite potential environmental benefits, concerns persist about the additional use of fertilizers and water resources that could be required to increase the per-acre yields to economically feasible levels; for example, that cellulosic feedstocks may be irrigated to increase yields, even though irrigation may not be required. Also, land use pressure for expanded production also applies to cellulosic biomass feedstock, possibly creating direct competition with current land conservation programs and replicating the concerns of traditional biofuel feedstock stated above. Despite federal incentives, technological and economic hurdles continue to prevent the cellulosic biofuels industry from developing to commercial scale production. <6. Meeting and Managing Energy's Water Demand: Policy Options> The previous sections described how energy's demand for water is increasing and provided some regional examples. This section discusses options for meeting and managing that demand. Historically the energy sector and the states have determined how water is used in the energy sector, but the significant role that current federal policies are playing in driving up energy's water demand is raising questions about the federal role in meeting and managing that demand. These questions include Are states being unfairly burdened with the responsibility of increased water use and competition resulting from federal energy policies, or is this part of the responsibility that comes with state primacy in water allocation? Who is responsible for the vulnerability of the nation's energy system to water availability? Congress is faced with deciding not only whether, and if so how, to alter current policies to respond to energy's water demand, but also who is the most appropriate entity to respond to energy's growing water demand. Currently little direct federal action is aimed at managing the energy sector's water demand, although federal policies at times have significant indirect influence on this demand. Instead, present roles rely on the energy industry and the states and local governments to manage water constraints and to resolve energy-water conflicts. The issue of the energy sector's water use may arise during the 112 th Congress in a variety of contexts. Support or opposition for legislation affecting energy's water demand may be influenced by opinions about the proper federal role in water allocation and planning, as well as concerns about the cost of actions and who is responsible for those costs. Positions on the larger energy and climate debate and other factors may also be important. Federal responses to energy's water use are complicated by the wide-ranging and place-based nature of the issue, the variety of actors involved, the costs and other tradeoffs involved, and the existing institutions and divisions of responsibilities for water and energy. If increased federal action to meet and manage energy's water demand is deemed appropriate, possible actions fall under a few broad options. Attempts can be made to minimize the growth in energy's freshwater use by adopting general energy policies that are less water intense and more sensitive to water constraints, or by specifically promoting activities that reduce energy's water use, such as incentives for adopting less water intense energy generation technologies. Another option is to make freshwater available for the energy sector (e.g., through allocations, permits, or facilitating water trading); however, the majority of water quantity allocation and permitting decisions are up to the states. An additional option is improving data and analysis on energy's water use to better inform decision-making (e.g., resource planning efforts and decision-support tools) and enhancing the availability and dissemination of water-efficient technological alternatives. These approaches are presented in Table 2 , with examples of each from legislation reported by a congressional committee of the 111 th Congress. These options are not mutually exclusive and different options may be more or less appropriate and attractive for different components of the energy sector's water demand. These options also represent different potential roles and costs for federal and state governments, the energy sector, and energy consumers. No entity has performed a comparative analysis of these policy options using multiple criteria (e.g., cost-effectiveness; who bears the cost; risks, reliability, and vulnerability; opportunity costs; role of state entities; role of federal entities). One of the challenges of a federal response to energy's water demand is that the concerns, policy options, and technological options vary greatly by region. Whether these policy alternatives should be pursued at the local, state, or national level depends in part on perspectives on the appropriate role of each level of government. Perspectives on the policy options related to energy's water demand also are influenced by long histories of regulation, management, promotion, and oversight of the nation's energy and water resources and infrastructure. Current and evolving conditions also play a role: providing greater access to water for the energy sector (which is primarily up to the states) may be difficult and controversial in water-scarce, drought-prone, or environmentally sensitive areas, especially with climate change anticipated to affect the availability and reliability of water in some regions. States have traditionally had primacy in water allocation, so decisions about permitting energy's water use largely have been non-federal. State and federal laws and policies can affect the ease or difficulty of, and incentives for, transferring water from existing uses to energy. The federal government can, if it chooses, promote change in state water laws, institutions, and decision-making. Some view this as infringing on states' rights. Similarly, while private entities make many of the decisions on the energy sector's water use, the public sector influences these decisions through numerous routes (e.g., tax incentives, loan guarantees, permits, regulations, planning, education); this influence can come from local, state, or federal policies. The federal role in water resource allocation and management increases as the federal interest increases for example, when the use occurs on federal lands. Competing water demands, including those from the energy sector, are raising questions for federal agencies about the operations of federal facilities. For instance, can water delivered to Bureau of Reclamation contractors (e.g., water delivered to irrigation districts in California's Central Valley) be used not for agriculture, but for energy development (e.g., evaporative cooling of a concentrating solar power facility)? Can water from an Army Corps of Engineers dam that has multiple purposes (e.g., flood control, navigation, and/or municipal or agricultural water supply) be used for the oil and gas development, and if so, how much water can the Corps provide under existing authorities? <7. Observations and Concluding Remarks> The energy sector has long been a major water user, so why the current concern? Major energy trends are pushing the energy sector to become more dependent on, and therefore vulnerable to, freshwater availability. This is occurring at a time of increasing concerns about the adequacy and reliability of freshwater supplies due to population growth and climate change. Energy resource and technology paths chosen and capital investments made in the near term are likely to establish long-term trajectories for energy's water use. Many of the current trends are in part driven by federal policy. The federal government partially shapes the energy sector and at times defines a vision for the nation's energy future (e.g., biofuel production targets). Some stakeholders have raised concerns about the feasibility and consequences of meeting various energy targets and policy proposals, including concerns about physical inputs like water, land, materials, and rare minerals. Because affordable freshwater is a finite resource, commitments of water supplies for the energy sector reduce availability for other sectors and for ecosystems. Local or regional competition for water is often what makes energy's water demand significant; at the same time, it is the regional and local scale of water resources and how they are managed that often complicates many federal water-related actions. The federal role in energy supply and demand raises questions about the policy direction for meeting and managing energy's water needs, among them: If energy security is a national security issue, is energy's water use by association a national security issue? Would this be a justification for federal spending on energy and water efficiency measures? Water supply concerns are not only being raised in the context of energy. There also is growing concern about water availability and aquatic conditions for meeting the demands of the agricultural and municipal sectors and the needs of ecosystems and threatened and endangered species; these concerns are raised particularly in the context of droughts and impacts of climate change on water resources. Given available freshwater resources, a challenge for the nation will be to cost-effectively, sustainably, and reliably meet energy demands while satisfying agricultural, municipal, and industrial water demand, as well as ecosystem needs. This challenge raises fundamental and controversial questions about how U.S. freshwater resources are allocated and used for various purposes, and about the availability and value of water in different sectors of the economy and in the environment. At issue for Congress is the role that the federal government and federal funding plays in shaping, meeting, and managing energy's water demand, while accounting for the significant role of the states and private sector in water use decisions. Appendix A. Energy's Water Consumption Trends Ideally, policy and decision makers should know how energy choices and policies compare across a wide array of parameters (e.g., cost, reliability, dispatchability, emissions, land requirements, water use) under different scenarios. That is, informed decisions would require water use data, analyses of least-cost water and energy conservation and efficiency actions, understanding of other water uses and their costs and benefits, life-cycle assessments of energy's water uses and risks, and more. Such assessments are not available. While not addressing this shortfall, Table A -1 and Table A -2 summarize the freshwater impacts of numerous shifts in transportation fuels and the electricity sector, respectively. Without such multi-variable assessments, it is difficult to understand the full implications of energy decisions. While this report focuses on energy's water use, there are a host of other factors to consider when analyzing energy policy tradeoffs. For example, fuel and technologies for generating electricity are not equally dispatchable; that is, is they are not equally able to increase or decrease generation, or to be brought online or shut down to match demand. Thermoelectric facilities using fossil fuel or geothermal sources are advantageous because they can be operated to produce electricity constantly or dialed up or down with demand. While electricity from hydropower, tidal, and wave energy generally can be produced fairly predictably, often the timing of operations is subject to the intensity of tides and waves, to water conditions such as drought or large storms, and to environmental restrictions regarding potential impacts on marine life and ecosystems. In contrast, until more advanced storage technologies become commercially competitive, photovoltaics and wind, which require very little water, remain intermittent sources that generally cannot be dispatched when the sun is not shining or the wind is not blowing. Appendix B. Water Use by Transportation Fuels D. Elcock's study projects that the energy sector's consumptive water use will increase from 6 billion gallons per day (bgd) in 2005 to 10 bgd in 2030 in the areas of fossil fuel mining, production, and processing and bioenergy. (See Figure B -1 .) The growth is dominated by water consumed for bioenergy. The Elcock study and other sources show that the effect of bioenergy on energy's water use was already felt between 2005 and 2010. The projected water demand by bioenergy could drop, potentially significantly, if less-water intense bioenergy is developed and adopted. This projection covers most of the water used to fuel transportation and the water used for obtaining and preparing fossil fuels for use in either transportation or the electricity sector. Figure B -2 provides data from research on the comparative water intensity of different U.S. transportation fuels. Note that the figure has a logarithmic scale, and that the water consumed traveling on irrigated biofuels is orders of magnitude larger than the water embedded in other fuels. Appendix C. Water Use for Electricity Generation Trends in the electricity sector contributing to increased water consumption currently overwhelm actions that reduce water consumption. As a result, local water challenges presented by electric generation are becoming more common in many water-constrained areas. These challenges may drive action to reduce electricity's freshwater footprint, such as the adoption of water-efficient electricity generation and water-efficient thermoelectric cooling options, or the use of impaired water. This appendix describes the available data on the electricity sector's water consumption and data on the different electricity generation's water use. Then it presents alternative thermoelectric cooling choices that may reduce electricity's water use. Lastly, it discusses the tradeoffs between water use and other characteristics (e.g., environmental impacts, reliability, dispatchability) of electric generation from hydropower facilities, photovoltaic solar and wind installations, and geothermal resources. Data on Electricity's Water Use Available estimates for the electricity sector's water consumption focus primarily on thermoelectric cooling water needs because cooling dominates water use during generation. Other aspects of electric production (e.g., fuel mining and processing) also use water. (See Table C -1 .) Data and projections on the water consumed in the mining, production, and processing of fuels for generating electricity are bundled with the production of fossil fuels used in the transportation sector, like the Elcock study. The projections in Figure 2 for thermoelectric cooling come from the Elcock study, which was based on projections in a 2007 report by NETL. The NETL projections are limited to coal, natural gas, and nuclear-powered facilities; that is, they do not calculate water use changes that would occur from shifts in the electricity sector broadly (e.g., adoption of more wind or photovoltaics) or shifts in thermoelectric generation more specifically (e.g., concentrating solar power or biomass generation). Elcock assumed that biomass generation for electricity production would be based in regions not requiring irrigation. No analyses of electricity's total water consumption or how it may change under different policies exist; this type of analysis is difficult to perform without reliable data on water intensities of different electricity generation technologies and fuels. No authoritative comparison of the various water intensities of electricity generation options exists. Figure C -1 and Figure C -2 illustrate the best available data for average water intensities for various electricity alternatives, with and without carbon mitigation using CCS, respectively. These figures are based on Table C -1 , which represents the best available data on water consumed in producing electricity using various fuels and technologies. The data in Figure C -1 are imperfect and come from multiple sources, raising questions about whether the data can be used to make accurate comparisons across technologies. Thermoelectric Cooling: Emerging Alternatives The withdrawal and water quality impacts of once-through cooling have resulted in newer power plants generally using evaporative cooling. Emerging cooling technologies have the potential to use much less freshwater than once-through or evaporative cooling. These include dry cooling (previously discussed), hybrid dry-wet cooling, cooling with fluids other than freshwater, and more innovative technologies (e.g., wet-surface air coolers, advanced wet cooling). However, these alternatives have their own costs and disadvantages. A DOE report found that dry cooling could reduce water consumption to roughly 80 gal/MWh for solar troughs and 90 gal/MWh for solar towers. While they consume less water, dry and hybrid cooling systems have financial as well as efficiency costs. Total annualized costs for dry cooling tower systems can be four times those of evaporative cooling tower systems. Due to the higher cooling and lower generation efficiency costs, the cost of electricity from a dry cooled solar thermal plant may be 3% to 8% higher than a similar wet cooled plant. Dry cooling uses fans to blow air for steam condensation. While power plants with dry cooling use considerably less water, dry cooling is less effective at cooling the power plant than evaporative cooling, thus reducing electric generation at the facility. The DOE report also found that electricity generation at a dry-cooled facility dropped off at ambient temperatures above 100 F. For a solar parabolic trough facility in the Southwest, the benefit in the reduction in water consumption from dry cooling resulted in cost increases of 2% to 9% and a reduction in energy generation of 4.5% to 5%. The cost and energy generation penalties for dry cooling depend largely on how much time a facility has ambient temperature above 100 F. Dry cooling would reduce generation on the same hot days when summer peak electricity demand is greatest. Hybrid wet-dry cooling attempts to balance water consumption with power generation efficiency; it remains under development for commercial scale applications. To weigh the tradeoffs in energy generation, cost, and water use, DOE researched hybrid cooling processes that combine dry and evaporative cooling. The hybrid system consists of parallel evaporative and dry cooling facilities, with the evaporative cooling operating only on hot days. By using dry cooling generally and evaporative cooling above certain ambient temperatures, losses of thermal efficiency from dry cooling can be reduced. How often the evaporative cooling is used determines how much water is consumed and the effect of hot days on thermal efficiency. DOE found that a hybrid cooling system in the Southwest using 50% of the water of evaporative cooling would maintain 99% of the performance of an evaporative-cooled facility. A hybrid cooling system using 10% of the water of evaporative cooling would maintain 97% of the energy performance. A hybrid system requires greater capital investment and is more complicated to operate; its cost effectiveness over the life of the project depends in part of the cost of water. Another means for decreasing freshwater impacts is employing alternative water sources for evaporative-cooling. These alternative water sources include effluent from wastewater treatment plants or other reclaimed or impaired water, such as brackish or low-quality groundwater and mine pool water. These alternative water sources, however, may lead to additional scaling, corrosion, and fouling of cooling equipment or require pretreatment before cooling use. Additional research may be able to improve the viability of saline water cooling. Availability of alternative water sources in proximity to electricity generation facilities is a potential limitation to their use. Understanding of the opportunities for brackish cooling alternatives is likely to be improved when the assessment of brackish groundwater authorized by Section 9507 of P.L. 111-11 , the Omnibus Public Land Management Act of 2009, becomes available. Tradeoffs of Select Electricity Generation Technologies Hydroelectric Generation Hydroelectric power is produced when water passes through a turbine. Turbines for large-scale hydroelectric generation are located at dams. Electricity at U.S. hydropower facilities is produced with relatively low greenhouse gas emissions. However, hydropower's environmental effects can be significant. Conventional hydropower development through dam building often significantly alters river ecosystems, harming many indigenous species. Drought and changes to hydrology, such as possible reduction in snowpack under a changing climate, can reduce electricity generation at hydropower facilities because of the effects on reservoir operations and levels. Constructing new large dams is contentious; therefore, efforts to identify opportunities for increasing hydropower generation have focused on smaller-scale opportunities or improved efficiency and expansion of hydropower at existing facilities. The Electric Power Research Institute estimates a potential capacity hydropower gain of 10 GW by 2025 as feasible, without the construction of new large dams. Six western states Alaska, Washington, Oregon, California, Idaho, and Montana have the highest potentials. Despite this identified potential, little additional hydropower generation has been installed in recent years for a number of reasons (e.g., hydropower and water-related permit and regulatory requirements, and public concerns and perceptions about environmental effects). Similarly, the number of applications for FERC preliminary permits for pumped storage has increased substantially in recent years; however, the proposals have not proceeded to construction. Photovoltaic Solar and Wind Renewable electricity technologies that do not use thermoelectric processes may have minimal water requirements for electricity generation. Wind turbines and solar photovoltaic (PV) panels, for example, require small volumes of water for cleaning, but otherwise use no water. However, the minimal water intensity of wind and PV comes with tradeoffs. Transmission constraints; cost; and regulatory, technical, and operational factors currently restrict the extent to which solar and wind resources can be exploited to meet electricity demand. As previously noted, wind and PV are intermittent electricity sources. Some storage options for these intermittent technologies exist (e.g., wind used in conjunction with a pumped storage hydropower facility); however, their applications are limited and intermittency continues to limit generation from wind and PV. Electricity from PV is also currently more expensive than electricity from CSP, although electricity from wind is less expensive than electricity from CSP. For a discussion of wind technologies and policy issues, see CRS Report RL34546, Wind Power in the United States: Technology, Economic, and Policy Issues , by [author name scrubbed]. Geothermal There are several ways to use geothermal energy: electricity generation (discussed herein) as well as direct-use (recovering water heated by the earth) and heat pumps (using the earth's heat to cool/heat buildings). Traditional geothermal power production uses naturally occurring convective hydrothermal sources in hot rock formations to produce steam to run a thermoelectric power plant's turbines (i.e., a geothermal flash system). Alternatively, for lower temperature geothermal resources, a second working fluid is heated by the geothermal water using a heat exchanger; it is the working fluid that drives the turbines (i.e., a geothermal binary system). Finally, because the majority of hot rock is dry, electricity can also be generated by injecting water into fractured rock to be heated (i.e., an enhanced geothermal system). The water is then injected back into the rock formation to create a relatively closed-loop system. Because the geothermal or injected water is an essential component of geothermal electricity generation and the size of the plants are generally smaller than 50 MW, dry cooling is becoming the standard for new geothermal facilities. Smaller power plants are generally easier to dry-cool than larger plants. A 2008 USGS study estimated that the United States has geothermal resources sufficient to supply half of the nation's electric generation needs, assuming enhanced geothermal systems could be successfully developed and deployed at a commercial scale. That is, much of the geothermal potential shown on maps of geothermal resources requires water to be injected (and therefore consumed) to exploit the geothermal energy. Enhanced geothermal power plants require relatively little land and can be used in coproduction with enhanced oil recovery to lengthen the lifespan of oil fields. These enhanced systems are an emerging technology, so more research and development are needed for large-scale commercial deployment. Current research is investigating the possibility of replacing water with carbon dioxide as the working fluid, which would significantly reduce water usage and would be a means of carbon sequestration.

The energy choices before Congress represent vastly different demands on domestic freshwater because water is used in varying amounts in most aspects of the energy sector. Transitions in the energy sector, such as the pursuit of greater energy independence and security, produce changes in how much and where the energy sector uses water. The energy sector is the fastest-growing water consumer in the United States, in part because of energy policies. Whether the federal government addresses the energy sector's rising water demand, and if so how, is one of the many energy decisions that may be considered by the 112th Congress. Much of the growth in the energy sector's water demand is concentrated in regions with already intense competition over water. Whether the energy sector exacerbates or alleviates future water tensions is influenced by near-term energy policy and investment decisions. These decisions also may determine whether water will limit or harm U.S. capability to reliably meet the nation's energy demand. Part of the policy issue for Congress is identifying the extent of the federal role in responding to the energy sector's water use. Currently, the energy industry and states have the most responsibility for managing and meeting the energy sector's water demand. The energy sector's water consumption is projected to rise 50% from 2005 to 2030. Projections attribute to the energy sector 85% of the growth in domestic water consumption between 2005 and 2030. The drivers of the energy sector's increasing water use are rising energy demand, greater development of domestic energy, and shifts to more water-intense energy sources and technologies. The more water used by the energy sector, the more vulnerable the energy system is to water availability. Climate change alterations of historic water patterns may exacerbate this vulnerability in some regions. While the energy sector's water demand is anticipated to rise across the United States, the West is likely to experience some of the more significant constraints in meeting this demand. Examples of regional water use concerns related to energy are shale gas production using hydraulic fracturing in many regions across the nation, some solar electricity generation in the Southwest, and current biofuel feedstock production in the High Plains. The 112th Congress may see the issue of energy's water demand in a variety of contexts, including oversight and legislation on energy, infrastructure, environment, agriculture, public lands, climate, research, and water. Approaches for addressing energy's water demand range from maintaining the current approach to taking a range of actions. One set of available actions includes those that attempt to minimize the growth in energy's freshwater use (e.g., through promotion of water-efficient energy alternatives and energy demand management), which could be accomplished through changes to broad policies or legislation targeted at water use. Many of the possible actions to decrease water use come with energy cost, generation, and reliability penalties. Another set of actions includes measures that facilitate access to water for the energy sector. While water allocations and permits generally are a state responsibility, limited federal actions to provide water to the energy sector are possible (e.g., access to surplus water at federal reservoirs). An additional set of actions encompasses investments in data and research to inform decision making and to expand water-efficient energy technology choices. These approaches represent different potential roles and expenses for government, the energy sector, and energy consumers. Legislation in the 111th Congress proposed a variety of actions, including provisions in H.R. 469, H.R. 2454, H.R. 3598, H.R. 1145, S. 1462, S. 1733, S. 3396, and the Secure Water Act of 2009, Subtitle IV of P.L. 111-11 (H.R. 146). A significant challenge to a federal response to the energy sector's water demand is that the available options are not equally needed, attractive, or feasible across the United States.

<1. Introduction> Beginning with the Clean Air Act of 1970, and with substantive additional measures enacted in amendments of 1977 and 1990, electric utilities have been subjected to a multilayered patchwork of air pollution emission requirements. Fossil fuel fired electric generating facilities are major emitters of gases (see table 1), with clean air controls currently directed at three pollutants: sulfur dioxide (SO 2 ), nitrogen oxides (NOx), and particulates (PM). Sulfur oxides have health effects and are a major contributor to acid rain and visibility impairment. Nitrogen oxides have direct health effects, contribute to acid rain and visibility impairment, and are a precursor to ozone, a primary constituent of smog. Particulates have health effects, with the smallest particles now thought to be the most serious causative agents; current regulations focus on particles 10 microns in size or smaller (PM 10 ) and new regulations would control particles less than 2.5 microns in diameter (PM 2.5 ). Emissions of SO 2 and of NOx contribute to the formation of these very fine particles. In 1998, electric utilities accounted for approximately 67% of U.S. emissions of SO 2 , 25% of NOx, and 11% of PM 10 . The evolution of air pollution controls over time and as a result of developing scientific understanding of health and environmental impacts has led to the multilayered and interlocking patchwork of controls, which are outlined in more detail below. Moreover, additional controls are in the process of development, in particular with respect to NOx as a precursor to ozone, and to both NOx and SO 2 as contributors to PM 2.5 . In addition, fossil fuel fired electric generating facilities produce two other gases of environmental and health concern: mercury (Hg) and carbon dioxide (CO 2 ). While some sources of mercury are currently regulated, emissions from electric utilities are not. However the Clean Air Act Amendments of 1990 designated Hg as a hazardous air pollutant subject to a regulatory regime spelled out in 112. EPA was also required to study hazards to public health from hazardous air pollutant emissions of electric utility steam generating units in general; and, separately, to report to Congress on mercury emissions from major sources, including electric utility steam generating units. This study, completed in 1997, concluded mercury is a hazard to public health; and it found that electric utility steam generating units account for about one-third of the nation's mercury emissions. On December 14, 2000, EPA announced its intention to regulate utility Hg emissions in 2004, with an effective date of 2007 or 2008. Carbon dioxide is a major greenhouse gas, and fossil fuel fired electric generating facilities account for about 36% of U.S. emissions. While CO 2 emissions are not currently regulated, the United States is a signatory of the United Nation Framework Convention on Climate Change, which involves a voluntary commitment to hold greenhouse gas emissions to 1990 levels. At present, U.S. emissions of CO 2 are running some 10% over that goal. Further, the U.S. has signed the Kyoto Protocol, under which the U.S. would be legally committed to reduce emissions in the 2008-2012 period by 7% from a baseline that includes 1990 CO 2 levels; however, that Protocol has not yet been submitted to the Senate for advice and consent and is not in force. But it remains possible that, beyond the already existing voluntary goal, utilities will be subjected to emissions limits on CO 2 at some time in the future. As described below, this patchwork of existing and potential emissions requirements applicable to fossil fuel fired electric generating facilities has a direct impact on strategic decisions concerning investment in new facilities as well as operational decisions with respect to the timing of maintenance and scheduling of operation. At the same time, the electric utility industry is undergoing major restructuring changes. Proponents of change argue that the air quality requirements add confusion and uncertainty to a utility decisionmaking environment already challenged by new generating technology and new policies concerning competition and economic regulation. A restructured electricity generating sector may have consequences for emissions: current electricity generating economics favor the continued operation of older, more polluting coal-fired facilities, at the expense of building newer, cleaner, natural gas-fired facilities. Previous CRS analysis suggests that the environmental effects of restructuring depend on how well the existing regulatory regimen will work as the industry structure changes. It appears that pollutants controlled under emissions caps, such as SO 2 under the acid rain title of the 1990 CAA Amendments, would retain their efficacy regardless of the industry's structure. The robustness of emissions caps and the possible cost savings that tradeable emissions credits provide are seen by some as a better fit for a restructured industry than the current regulatory system. For many years the complexity of the air quality control regime has caused some observers to call for a simplified approach. Now, with the potential both for additional control programs on SO 2 and NOx and for new controls directed at Hg and CO 2 intersecting with the technological and policy changes affecting the electric utility industry, such observers have become more numerous and are pushing more strongly for a simplified approach. Several simplifying approaches have been proposed, ranging from repeal of various components of the air pollution regulatory system, to comprehensive replacement of the "command and control" regulatory approach with some economic mechanism, which is often touted as more efficient and transparent. In the mid-1990s, EPA began investigating the merits of a comprehensive approach to utility emissions control. Called the "Clean Air Power Initiative," the purpose was "to develop, in consultation with stakeholders, an integrated regulatory strategy for pollutants emitted from electric powerplants: sulfur dioxide, nitrogen oxides, and, potentially, mercury." It was "a collaborative effort to seek new approaches to future pollution control that cost less, rely on market mechanisms, and reduce the number and complexity of requirements...." As the effort evolved, a "multi-pollutant"or "four pollutants" approach has come to the fore. This approach involves a mix of regulatory and economic mechanisms that would apply to utility emissions of up to four pollutants SO 2 , NOx, Hg, and CO 2 . The objective would be to balance the environmental goal of effective controls across these pollutants with the industry goal of a stable regulatory regime for a period of years. During the 106 th Congress, ten bills were introduced to increase pollution controls on electric generating facilities. The pollutants targeted under these bills included SO 2 , NOx, Hg, and CO 2 . All of these bills involved some form of emissions caps, and most included a tradeable credit program to implement that cap. With President Bush endorsing a four pollutant emissions cap with tradeable permits program during the campaign, attempts to address the issue are possible in the 107 th Congress. This report proceeds by (1) laying out the existing regulatory framework, with emphasis on how it can affect strategic and operational decisions in the utility industry; (2) identifying the "drivers" for rethinking the way air pollution controls are imposed on the industry; (3) describing the elements of a "four pollutants" approach; and (4) discussing the ways that this approach would affect the control of emissions and the industry's decisonmaking. It concludes with a brief outline of legislative options for achieving the goal of balancing environmental and industry objectives. <2. The Regulatory Framework: Utility Air Quality Regulation> To understand the interest in an integrated approach to controlling utilities emissions of air pollutants, it is necessary to recognize the diverse requirements imposed by the CAA. Within the general regulatory structure, several distinctions arise that affect utility planning and operations (e.g., whether the facility is located in clean or dirty air areas, whether a facility is existing or new, and what fuel it burns). And while the underlying regulatory structure generally applies to SO 2 , NOx, and PM, the specific requirements for each differ. <2.1. National Ambient Air Quality Standards New Source Performance Standards Lowest Achievable Emissions Rate> As enacted in 1970, the CAA established a two-pronged approach to protect and enhance the quality of the nation's air. First, the Act established National Ambient Air Quality Standards (NAAQS), which set limits on the level of specified air pollutants in ambient air. Second, the Act required national emission limits to be set for major new polluting facilities; these are called New Source Performance Standards (NSPS). NAAQS have been established for six pollutants, including SO 2 , NOx, and PM. Under the law, EPA sets primary NAAQS to protect the public health with an "adequate margin of safety." EPA periodically reviews NAAQS to take into account the most recent health data. NAAQS are federally enforceable with specific deadlines for compliance, but states are primarily responsible for actually implementing the standards, through development and enforcement of State Implementation Plans (SIPs). In general, these plans focus on reducing emissions from existing facilities to the extent necessary to ensure that ambient levels of pollution do not exceed the NAAQS. For areas not in attainment with one or more of these NAAQS, the 1970 CAA mandates states to require new sources to install Lowest Achievable Emissions Rate (LAER) technology. Along with offset rules, LAER ensures that overall emissions do not increase as a result of a new plant's operation. LAER is based on the most stringent emission rate of any state implementation plan or achieved in practice without regard to cost or energy use. Existing sources in a non-attainment area are required to install Reasonably Available Control Technology (RACT), a state determination based on federal guidelines. The 1970 CAA also established New Source Performance Standards (NSPS), which are emission limitations imposed on designated categories of major new (or substantially modified) stationary sources of air pollution. For fossil fuel fired electric generating facilities, EPA has set NSPS for SO 2 , NOx, and PM 10 , and is required by the Act to review the standards every eight years. A new source is subject to NSPS regardless of its location or ambient air conditions. In summary, under this overall regulatory regimen, existing sources in non-attainment areas are subject to controls determined by the state as necessary to meet NAAQS; existing sources are essentially free from controls in attainment areas. And major new sources, including fossil fuel fired electric generating facilities, are subject to NSPS as the minimum requirement, anywhere. <2.2. Prevention of Significant Deterioration New Source Review Best Available Control Technology> The 1977 CAA broadened the air quality control regimen with the addition of the Prevention of Significant Deterioration (PSD) and visibility impairment provisions. The PSD program (Part C of the CAA) focuses on ambient concentrations of SO 2 , NOx, and PM in "clean" air areas of the country (i.e., areas where air quality is better than the NAAQS). The provision allows some increase in clean areas' pollution concentrations depending on their classification. In general, historic or recreation areas (e.g., national parks) are classified class 1 with very little degradation allowed while most other areas are classified class 2 with moderate degradation allowed. States are allowed to reclassify Class 2 areas to Class 3 areas, which would be permitted to degrade up to the NAAQS. New sources in PSD areas must undergo preconstruction review (called New Source Review or NSR) and must install Best Available Control Technology (BACT) as the minimum level of control. State permitting agencies determine BACT on a case-by-case basis, taking into account energy, environmental and economic impacts. BACT cannot be less stringent than the federal NSPS, but it can be more so. More stringent controls can be required if modeling indicates that BACT is insufficient to avoid violating PSD emission limitations, or the NAAQS itself. A complement to the PSD program for existing sources is the regional haze program (section 169A) that focuses on "prevention of any future, and the remedying of any existing, impairment of visibility" resulting from manmade air pollution in national parks and wilderness areas. Among the pollutants that impair visibility are sulfates, organic matter, and nitrates. Existing sources are required to install Best Available Retrofit Technology (BART). In 1999, the EPA promulgated a regional haze program, which would entail more stringent controls on NOx and SO 2 . With a comprehensively regulated electric utility industry, the above regime resulted in significant reductions in pollutant emissions, particularly from new sources. However, environmental and economic factors have evolved over the past thirty years that expose cracks and discontinuities in the regime. Environmentally, it became increasingly clear that ecological effects were occurring at pollutant levels below those necessary to protect human health. The classic example is acid rain, in which total pollutant loadings are more important that ambient concentrations. Economically, the requirements on new sources were proving to be a strong incentive for the "life extension" of older, existing facilities that could operate more inexpensively but which were emitting pollutants at higher rates than new facilities. <2.3. Acid Rain Statutory SO2 Cap and Allowance Trading System> To address acid rain, title IV of the 1990 CAAA established a new control regime essentially independent of the NAAQS-NSPS processes. Instead of the NAAQS-based focus on acceptable ambient concentrations of a pollutant enforced on a plant-by-plant basis, title IV establishes a cap and trade scheme that limits SO 2 (the primary precursor of acid rain) emissions more stringently than NAAQS levels. (Although total emissions, not ambient concentrations, become the focus of reductions, concentrations are still limited by NAAQS, so "hot spots" are prevented). Such an approach is appropriate where regional, national, or global loadings of a pollutant reaches critical levels despite acceptable localized effects. The ability to trade emission rights increases the economic efficiency of the system and, assuming rigorous monitoring, simplifies enforcement. Title IV also required reductions in NOx emissions. However, in contrast the SO 2 cap and trade program, the NOx program set performance standards based on low-NOx burner technology on a boiler-specific basis for facilities affected by the SO 2 requirements. Statutorily, then, the air quality control requirements imposed on fossil fuel fired electric generating facilities can be summarized as shown in table 2. <3. Pending and Prospective Utility Air Quality Controls> The preceding section outlined the air quality controls that have directly affected fossil fuel fired electric generating facilities. Continuing developments in understanding of the effects of different pollutants, especially of SO 2 and NOx, both individually and in combination, are heightening concerns about the adequacy of existing controls. Issues include continuing difficulties in meeting the ozone NAAQS, health effects of fine particulates, impaired visibility, and global warming. These concerns are driving new initiatives to increase controls at existing sources of these pollutants. As a result, more air quality controls on utilities are pending or prospective. At the same time, the increasingly complex and interactive structure of the air quality control regime is raising questions about the effectiveness and economic efficiency of the individual initiatives. <3.1. Health and Environmental Concerns Driving New Air Quality Initiatives> Achieving the NAAQS for certain pollutants (particularly ozone), has called for new control regimes. EPA's NOx SIP Call is an example of one such approach. Under the SIP Call, the affected states are given emission budgets that they can achieve in whatever manner they choose. Noting the regional nature of the ozone problem in the eastern U.S., EPA is strongly encouraging states to implement the rule through a cap and trade program. As the ozone problem is seasonal, the controls are only for the summer months. This seasonal requirement may be adequate for meeting the ozone NAAQS, but may not fall short in addressing other environmental concerns (fine particulates and visibility, for example). Moreover, this ozone control regime is based on EPA regulation, whereas the acid rain control regime is statutory. As a result, the ozone requirements are subject to some uncertainty, in particular the potential cap and trade provisions for NOx which would be implemented by states individually. Along with the pending NOx controls resulting from the continuing difficulties in meeting the ozone NAAQS, concern has been growing about the health and/or environmental impacts of mercury and greenhouse gases. Under the 1990 CAAA, mercury was listed as a toxic air pollutant under Section 112. This requires EPA to set standards for sources of Hg that achieve "the maximum degree of reduction in emissions" taking into account cost and other non-air-quality factors. These Maximum Achievable Control Technology (MACT) requirements for new sources "shall not be less stringent than the most stringent emissions level that is achieved in practice by the best controlled similar source." The standards for existing sources may be less stringent than those for new sources, but must be no less stringent than the emission limitations achieved by the best performing 12% of existing sources (if there are more than 30 such sources in the category or subcategory). As previously noted, EPA stated on December 14, 2000 that it would be regulating utility emissions of Hg. However, the exact form those regulations will take remains to be seen. The possibility of carbon dioxide emission controls is less clear. No federal policy currently imposes a control program on CO 2 emissions, but global climate change concerns seem to be growing. If such a policy were to be adopted, utilities would be among the most affected sectors. The prospect of controls is underlined by a provision of the CAAA of 1990 ( 821), which requires the monitoring of greenhouse gases, and a provision of the 1992 Energy Policy Act ( 1605(b)), which provides a mechanism for reporting voluntary reductions in greenhouse gases. Electricity projects account for half the voluntary reductions that have been reported under 1605(b). These several concerns emissions of SO 2 and NOx, ozone nonattainment and fine particulates, and mercury and global warming introduce uncertainty and the prospect of new layers of air pollution controls. As major sources of emissions of these pollutants, fossil fuel fired electric generating facilities thus have a particular interest in the outcome of these initiatives, which are summarized in Table 3 . <3.2. Economic and Regulatory Drivers Affecting Perspectives on Air Quality Controls> The control measures needed to address these environmental concerns have emphasized the basic economic decisions made in 1970. First, the 1970 CAAA created an economic bias in the system because existing sources can often achieve compliance with its provisions at less cost than new sources. It was perceived to be more economically efficient to require the most stringent control on new sources while giving states discretion through the SIP process to require existing sources to retrofit controls only when, and to the extent, necessary. This situation was not changed by the addition of market mechanisms in the 1990 CAAA. Under the acid rain provisions, existing sources were allocated credits based on a reduction requirement less stringent than the current NSPS, while new sources were allocated no credits at all. This disadvantage may not have been particularly significant during a time when electric utilities were comprehensively regulated and new sources were needed to meet increased electric demand. However, in the emerging competitive electric supply market, the bias arguably discriminates against new entrants as existing suppliers have the advantage of less stringent control requirements and a pool of free emission credits. Economic bias has also been created on a regional basis. For example, under the 1990 CAAA, an Ozone Transport Region was created among 12 northeastern states (and the District of Columbia). In this region, it is virtually impossible for an individual state to achieve the ozone NAAQS because of interstate movement of air masses. Among the control mechanisms to reduce the region's ozone load, these states have instituted significant NOx controls not required in neighboring states, and 11 of the states (and the District of Columbia) have joined in a regional NOx trading system. These regional ozone controls impose costs not borne by other states. Second, the mixture of control requirements, standards, and market mechanisms has complicated corporate planning with respect to renovating existing capacity and building new capacity. Uncertainty with respect to planning is increasing with the possibility of new pollutants being added (e.g., carbon dioxide and mercury), and with potentially conflicting control regimes for existing pollutants. For example, EPA's NOx SIP Call requiring pollution controls in the eastern U.S. is based on ozone concerns. Therefore, the controls are only in place for the season of the year that ozone is a problem (i.e., May-September). However, potential fine particulate NAAQS implementation strategies would involve year-round NOx controls. Compliance strategies that might be optimal for a seasonal program might not be the strategies of choice under a year-round control regime. Thus, a utility may find itself having to make an expensive mid-course correction, or living with a sub-optimal compliance scheme, because of changing regulatory requirements. Third, the market forces unleashed by electricity restructuring are providing impetus to companies' desires for flexibility in complying with environmental standards, and for what they see as a level playing field between competitors. Producers of newer "clean electricity" wants their competitors to meet the same or equivalent standards that they have had to meet. All producers want more certainty in terms of the standards they are likely to see imposed in the near to mid term. <4. Alternative: The Four Pollutant Strategies> With the prospect of new layers of complexity being added to air pollution controls and with electricity restructuring putting a premium on economic efficiency, it is not surprising that interest in finding mechanisms to achieve these new health and environmental goals in simpler, more cost-effective ways has been on the rise. Taking the acid rain program widely viewed as highly successful both in controlling emissions and in economic efficiency as a model, the proposed "multi-pollutant" approach would establish a consistent framework of emissions caps, implemented through emissions trading. Just how the proposed approach would fit with the current (and proposed) diverse regulatory regimes remains to be worked out; they might be replaced to the greatest extent feasible, or they might be overlaid by the framework of emissions caps. The key assumption of this approach is that the current process of addressing pollution problems on a sequential, pollutant-by-pollutant basis can be superceded with a coordinated and integrated national program that would stabilize requirements for a number of years. Such an approach to powerplant emissions would have several tradeoffs. Overall, the primary tradeoff is exchanging regulatory and economic uncertainty for short to mid-term certainty. The environmental advantage of this approach is the probability that emission reductions would occur earlier than under the current regulatory process. If the current acid rain program is any indication, a legislated cap and trade program could result in earlier emission reductions than the current, often adversarial regulatory process. Challenges to the system, and resulting delays, might be reduced under a cap and trade system. The potential environmental disadvantage would be that any reduction target agreed to might be frozen for a specific period of time. Arguably, however, it could be easier (administratively or statutorily) to reduce an emissions cap in the future after the agreed upon time has expired than to develop a new, potentially overlapping regulatory scheme as would be currently the case. For example, many proposals to further reduce SO 2 emissions simply call for a reduction in the current title IV cap, rather than the development of new control structures. Economic analysis projects that implementing emission caps through emission trading would reduce costs by a significant amount, although the actual savings that might be realized is debatable. For industry, a cap and trade system could not only save costs directly, but would likely reduce uncertainties with respect to utility responsibilities and potential penalties, thus allowing the industry to plan for the future in the context of a more coherent regulatory regime. Finally, a flexible cap and trade program might open the door for reforming or replacing the current, sometimes burdensome, NSR/PSD permitting process. Specifically, the cap and trade programs might be coupled with a streamlined permitting process along the line of the Title V permit program. A disadvantage of emissions caps would be the possibility that unnecessary emission reductions could be required. Emission caps could overshoot the mark, resulting in unnecessary costs. Also, the certainty of reductions could also result in costs being incurred earlier than would be the case under the current system. Finally, most proposals for a cap and trade system do not eliminate the requirement to protect local air quality, so mechanisms to ensure NAAQS would not be exceeded locally such as some sort of trading restrictions might be imposed. <5. Specific Pollutant Issues> Although the four pollutant approach calls for a coordinated cap and trade system to supplement, and, in some cases, replace the existing structure, the resulting caps would not necessarily be the same. Each pollutant presents unique issues with respect to baselines, allocation schemes, reduction targets, and compliance measures. <5.1. Sulfur Dioxide> Utility emissions of sulfur dioxide are the only pollutant of the four identified here that is currently controlled with a cap-and-trade system. Specifically targeting acid rain concerns, this cap and trade system is laid on top of a number of regulatory schemes (as illustrated in Table A-1 in the appendix). When enacting the title IV acid rain provisions, Congress did not remove any existing provisions with respect to utility SO 2 emissions, except for an ambiguous repeal of the percent reduction requirement (ambiguous in that the repeal prohibits any backsliding). Thus, in one sense, title IV is little more than another patch in the current patchwork that constitutes current air policy. However, in terms of mechanics, the SO 2 program provides a working example of how a system employing emission caps and trades can operate successfully. By just about any criterion economic, environmental, implementation the program has met or exceeded its goals. Economically, the SO 2 program is costing about $1 billion annually. This is substantially below EPA's costs estimates in 1990 of $2-$4 billion annually, and an order of magnitude lower than the $10 billion annual cost estimate provided by the utility industry. Environmentally, reductions achieved from 1995-1999 have exceeded the mandated target by between 23% (1997) and 40% (1995). In terms of implementation, compliance with the program has been 100%, with no delays in implementation of the SO 2 program. Thus the current SO 2 program might be seen as a good model for developing a coordinated policy for more stringent control of utility air emissions both of SO 2 and potentially of other pollutants. The model includes an established baseline (1990 emissions) with a credible inventory and continuous monitoring system. The trading mechanics, including the automatic tracking system, outside brokers, and banking, are well established and functioning efficiently. The permitting, monitoring, and enforcement provisions are well-understood. In theory, to more stringently control SO 2 the overall cap and individual allowance values would simply need to be reduced by an agreed upon percentage. It is possible that more stringent control could expose difficulties with the current system that have not shown up. For example, a more stringent program would increase the value of allowances and make issues of economic bias more transparent, both regionally and between competitors. The allocation system for the 1990 CAAA title IV program was a hard-fought compromise. It was also arrived at during a time when non-utility emissions were minor. Schemes designed to protect new competitors have proven unnecessary, as allowance prices have remained low. Higher valued allowances could change all that. Under the current system, newly constructed power plants receive no allocation of allowances; instead, new sources must obtain any necessary allowances from owners of existing facilities on the open market or through the EPA-sponsored auction. In either case, a more stringent cap would make this process more expensive. Opening the allowance allocation scheme to revision could involve a protracted debate between the different interest groups. Both baseline issues and distribution issues would be involved. The current system provides free allocation of allowances to existing facilities based on a 1985-87 database and a legislated emissions rate. Alternatives range from a new source pool of free allowances to wholesale auctions to allocate all allowances. Any decision made with respect to SO 2 allowances could spill over into any NOx, Hg, or CO 2 allocation scheme. <5.2. Nitrogen Oxides> NOx illustrates many of the concerns driving the current interest in a four pollutant strategy. As indicated in Table A-2 in the appendix, the multiple effects resulting from NOx emissions have led to their control under several different parts of the CAA. Nitrogen oxides, both directly and because they contribute to formation of ozone, raise human health and environmental concerns that bring them under the purview of the CAA. In addition, nitrogen oxides are precursors of fine particulates, which are suspected of significant human mortality and morbidity effects. Environmental concerns about NOx emissions include its transformation into nitric acid, a component of acid precipitation; visibility impairment; and known effects of ozone on plant life. In addition, EPA estimates that up to 40% of the nitrogen "loading" in the Chesapeake Bay, resulting in excessive nutrient enrichment, is the result of deposition of air-borne nitrogen oxides. For proponents of a four pollutant strategy, this discovery of one effect after another for NOx, resulting in one regulation after another, illustrates the need for a more stable and coherent regime. However, each component of the existing structure has emerged from a set of negotiations and compromises; imposing a new structure could likely disrupt agreed-upon outcomes, and keeping all stakeholders whole would be very difficult. Under title IV of the 1990 CAAA, a continuous monitoring network has been set up to measure NOx emissions at the stack. Thus, inventories and monitoring of NOx emissions are not problems in developing a NOx cap and trade program. There is also some experience in trading NOx credits, thanks to the Ozone Transport Commission's trading regime for the eleven northeastern states (plus D.C.). Experience there suggest a more volatile market than for the larger 48 state SO 2 market. Interest in the market has spawned outside brokers to facilitate trades in the Northeast. However, the regional nature of current NOx markets may present problems for a national cap and trade program. This situation will not necessarily be improved by implementation of EPA's Ozone Transport Rule (NOx SIP Call). Under the SIP process, EPA does not have the authority to require that individual states employ compatible cap and trade systems to implement the rule; or even to use a cap and trade program at all. EPA has provided guidance through a model cap and trade program. And it has proposed Federal Implementation Plan (FIP) requirements as to what kind of cap and trade program it would feel appropriate to implement the rule. However, states are free to ignore EPA's model rule, and comply with the NOx SIP Call in any fashion they believe appropriate to their state's conditions. Besides this lack of uniformity, existing and potential future NOx regulatory regimes create other difficulties. Some of these difficulties resemble those surrounding SO 2 regulation. Developing an acceptable allocation scheme would be at least as difficult as it was for the SO 2 Title IV program. Indeed, it may be more contentious because NOx allowances would potentially be more expensive to buy than SO 2 allowances. Over the past year, SO 2 per ton allowances have run in the range of $150 or less. In contrast, NOx allowances under the OTC program has fluctuated between $500 and $1000 each. A larger market might reduce the price instability in the current OTC market, but the clearing price is still likely to be higher than the current SO 2 price. This situation might be of particular concern to new competitors in the generation market who would object to any allocation scheme that grandfathered existing facilities at their expense i.e., that allocated free allowances to existing facilities but not to future ones. However, other difficulties are unique to the development of NOx regulation. A major problem is the current focus on NOx as precursor to ozone, which results in it being treated as a regional, not national problem. Efforts to control NOx have concentrated on the northeast and California, where the ozone problem is most acute. EPA's NOx SIP Call covers only the eastern 21 states and D.C. Likewise, because ozone is a summer pollutant, a second major problem is that controls are only required during the summer season (May-September), not year-round. With other environmental concerns, such as fine particulates and visibility calling for year-round controls, confusion with respect to appropriate control strategies is common. Would a new regime have any obligation to provide a transitional period to polluters who in good faith installed seasonal controls, only to have the rules changed by further regulation? Laying a national four-pollutant strategy over these individual programs is problematic. The Northeast has a working cap and trade program for the summer months. Much of the rest of the East would be incorporated into a summer program under the NOx SIP Call, which may or may not include cap and trade. California has its own control program with NOx credits. Much of the rest of the country only has special NOx controls as required by the low-NOx burner requirement of title IV. How could these diverse elements be integrated into a national cap and trade program? The development of an allocation scheme that deals equitably with these elements within acceptable time frames would be a tremendous challenge. <5.3. Mercury> While not currently regulated, utility emissions of Hg are prospective. While SO 2 , PM, and NOx are regulated under the NAAQS process, Hg would be regulated as a toxic air pollutant under the hazardous air pollutants section of the CAA ( 112), which would require maximum achievable control technology (MACT). Moreover, Hg regulation would be starting from a more rudimentary position than regulation of SO 2 , PM, and NOx. Despite these challenges, EPA has stated it will be regulating Hg in the next few years; thus its inclusion in a four-pollutant strategy seems reasonable. The lack of experience in regulating Hg is reflected in proposed four-pollutant strategies. Some proposals simply defer the decision and implementation strategy to EPA; some require MACT on a unit-by-unit basis; and others would allow a trading system under an emissions cap ranging from 70% to 90% reduction. At a 90% reduction cap, Hg allowances are likely to be very expensive, so the initial allocation of allowances would be a critical step in finding any acceptable strategy. Besides starting from near zero, any Hg trading system would also have to develop market institutions, including tracking, trading and other mechanisms to ensure a smooth working market. <5.4. Carbon Dioxide> Except for requiring utility monitoring of emissions, CO 2 is not controlled under the CAA, and controversy exists as to whether CO 2 should be considered a pollutant at all. The slim chance that the regulatory regime adopted at Kyoto would be ratified by the Senate contributed to the Clinton Administration's refusal to even submit the treaty to that body. At the same time, the country is obligated under the 1992 United Nations Framework Convention on Climate Change (FCCC) to pursue strategies with the goal of maintaining CO 2 emissions at their 1990 levels. Current CO 2 emissions are about 10% above their 1990 levels. In the face of scientific uncertainty, the focus of U.S. debate on a climate change policy can be categorized by the three-Cs: (1) cost (the impact on the economy); (2) competitiveness (impact of U.S. global competitiveness); and (3) comprehensiveness (desire for a level playing field for all countries). Consensus is difficult because of the wide range of cost estimates presented. A CRS survey of 17 costs estimates for the Kyoto Protocol resulted in a range of between $23 and $348 a metric ton of CO 2 removed. Such an order of magnitude difference makes consensus difficult. Several factors can both lower the cost and reduce the range of cost estimates presented above. One major factor in producing the $23 - $348 range is assumptions made about the viability of emissions trading under Kyoto. CO 2 reduction cost estimates for global emissions trading scenarios are in the range of $23-$50 a ton. However, serious questions have been raised as to whether the trading mechanisms embodied in the Kyoto Protocol could produce the cost savings suggested by some studies. Some of the these objections could be swept away under a properly designed four-pollutant strategy as its purpose would not necessarily be to comply with, or be compatible with, Kyoto. Indeed, several of the four-pollutant strategies proposed in the 106 th Congress chose the FCCC 1990 stabilization target for their CO 2 cap, not the Kyoto reduction requirement. Setting a CO 2 reduction target under a four pollutant strategy would be a very contentious issue. CO 2 emissions from electric generation have risen about 23% from 1990 to 2000. Add to this an additional 19% for increased emissions anticipated between 2000 and 2010, and a reduction requirement back to the FCCC target would be a substantial undertaking. However, the cost would be less than if the additional 7% required by Kyoto was added to the reduction requirement. Several of the building blocks for a CO 2 cap and trade program are in place. There is an established baseline (1990), and a credible inventory for powerplant emissions. Continuous monitoring is required for powerplants under the 1990 CAAA. There is some experience with international emission credits thanks to the Joint Implementation program pioneered by the U.S. in the mid-1990s. The issues of baselines for international projects and domestic allocations would be contentious, but there is not the baggage included in those issues that there is with NOx control. The advantage of CO 2 not having been controlled is that policymakers can begin with a pretty clean sheet. <6. Integrative Effects of Multi-Pollutant Strategy> The integrative effects of a multi-pollutant strategy are environmental, economic, and regulatory. <6.1. Environmental> Multi-pollutant controls would integrate efforts to address several environmental problems, including aquatic loadings (Hg deposition and acid rain (SO 2 and NOx)), health effects of fine particulates (SO 2 and NOx), and visibility impairment (SO 2 and NOx). Given the numerous effects and interactions of pollutants, a multi-pollutant strategy is likely to enjoy considerable benefits along with the costs. What is hoped for is that the benefits will accrue at a rate faster than the rate at which costs rise. <6.2. Economic Effects> Economic effects including energy effects include both planning issues and compliance costs. EPA analyzed the costs and benefits of two multipollutant initiatives introduced in the 106 th Congress: S. 172 / H.R. 25 and H.R. 2569 . S. 172 / H.R. 25 was a three-pollutant bill mandating 50% reductions in SO 2 and NOx emissions by 2005, plus requiring an Hg regulation within one year, but without specifying a reduction percentage or target. The effect of this mandate would have been to cap SO 2 emissions from powerplants at 4.45 million tons annually (reducing emissions by approximately 3.7 million tons), and NOx emissions at 2.36 million tons (reducing emissions by approximately 2.1 million tons) annually. H.R. 2569 was a four-pollutant bill mandating annual emission caps on utilities of 4.0 million tons for SO 2 (reducing emissions by approximately 5.7 million tons), 1.66 million tons for NOx (reducing emissions approximately 2.4 million tons), 1.914 billion tons for CO 2 , and a 90% reduction on a unit-by-unit basis for Hg from 1990 levels. Table 4 is derived from EPA analyses of the SO 2 and NOx reduction requirements of these two proposals. At first glance, the costs are not what one would expect. First, although the tonnage reduced by H.R. 2569 is 40% greater than S. 172 / H.R. 25 , the costs only rise 42%, whereas one would expect costs rising more quickly as more reductions are achieved. Some of the reduction in anticipated costs can be explained by the combination of NOx and SO 2 included under each bill. Two million of the 2.3 million ton difference between S. 172 / H.R. 25 and H.R. 2569 is SO 2 reduction, the less expensive of the two pollutants to reduce. EPA did not calculate separate cost-per-ton estimates for NOx and SO 2 . As indicated in Table 4 , the combined NOx/SO 2 cost per ton estimates only differ by about 2%. In its analysis of S. 172 , EPA did calculate separate cost-per-ton estimates for NOx and SO 2 assuming separate implementation of the bill's provisions. Using the ratio of per ton costs resulting from those estimates, CRS estimated the per ton costs for the full bill at $482 for SO 2 and $728 for NOx. If it is assumed that the ratio holds for H.R. 2569 , the resulting per ton costs are $508 and $762 a 5% increase from S. 172 . This increase seems low, given a 15% difference in NOx reductions and a 54% difference in SO 2 reductions between the two bills. EPA explains the relatively flat cost curves in the case of SO 2 emissions by arguing that the current 11 million tons of surplus SO 2 allowances under the title IV program hold down the increase in per ton costs. These surpluses are seen by EPA as sufficient to dampen the effects of the controls mandated for 2005 even through the 2010 time period examined here. However, this surplus does not explain the relatively flat NOx reduction costs. There are several possible explanations. If the 11 million ton SO 2 allowance surplus projected by EPA is sufficient to prevent any per ton cost increase from the 2 million additional tons of SO 2 reduced annually by H.R. 2569 , the resulting NOx cost per ton is $813 about 12% above the NOx costs of S. 172 . This estimate would appear more in line with the NOx reduction increase of 15% between the two bills. However, if correct, this result would suggest that the SO 2 allowance surplus is masking a significant increase in H.R. 2569 SO 2 compliance cost just beyond the year 2010. The EPA analysis for H.R. 2569 also included Hg and CO 2 controls. For CO 2 , the cost of reducing emissions to their 1990 levels is estimated by EPA at $3.82 billion. EPA modeled the Hg provisions in a two-step process beginning with a source specific reduction of 73%, followed by a 5 ton Hg cap (equal to a 90% reduction in Hg) beginning in 2005. According to the analysis, the source specific reduction would cost $1.56 billion in 2010 and the further reduction via the cap would cost $1.43 billion. Thus, total Hg cost for a 90% reduction is about $3 billion annually in the year 2010. The total costs of the pollution control requirements of H.R. 2569 is presented in Table 5 . Utilities would meet these reduction requirements through a mix of technology, fuel choice decisions, and other means. EPA's analysis of S. 172 / H.R. 25 suggests that NOx control would be primarily achieved through installation of control equipment. For coal-fired capacity, it is projected that half would install Selective Catalytic Reduction (SCR) and a quarter would install Selective Non-Catalytic Reduction (SNCR). For SO 2 , it is projected that about a fifth of coal-fired capacity would install Flue Gas Desulfurization (FGD or scrubbers), while an undisclosed amount of capacity would switch to lower sulfur coal. Less than 1% of coal-fired capacity is projected to be repowered in order to burn natural gas. Proposals that include significant reductions in CO 2 emissions greatly increase the likelihood that natural gas may displace coal in fueling electric generating facilities. As stated by EPA in its H.R 2569 analysis: "The reduction in CO 2 to 1990 levels is projected under the current model to be accomplished through a shift towards lower emitting generating technologies and fuels, primarily natural gas-fired electricity generation." Unfortunately EPA's H.R. 2569 analysis presents no data on its fuel source effects. However, other analyses done by EPA in 1999 do provide some idea as to the magnitude of this effect. Using analyses incorporating a 50% SO 2 reduction from title IV levels, coal production in 2010 is projected at almost 1 billion tons. To reduce U.S. CO 2 emissions to their 1990 levels, as would have been required under H.R. 2569 , these analyses indicate a 158 million metric ton reduction in carbon from EPA's 2010 baseline. Using EPA analyses of other reduction requirements as a guide, CRS estimates that coal production losses from such a requirement would be in the range of 300 million short tons (table 6). This production would be replaced mostly with natural gas, along with some additional conservation. Such a substantial change in compliance strategies highlights the arguments in favor of a comprehensive approach to controlling these four emissions in contrast to addressing them individually. Upfront knowledge of the reduction requirements could permit facilities to optimize compliance strategies rather than make costly investments that could be rendered obsolete by future regulatory decisions. The cost and other effects of control strategies for these pollutants are highly interdependent. As stated by EPA in its 1999 analysis of multi-pollutant options: "The analysis shows that having advance knowledge of potential requirements for all four pollutants could lead firms to follow significantly different compliance strategies at individual plants, compared with compliance choices made when the pollutants are addressed one-by-one." These potential costs and fuel disruptions do not occur in isolation, however; the benefits must also be taken into account, as discussed below. Further, a integrated, multi-pollutant air pollution control regime may offer opportunities for utilities to reduce costs through comprehensive approaches to generation and control technologies and fuel choices. <6.3. Economic Benefits> As shown in table 4, EPA estimates that the benefits of S. 172 / H.R. 25 and of H.R. 2569 greatly exceed costs. These figures are consistent with other EPA analyses of pollution control that find very substantial health benefits in terms of annual avoided costs from reductions in SO 2 and NOx. These benefits accrue primarily from avoided adverse health effects of PM 2.5 (SO 2 and, to a lesser extent, NOx contribute to PM 2.5 ). For the benefits shown in table 4, all but 1% or 2% are accounted for by the health benefits of PM 2.5 reductions, with the balance attributed to visibility improvements. EPA's analyses indicate that other benefits are likely, but they are not quantified. (It should be noted that these large estimates of benefits from PM 2.5 reductions have their critics. ) However, whether the costs of an integrated, multi-pollutant air quality program are justified can be evaluated not just in terms of the net benefits, but also from the comparison of the costs of the integrated approach to the costs of the current, pollutant-by-pollutant approach. This is discussed below. <6.4. Regulatory Effects> The regulatory effects of a four-pollutant strategy are probably the most difficult to determine. Two key dimensions of these effects would be (1) their impact on the other elements of the air quality control regimen and (2) their impact on the state, local, and private sector managers implementing the program. In terms of the impacts on air quality control programs, integrating the four-pollutant strategy with the Title V permit process would probably be the easiest. Integrating the strategy with the NAAQS/SIP process would probably be the most difficult, since the cap and trade framework central to most multi-pollutant approaches focuses on total loadings, while the NAAQS process focuses on local ambient concentrations. The final disposition of other regulatory requirements, such as NSPS, NSR, visibility, and PSD would be problematic and surely the subject of considerable discussion. If the debate on title IV is any indication, it might be argued that continuation of NSPS would be unnecessary under a comprehensive cap and trade program. Likewise, modification or streamlining of the NSR/PSD siting processes might also make sense. The logic for a multi-pollutant strategy modifying or replacing NSPS and NSR for the affected pollutants would be that neither program focuses on local ambient concentrations. A cap and trade approach could allow some new sources to emit more than allowed under NSPS or through NSR, if counterbalancing reductions occurred elsewhere. The disposition of PSD and visibility requirements could be quite controversial. Unlike NSPS and NSR that focus on total emissions (like a cap and trade program does), visibility and PSD are concerned with ambient concentrations as well as loadings. If the cap were set stringent enough, it is possible that these ambient concentration concerns could be eliminated. Otherwise, some restriction on trading might be considered necessary. From a political point of view, there would be tensions between the mix of potential synergies, certainties, and flexibilities introduced by a multi-pollutant approach on the one hand, and the fear that deleting any existing program could erode control capabilities on the other. Each existing element of the air quality control program developed through a legislative process involving negotiation and tradeoffs; those with stakes in those efforts might be expected to resist changes unless the compensating advantages were obvious and substantial and even then perceived symbolic values associated with a program might be hard to overcome. Even harder to assess prospectively is the way in which a multi-pollutant approach might affect the air pollution control management task of state, local, and private sector managers. Past experience with the CAA suggests estimates of projected costs of compliance tend to be too high, as technological and managerial innovations bring down costs. A cap and trade approach, included in most multi-pollutant proposals, facilitates each manager's flexibility in seeking least-cost solutions to controlling emissions. At present, the CAA (with some exceptions, most obviously title IV) is based on each source making pollution control decisions pollutant-by-pollutant, smokestack by smokestack. The underlying presumption is that each manager will make the most cost-efficient decision, and the sum of those decisions will be an efficient outcome. Where the CAA provides for taking costs, energy, or other factors into account in setting standards, it is always in a pollutant-by-pollutant context. The multi-pollutant approach pursues a new direction: that individual decisions within a collective framework, such as cap and trade, can be more efficient, by shifting controls to those sources where reductions can be least-cost. Thus it builds on the experience of the title IV program. Virtually all studies of trading mechanisms find that they lower costs, although by how much varies, depending on assumptions about transactions costs, the number of participants, and so on. But it is one thing to conclude that cap and trade will reduce costs of achieving reductions for any one pollutant; it is another to anticipate the implications of a multi-pollutant system allowing caps and trades for each pollutant, and giving managers the opportunity to address a suite of requirements across several pollutants. As noted above, compliance strategies for these pollutants are highly interdependent. EPA analyses suggest that synergies exist when addressing these pollutant comprehensively; for example, EPA estimates that controlling SO 2 and NOx separately would cost $300 million more than the integrated control program proposed under S. 172 . <7. Legislative Options> One thing is clear: a multi-pollutant approach would require legislation. As it stands, the CAA leads EPA to identify and assess the effects of pollutants one by one; and it directs EPA and the states to evaluate and mandate controls on most sources individually or by subdivided category (existing or new; large or small, etc.). With only a few exceptions, mainly involving mobile sources, the Act does not provide for integrating regulatory decisions, even when pollutants interact or have similar effects or are emitted by separate but similar sources. EPA therefore has little authority to develop and implement a regulatory approach that would embrace the collective emissions of a group of sources, even if it would achieve more cost-effective reductions and more efficient compliance by sources. At best, as in the NOx SIP Call, EPA can ask states to cleave voluntarily to such a system in this case a NOx cap and trade one. <7.1. Dimensions of a Cap and Trade Program> Essentially all multi-pollutant proposals have included cap and trade programs for all or most of the pollutants. This common element underscores the presumption that cap and trade programs can be more efficient than command and control requirements on individual sources. Each pollutant raises particular questions about a cap and trade program. These include the following: Scope. For which pollutants would cap and trade programs be created all or only some? (A national one exists for SO 2 , and some regional efforts for NOx.) Would cap and trade programs be restricted only to power plants, or could other sources, stationary or mobile, opt in? How large would facilities have to be in order to be included? Reduction Requirements. At what levels would emissions caps be set? What baselines would be used? Would emission credits or allowances be allocated to sources free (as with acid rain), or would affected sources initially have to bid on pooled allowances? Would the caps be phased in with interim reductions? Would some regions get treated differently than others? Time Frame. Within what time frame should compliance be expected? Should there be exceptions for facilities that choose innovative control measures? Techniques Permitted. Should there be any restrictions on the methods used for compliance? Should incentives be included to encourage specific techniques or technologies? Enforcement. How would the cap and trade program be enforced? What changes in existing emissions monitoring requirements, or new monitoring, would be required? What would be the penalties for non-compliance? Table 7 summarize the current status of the four pollutants with respect to a cap and trade program, which implies at least partial answers to some of the above questions. As indicated, each pollutant is differently positioned to incorporate a cap and trade program, and each raises several specific concerns that must be addressed. <7.2. Regulatory Changes> Another aspect of establishing cap and trade programs for additional pollutants is what parts of the existing regulatory system (if any) would need to be modified or might become superfluous and hence could be repealed. Table 8 summarizes some of the possibilities, along with potential concerns. As is evident, a concern inherent to the cap and trade approach is the possibility of creating localized "hot spots" because of unrestricted trading. Such hot spots could potentially hinder compliance with NAAQS, PSD, or visibility objectives. Very stringent emissions caps would minimize the risk; modeling of major trades to determine their effect on local emission concentrations and restrictions on trades in certain areas could help ensure compliance with ambient requirements. The title IV SO 2 program prohibits any trade that would violate NAAQS. Terms that would have to be fleshed out would include "stringent," "major trades," and "certain areas." <8. Conclusion> The Clean Air Act has evolved over time in response to a developing understanding of the environment, new technologies, and changes in the nation's transportation, energy, and industrial sectors. The result has been a patchwork of requirements that are not always consistent and may even be incompatible at any given moment. Moreover, these requirements change and are added to over time. Although the resulting development of the Act has resulted in a structure that some consider unwieldy, emissions of most air pollutants have substantially declined, and the number of persons living in areas where pollution exceeds standards has diminished. Arguably, the Act's success puts the burden of proof for revising the existing structure on those favoring change. The multi-pollutant proposals seek to bring more consistency and stability to the diverse elements of the Act, with the focus being on pollutants emitted by utilities, one of the largest emitting sectors. In a way, "multi-pollutant" may be misleading, as the proposals would not combine regulations or controls on several pollutants; rather, the proposals typically do several things: they would align pollution control processes and procedures for several currently regulated pollutants (SO 2 and NOx, and, indirectly, PM and ozone) so that both regulators and utility managers could anticipate requirements and integrate their decisions about how to control emissions; they would adopt the efficiency of economic mechanisms most notably "cap and trade" into the control of most or all of the pollutants; they would stabilize requirements over time; and they would anticipate incorporating potential future control requirements for other emitted gases (e.g., Hg, CO 2 ) into this more stable scheme. For regulators, the advantages of this approach could be to reduce complaints about the costs and inefficiencies of the current system, and possibly to forestall litigation. For utility managers, the advantages of this approach could be to provide a certainty about environmental requirements over a several-year planning horizon (that must cope with restructuring changes and volatile energy prices), and to expand an existing method designed to achieve more cost-effective compliance. For environmental and health interests, the advantages of this approach could be to speed up reductions in emissions and, especially, to advance the controls on Hg and CO 2 . There are potential disadvantages, as well, depending on how the old (existing) system is adapted when and if a new, multi-media approach is enacted. Regulators and utility managers could find that the new approach merely adds more requirements, compounding the current complaints of regulatory overload. Utility managers could face having to control emissions (Hg and CO 2 ) not now regulated. Environmental and health interests might find that some existing protections would be removed, with the risk of local "hot spots" emerging where emissions threaten or even exceed current health standards or visibility requirements. For legislators, then, the multi-pollutant approach represents an interlocking series of tradeoffs among numerous stakeholders. Achieving balance may be difficult, but the potential for all parties to find advantages could give impetus to the proposals. <8.1. Appendix.>

Fossil fuel fired electric generating facilities are major sources of air pollutants, including particulate matter (PM), sulfur dioxide (SO 2 ), nitrogen oxides (NOx), and mercury (Hg), and of the greenhouse gas carbon dioxide (CO 2 ). A patchwork of regulations to limit PM, SO 2 , and NOx emissions exists, with further requirements on the horizon. The piecemeal nature of the regulations and the uncertainty of future requirements impose not only direct costs on utilities, but also make planning difficult in an environment already characterized by industry restructuring, volatile energy prices, and technological changes. To bring some consistency and stability to the regulations affecting utility emissions, legislative initiatives have proposed a "multi-pollutant" strategy. Key elements of the strategy include: aligning pollution control processes and procedures for PM, SO 2 , and NOx so that both regulators and utility managers could anticipate requirements and integrate their decisions about how to control emissions; adopting efficient economic mechanisms—most notably "cap and trade" strategies—for the control of the pollutants; stabilizing requirements over time; and incorporating potential future control requirements for other emitted gases (e.g., Hg, CO 2 ) into this more stable scheme. This approach to controlling powerplant emissions would have several tradeoffs. Overall, it exchanges regulatory and economic uncertainty for short to mid-term certainty. For the environment, the current controversy that accompanies the setting of standards and the implementing of regulatory reduction requirements would be exchanged for a specific reduction target that would not change for 10-15 years. From an economic standpoint, implementing emission caps through emission trading would reduce costs, and the straightforward enforcement mechanism would also provide industry with certainty with respect to their responsibilities and potential penalties, and allow industry to plan for the future in the context of a consistent regulatory regime. Finally, the program might open the door for simplifying or replacing elements of the current piecemeal requirements. However, cap and trade systems could conflict with health standards to protect local areas from "hot spot" emissions. Although the Clean Air Act's evolution has resulted in a structure that some characterize as unwieldy, the number of persons living in areas where air pollution exceeds standards has diminished. Arguably, the Act's success puts the burden of proof concerning amendment on those favoring change. Amending the Act has always proved contentious; but for many, the opportunities for greater predictability of requirements, fixed emission reductions, and cost efficiency are enticing.

<1. Introduction> In an April 2009 speech in Prague, President Obama said that nuclear terrorism is the "most immediate and extreme threat to global security," and announced "a new international effort to secure all vulnerable nuclear material around the world within four years." To mobilize world leaders to meet this goal, the President hosted a Nuclear Security Summit in Washington, DC, on April 12-13, 2010. Heads of state from 47 countries gathered to lay out their priorities and focus the world's attention on the issue. The Obama Administration's April 2010 Nuclear Posture Review Report confirms nuclear terrorism as topping the list of nuclear dangers to the United States: "The vulnerability to theft or seizure of vast stocks of such nuclear materials around the world, and the availability of sensitive equipment and technologies in the nuclear black market, create a serious risk that terrorists may acquire what they need to build a nuclear weapon." Securing nuclear materials is seen by many as crucial to preventing an act of nuclear terrorism. The nuclear terrorism threat can be divided into four categories: an attack using a stolen nuclear weapon, an attack using fissile material in an improvised nuclear device (IND), an attack using a radiological dispersal devise (RDD), and sabotage against a nuclear power plant. Nuclear security practices would be necessary to prevent each of these scenarios. The IND scenario would require that a terrorist group obtain weapons-usable fissile material (highly enriched uranium or plutonium). Because production of fissile material is costly and equipment relatively difficult to obtain, many believe that terrorist groups would not be able to produce weapon-usable nuclear material and would therefore need to steal or purchase the material or weapon from a state. Therefore, the United States has made it a policy priority to secure nuclear material where it is housed or remove the material from sites around the world. Nuclear security measures refer to a wide range of actions to prevent theft or diversion of nuclear material or sabotage at an installation or in transit. They could include physical protection measures, material control and accounting, personnel reliability screening, and training. A broader understanding of nuclear security also includes measures to prevent and detect illicit trafficking cargo inspections, border security, and interdiction measures. Another aspect, "nuclear security culture," describes personnel attitudes towards the importance of nuclear security practices in their daily work. The United States government has worked both domestically and in partnership with other countries to address this problem through multiple programs at the Departments of Defense, Energy, Homeland Security, and State. The International Atomic Energy Agency has also played a lead role in these efforts, particularly since the 9/11 terrorist attacks. Congressional interest in this issue is centered around preventing a nuclear terrorist attack against the United States and providing funding for related programs. <2. The 2012 Seoul Summit> The South Korean government has said that its main objectives for the 2012 Nuclear Security Summit are to enhance cooperative measures to combat nuclear terrorism, to encourage protection of nuclear materials and related facilities, and to prevent illicit trafficking. The 2012 summit attendees may also broaden the scope of the discussion to include radiological material security, information security, and the interrelationship of nuclear security and nuclear safety in the wake of the Fukushima nuclear accident in Japan last year. The role of the International Atomic Energy Agency in facilitating states' implementation of nuclear security measures will also be emphasized. The Netherlands has agreed to host a third Nuclear Security Summit in 2014, creating another opportunity to measure progress. As with the 2010 summit, participants are expected to make announcements about how their country will contribute to nuclear security in the intervening years. <3. The 2010 Washington Summit> President Obama has said that at the April 2010 Nuclear Security Summit, "we will advance our goal of securing all of the world's vulnerable nuclear materials within four years." Secretary of State Hillary Clinton has called the summit "an unprecedented gathering that will help promote a common understanding of the threat of nuclear terrorism and build international support for effective means of countering that threat." Leaders of 47 countries attended the summit, including many heads of state. The attendees represented a wide geographic range of states. Their experience with nuclear security issues ranges from countries that possess nuclear weapons, those that have nuclear energy programs, and others that are potential transshipment points for illicit trafficking. Representatives from the IAEA, the United Nations, and the European Union also attended. The summit resulted in a joint statement with a pledge to improve nuclear security standards and share best practices, and confirmed agreement that international action is necessary to prevent an act of nuclear terrorism. Vice President Biden described the timing of the meeting as thus: "We cannot wait for an act of nuclear terrorism before coming together to share best practices and raise security standards, and we will seek firm commitments from our partners to do just that." The summit concentrated on the goal of securing weapons-usable nuclear materials (highly enriched uranium and plutonium), and did not address nuclear weapons security issues specifically. Focusing on nuclear materials may have been in part to secure the participation of states most sensitive to discussing nuclear weapons issues. Radiological material security was also not emphasized, although many nuclear security practices relevant to weapons-usable nuclear materials are also relevant to other nuclear materials, including radiological sources in the civilian fuel cycle. <3.1. Summit Outcomes> Summit participants discussed the nuclear terrorism threat and "steps that can be taken together to secure vulnerable materials, combat nuclear smuggling and deter, detect, and disrupt attempts at nuclear terrorism." The summit also highlighted the role of the IAEA and the nuclear industry in promoting nuclear security best practices. According to White House summaries, the outcome of the summit was to be a communiqu "pledging efforts to attain the highest levels of nuclear security, which is essential for international security as well as the development and expansion of peaceful nuclear energy worldwide." Summit documents endorse the key international treaties and multilateral initiatives dealing with nuclear security (detailed below). President Obama, in an April 5, 2010, interview said he expected "a communiqu that spells out very clearly, here's how we're going to achieve locking down all the nuclear materials over the next four years, and different countries, depending on their circumstances and vulnerabilities, taking very specific steps in order to assure that that happens." The summit documents included a work plan with specific follow-up steps. Additional benefits resulted from the meeting apart from summit policy documents. In the run-up to the summit, participating governments examined their own nuclear security and export control practices, their use of weapons-usable materials in the civilian fuel cycle, and in some cases, their ability to provide nuclear security assistance to other countries. This preparatory process could have spurred some countries to make progress to present at the summit for example, just prior to the summit, Chile, with U.S. assistance, removed the remaining HEU at research facilities; Malaysia passed national export control legislation; Ukraine announced on April 12 that it would remove all HEU from its territory and convert its research reactor to LEU fuel, with U.S. assistance, by 2012; and Canada's prime minister announced the return of HEU spent fuel to the United States. Canada and the United States announced a trilateral agreement with Mexico to convert its HEU-fueled research reactor to LEU fuel. The United States and Russia reached agreement on plutonium disposition, and Russia announced a shut-down of its last remaining plutonium production reactor. Kazakhstan completed work with the United States on moving sensitive material to more secure storage in November 2010. Many of these initiatives had been long-term objectives of the United States, and the summit seems to have moved stalled negotiations forward. Obama Administration officials said that almost every country came to the summit with something new that they pledged to accomplish on nuclear security in their country. The composition of the meeting was also important. Three states not party to the Non-Proliferation Treaty (NPT) were in attendance Pakistan, Israel, and India. Holding discussions of nuclear security outside the NPT context allows these countries to participate. Egypt's participation was also a key endorsement of the nuclear security agenda due to its vocal role in the Non-Aligned Movement, where skepticism of the nuclear terrorism threat runs highest. In addition, the Russian Federation said it would be helping the United States prepare the groundwork for the conference. The United States and Russia have a history of cooperating on nuclear material security and nuclear terrorism prevention, announcing the Global Initiative to Combat Nuclear Terrorism together, and fulfilling bilateral nuclear security pledges under the Bratislava Initiatives. Since Russia holds the world's largest stockpiles of weapons-usable nuclear material, it may be beneficial to continue this partnership at a high political level to ensure follow-through with past pledges and further progress in the future. In addition to nuclear material security goals, the summit has the potential to strengthen the overall nonproliferation regime. China, for example, has in the past been cautious in discussing these issues but announced the creation of a nuclear security "Center of Excellence" to share best practices with developing countries. Participation of the non-NPT states in discussions about the nuclear terrorism threat may lay the groundwork for future discussions on nonproliferation and export control initiatives. Some analysts in India, for example, are changing the conventional thinking about some aspects of nonproliferation (i.e., as a common good rather than a way to suppress their weapons ambitions). India announced it would create a regional nuclear energy training center with a nuclear security component. At the highest political level, through the summit process, countries are questioning how their country can help prevent a nuclear terrorism attack from occurring. However, although all countries may agree that nuclear terrorism should be prevented, many developing countries, particularly those without nuclear programs, do not view nuclear terrorism as a threat to their country, see its occurrence as unlikely, or simply are occupied with other priorities. However, others argue that it is important to gain the participation of all states, as any country could potentially be used as a transshipment point or may choose to develop nuclear-related facilities on its territory one day. Administration officials said that preparations for the summit and the meeting itself have bridged gaps in threat perceptions. The summit participants continue to meet to prepare for the next nuclear security summit in 2012, hosted by South Korea. <4. What Is "Nuclear Security"?> The 2010 Nuclear Security Summit focused on efforts to secure nuclear weapons-usable materials (highly enriched uranium and plutonium) and broader efforts to prevent nuclear terrorism. However, the phrase "nuclear security" is often associated with the security of nuclear weapons. "Nuclear security" has also been used to describe the role of nuclear weapons in national security, including maintaining the U.S. nuclear weapons arsenal. For example, Vice President Biden's March 2010 speech at National Defense University, "Pathways to Nuclear Security," addressed both stockpile stewardship and nuclear nonproliferation efforts. The NNSA refers to a modernized U.S. nuclear weapons complex as the "21 st Century Nuclear Security Enterprise." NNSA Administrator Thomas D'Agostino testified that the enterprise's future "range of missions include stockpile stewardship, nonproliferation and disarmament, arms control and treaty verification, counterterrorism and emergency response, nuclear forensics, and Naval nuclear propulsion." Still others use the term "nuclear security" to characterize a vision of a safer world without nuclear weapons. Nuclear security for the purpose of the summit, and in the International Atomic Energy Agency's usage, refers to a wide range of measures to prevent theft or diversion of nuclear material or sabotage at civilian or military facilities. The measures could protect material at an installation or in transit, such as physical protection measures, material control and accounting, personnel reliability screening, and training. A broader understanding of nuclear security also includes measures to detect illicit trafficking cargo inspections, customs, and border security. It would involve establishing or strengthening national export controls as well as improving international cooperation to identify and interdict shipments. Another aspect, "nuclear security culture," describes personnel attitudes toward the importance of nuclear security practices in their daily work. This is known as the "human factor" and recognizes that technology-based physical protection measures are only as effective as the people who are running them. The "insider threat" at nuclear facilities is a worker's knowledge of facility practices that could be used to aid terrorists or smugglers in obtaining material through diversion. <5. Challenges to Achieving the Four-Year Goal> The four-year goal set out by President Obama of securing "all vulnerable" nuclear materials around the world raises a number of questions, especially what is meant by vulnerable and what is an acceptable definition of "secure." Senator Lugar has defined nuclear security as "a satisfactory level of accountability, transparency, and safety." The highest priority for the United States is to secure weapons-usable material (e.g., that which can be used directly in a nuclear explosive device). This material could be in military fissile material stockpiles or in the civilian fuel cycle. U.S. government efforts will likely start with accelerated activities to secure these materials (see " Funding for Nuclear Security Programs "). One potential obstacle to progress is the sheer volume and wide geographic distribution of the material to be secured. The International Panel on Fissile Material estimates that there are 1,600 tons of HEU and 500 tons of separated plutonium in stocks worldwide. The scope of the problem underlines the Obama Administration's approach that the four-year goal cannot be met by U.S. assistance programs alone, but requires all states to examine their own nuclear security practices and commit their own resources to improving nuclear security. A challenge to measuring success in reaching the four-year goal will be to establish a baseline accounting of current nuclear material holdings and to improve transparency about current nuclear security practices. To this end, the 2006 National Security Presidential Directive 48 (NSPD-48/HSPD-17) established the Nuclear Materials Information Program (NMIP). NMIP is an interagency effort managed by DOE to "consolidate information from all sources pertaining to worldwide nuclear materials holdings and their security status into an integrated and continuously updated information management system." From open sources, it is not clear that this data collection is complete at this time, or to what extent this inventory includes threat assessments. The IAEA has kept inventory of nuclear material at sites under safeguards (declared nuclear material in non-nuclear weapon states party to the NPT). However, for the nuclear weapon states and non-NPT states, there are few data on inventories. The majority of states in possession of weapons-usable material participated in the 2010 Nuclear Security Summit, with the prominent exceptions of North Korea, Iran, and Belarus. Each of these cases poses a unique challenge. Belarus houses HEU research reactor fuel, but the United States has done security upgrades on the site, and the material is scheduled to be returned to Russia in FY2011. Iran has a small stock of U.S.-origin used HEU research reactor fuel under international safeguards, but Iran is not willing to return the fuel to the United States at this time. North Korea's plutonium stocks are for weapons purposes, and not under international monitoring. An additional challenge is convincing developed countries to improve nuclear security measures on their own stocks of HEU and plutonium or HEU research reactors. Other countries may also be sensitive about being to transparent in their nuclear security practices, either for commercial or national security reasons. Another point of contention amongst developed nuclear technology holders is the issue of minimizing or eliminating the use of highly enriched uranium in the civilian fuel cycle. Significant progress has been made in recent years on efforts to remove material from a site or convert a facility to using LEU, rather than HEU, fuel. The G-8 countries have agreed to minimize the use of HEU "to the extent possible." However, highly enriched uranium continues to be used in the civilian fuel cycle, for medical isotope production or research reactors, posing a risk of diversion. The Obama Administration has stopped short of calling for a ban on HEU for civilian use. Some analysts have suggested that U.S. leadership is required to get other countries to support this. Others argue that it is more important to secure international cooperation on this issue and that compromise language in the near term is appropriate. A group of nongovernmental representatives called the Fissile Materials Working Group on September 30, 2009, sent a letter to Administration officials urging that the Obama Administration propose a timetable for HEU phase-out in the civilian fuel cycle at the summit. Another policy challenge for international nuclear security efforts is how to place this set of issues and joint actions in the context of the wider nuclear nonproliferation regime. Due to the timing of the summit less than one month before the 2010 Review Conference for the Nuclear Non-Proliferation Treaty some countries, at least initially, were concerned that the summit was meant to overshadow the Review Conference. The NPT Review Conferences traditionally do not include in-depth discussion of nuclear material security or nuclear terrorism issues. The traditional three pillars of the NPT are nuclear disarmament, nuclear nonproliferation, and nuclear energy. Some states have proposed that in the post-9/11 security environment, nuclear security issues should be a part of NPT discussions. UK Foreign Minister Millibrand proposed that nuclear security become the "fourth pillar" of the NPT. Also, EU nonproliferation representative Annalisa Giannella has said that since the NPT requires states to prevent proliferation, "one can argue that this obligation also implies the obligation to protect nuclear or radiological material." However, some developing countries have resisted anything that may be perceived as an additional commitment under the NPT until further disarmament steps are taken. The Obama Administration decided to hold a separate summit on this topic perhaps partially due to this resistance, but also to include non-NPT states in the nuclear security summit and highlight the problem of nuclear diversion to terrorists as a distinct problem. According to U.S. officials, this was not meant to undermine in any way the NPT Review Conference, but to provide an opportunity to focus on addressing the problem of nuclear terrorism at the highest political levels. <6. Domestic Nuclear Security Measures> The steps the United States takes itself may be important in convincing other countries to take action to improve their own nuclear security. The United States has been working to improve its own nuclear security in recent years. Multiple agencies are involved in the effort. The Department of Defense (DOD) is responsible for securing the U.S. nuclear weapons stockpile, while the Department of Energy (DOE) maintains security at the national laboratories and other facilities in the nuclear weapons complex. DOE is also working to convert the last of the civilian HEU-fueled research reactors in the United States, and has recovered unwanted or excess high-priority radioactive sources in the United States. DOE has completed the conversion of 17 U.S. university HEU-fueled research reactors. Two remaining HEU-fueled university research reactors at the Massachusetts Institute of Technology (MITR) and the University of Missouri (MURR) both require a new higher-density LEU fuel, currently under development. DOE is also consolidating weapons-usable material within the weapons complex to lessen security risks. In order to improve security over the stocks at U.S. sites with special nuclear material (SNM), the NNSA has been working since October 2006 to consolidate SNM at five sites by 2012, and "significantly reduce square footage at those sites by 2017." The five sites are Los Alamos National Laboratory, the Nevada Test Site, the Savannah River Site, Y-12 Security Complex, and the Idaho National Laboratory. Work on this is ongoing. For example, Los Alamos National Laboratory has removed two-thirds of its SNM requiring the highest levels of protection. Lawrence Livermore National Laboratory announced the removal of 90% of its SNM in September 2011. The Y-12 nuclear complex has concentrated the majority of its SNM stocks at the HEU Materials Facility. The Uranium Processing Facility, to be built in the next decade, is to blend down the remainder of the HEU stocks at Y-12. The Nuclear Regulatory Commission (NRC) is responsible for security standards at civilian sites. After the 9/11 attacks, security measures at nuclear power plants were improved. The Energy Policy Act of 2005 ( P.L. 109-58 ) mandated that the NRC revise its "Design Based Threat," which specifies the maximum severity of potential attacks that a nuclear plant's security force must be able to repel. This act also required more extensive security checks for personnel at a broad range of nuclear facilities. U.S. Customs and Border Protection, under the Department of Homeland Security (DHS), uses handheld and portal-based radiation monitors to detect nuclear materials entering the United States. The DHS Science and Technology Directorate conducts research and development to improve radiation detection portals. <7. Multilateral Efforts to Improve Nuclear Security> One challenge for improving nuclear security around the world has been diverse threat perceptions and varying definitions of nuclear security. For some countries, like the United States, policy makers view the threat of nuclear terrorism as urgent, whereas other countries may see the threat as remote, with trans-shipment of nuclear materials through their territory being of greatest concern. The IAEA document, The Physical Protection of Nuclear Material and Facilities (IAEA INFCIRC/225), includes voluntary guidelines meant to strengthen a country's system for nuclear material control. They provide suggested requirements for physical protection against unauthorized diversion or sabotage during use, storage, or transport. It was last amended in 1999, and discussions are underway at the IAEA on how to amend and strengthen these guidelines. The Convention on the Physical Protection of Nuclear Material and its Amendment is now the most complete legally binding international instrument governing the physical security of nuclear materials, but its adherence is not universal. A 2005 Protocol strengthening the convention will not enter into force until two-thirds of the convention parties have adopted it, a process which could take many more years. The summit called for universality of the Convention and early entry into force of this Amendment. <7.1. The IAEA and Nuclear Security> The IAEA is the most prominent international body that promotes nuclear security, and summit documents endorsed its activities and called for a strengthening of the IAEA's role. Over the years, IAEA member states have adopted voluntary guidelines for nuclear and radiological material security through INFCIRC/225, the Code of Conduct on the Safety and Security of Radioactive Sources, and Guidance on the Import and Export of Radioactive Sources (INFCIRC/663). The fifth revision of INFCIRC/225 was completed in early 2011. The IAEA has routinely assisted countries with improving their nuclear security practices since the 1970s. IAEA safeguards (INFCIRC/153) agreements require that a country have an effective State System of Accountancy and Control (SSAC) for nuclear material. Just as the focus on nuclear safety drastically increased following the Chernobyl accident, the IAEA's role in nuclear security activities increased following the September 11, 2001, terrorist attacks which spurred the creation of a distinct Nuclear Security Program at the IAEA. A Nuclear Security Plan was adopted by the IAEA General Conference for 2006-2009 and recently for the period 2010-2013. The second plan emphasizes sustainability of nuclear security practices and training. The IAEA Nuclear Security Program has developed a series of guides on nuclear security topics, and provides in-country assessments and training. The International Physical Protection Advisory Service (IPPAS), for example, provides IAEA member states with confidential expert advice on how to strengthen their physical protection measures and comply with international guidelines. This could include legislation, regulations, licensing, and measures at the facility level. The Nuclear Security Program also works to recover lost radioactive source materials and tracks nuclear trafficking incidents. The United States provides funds to the Nuclear Security Fund (NSF), an extrabudgetary voluntary fund that supports these activities. The NSF annual budget is approximately $33 million. Starting in 2009, a small portion of the Nuclear Security operating costs is part of the general IAEA budget, but the majority of funds are dependent on voluntary contributions. The United States has supported increasing the portion of funds for the NSF in the IAEA regular budget. The United States dedicated $7 million of its FY2011 voluntary contribution and $8 million in FY2012 to the NSF. Both the Bush and Obama Administrations encouraged strengthening the IAEA's nuclear security activities. <7.2. Informal Initiatives and Nonproliferation Assistance> In addition to multilateral treaties and guidelines, a number of initiatives were developed in the past decade to address a wide range of approaches with the goal of gaining broader participation. These approaches include nonproliferation assistance and training programs, joint law enforcement activities, interdiction coordination, and general sharing of best practices. These programs aim to better coordinate governmental efforts to prevent nuclear terrorism including better coordination within a government at the interagency level and between countries. These efforts are detailed in Appendix A , and include the Global Initiative to Combat Nuclear Terrorism, the G-8 Global Partnership, and the Proliferation Security Initiative. The United States provides extensive aid to foreign countries to secure or remove nuclear materials. These programs, which span several agencies, are detailed in Appendix B . Funding for these programs is discussed in the section " Funding for Nuclear Security Programs ." <8. Role of Nongovernmental Organizations and Industry> Nongovernmental organizations play a very active role in recommending ways to address the nuclear terrorism threat and in pointing out gaps in governmental efforts. For the most part, nongovernmental voices on this subject urge more funds and faster governmental action on nuclear material security, and have done so for the past decade or more. Others also have published extensive analysis, particularly on the subject of eliminating HEU from the civilian fuel cycle. A Fissile Material Working Group was formed by a coalition of nongovernmental organizations in advance of the Nuclear Security Summit to jointly recommend courses of action. This group organized a nongovernmental nuclear security summit on April 12, 2010, and subsequent meetings to discuss civil society's contribution to the nuclear security agenda. Skeptical nongovernmental voices tend to criticize the Obama Administration's nuclear weapons policies more generally (including the START treaty and Nuclear Posture Review). While all appear to agree that it is necessary to prevent nuclear terrorism, some would argue that more policy emphasis should be put on counterproliferation initiatives rather than international agreements. Medical organizations in several countries have expressed interest in halting production of medical isotopes with use of HEU. In May 2008, for example, the Malaysian Medical Association unanimously passed a resolution titled "Eliminating Highly Enriched Uranium from Radiopharmaceutical Production." Industry associations are also working to promote nuclear security. For example, the World Institute of Nuclear Security (WINS) is an industry-oriented organization that brings together nuclear plant operators to exchange best practices. Industry representatives met following the 2010 summit to discuss how industry can improve nuclear security. <9. Considerations and Options for Congress> <9.1. Legislation in the 112th Congress> The House and Senate Judiciary Committees are considering implementing legislation for the Nuclear Terrorism Convention, CPPNM Amendment, 2005 SUA Protocols. The Senate approved resolutions of advice and consent to ratification for these agreements in September 2008 (Treaty documents 110-4, 110-6, 110-8). Implementing legislation is required before the United States can ratify them. The Bush Administration sent draft legislation to the committee in 2008, and the Obama Administration first sent draft legislation to the committee in late March 2010, but legislation was not introduced. Draft legislation was submitted to the 112 th Congress on the first anniversary of the Nuclear Security Summit, April 13, 2011. The White House press release said that the proposed legislation would "update the U.S. Criminal Code to strengthen our ability to fully investigate and prosecute acts of nuclear terrorism." The House Judiciary Committee held a hearing on the legislation on October 5, 2011. Senator Jeff Bingaman introduced the American Medical Isotopes Production Act of 2011 ( S. 99 ) in January 2011. Senator Lisa Murkowski co-sponsors the bill. S. 99 was reported out of the Senate Committee on Energy and Natural Resources on April 12, 2011, and passed by the full Senate on November 17, 2011 ( S.Rept. 112-17 ). It was referred to the House Committee on Science, Space and Technology, Subcommittee on Energy and the Environment. The bill seeks to promote the domestic (U.S.) production of molybdenum-99 for medical isotope production, and to condition and phase out the export of HEU for the production of medical isotopes within seven years after enactment. A phase-out of U.S. export of HEU for medical isotope production could strengthen U.S. calls for other countries to also eventually eliminate the use of HEU for civilian purposes. The House Foreign Affairs Committee approved H.R. 1280 sponsored by Committee Chairman Ileana Ros-Lehtinen and five co-sponsors on April 14, 2011. This bill would amend provisions of the Atomic Energy Act relevant to bilateral nuclear cooperation agreements. Among other changes to the nonproliferation requirements for cooperation, the bill would require partner states to be in full compliance with the Convention on the Physical Protection of Nuclear Material and the United Nations International Convention for the Suppression of Acts of Nuclear Terrorism. <9.2. Legislation in the 111th Congress> The Nuclear Forensics and Attribution Act ( P.L. 111-140 ), originally introduced by Representative Schiff, became law in February 2010. It expresses the sense of Congress that the President should pursue agreements to establish an international framework for nuclear forensics analysis on confiscated nuclear material and develop protocols for data exchange. It also amends the Homeland Security Act of 2002 to establish a National Technical Nuclear Forensics Center within the Domestic Nuclear Detection Office. Senator Casey and Representative Schiff introduced the Nuclear Trafficking Prevention Act ( S. 1464 , H.R. 3244 ) in July 2009. The bill would amend the federal criminal code to prohibit the transfer of a nuclear weapon or device, or of nuclear material or sensitive nuclear technology, to any foreign terrorist organization or any other person engaged in terrorist activities. It would grant extraterritorial jurisdiction to prosecute violations and impose a fine and minimum prison term of 25 years for violations (life imprisonment for violations resulting in death). It also says the transfer of a nuclear weapon or device or of nuclear material or technology for terrorist purposes should be a crime against humanity and should be punished under customary international criminal law. Senator Akaka introduced the Strengthening the Oversight of Nuclear Nonproliferation Act of 2009 ( S. 1931 ). This act would require the President's Coordinator for the Prevention of Weapons of Mass Destruction Proliferation and Terrorism to report to the appropriate congressional committees (1) annually regarding the Commission on the Prevention of Weapons of Mass Destruction Proliferation and Terrorism's findings concerning U.S. nuclear nonproliferation efforts, and (2) regarding U.S. cooperative efforts with the International Atomic Energy Agency (IAEA) on nuclear nonproliferation. The commission made several recommendations related to preventing nuclear terrorism. <9.3. Funding for Nuclear Security Programs> In its annual appropriations, Congress decides on funding for U.S. domestic and international programs focused on nuclear material security and nuclear terrorism prevention. As detailed in Appendix B , these programs are primarily implemented by the Departments of Defense, Energy, State, and Homeland Security. The intelligence community also clearly plays a key role in analyzing nuclear terrorism threats and illicit trafficking issues. The Obama Administration's FY2011, FY2012, and FY2013 congressional budget requests proposed overall increases in funding for nuclear security-related accounts, with the stated purpose of ramping up programs to meet the President's four-year goal. These budget increases are primarily visible in the DOE NNSA Defense Nonproliferation programs. Critics have pointed out that some of the increases are due to expensive construction projects related to U.S. fissile material disposition, and programs for international material security have struggled to maintain (or have decreased) funding levels. Appendix C details changes in DOE nonproliferation programs since FY2007. The DOD, State Department, and DHS programs have for the most part reprogrammed money from other parts of their nonproliferation or threat-reduction funds to programs that would contribute to global nuclear security goals. The major issues during the past few years of budget deliberations are summarized below. <9.3.1. The FY2011 Budget Debate> Congress struggled to pass an appropriations bills for FY2011, and instead funded the federal government through a series of continuing resolutions, ending with appropriations for the full fiscal year passed on April 15, 2011 ( P.L. 112-10 ). This bill avoided a government shut-down, which might have had an impact on the pace of programs to secure and remove nuclear materials overseas. The nuclear security-related assistance programs were at risk of significant budget cuts throughout this process, particularly the Department of Energy's defense nuclear nonproliferation accounts. These programs are authorized by Armed Services committees but are funded through the Energy and Water Appropriations bill. Cuts were proposed by House leadership to all non-defense-related programs. Until late March, it appeared that the NNSA budget was not being considered as a defense activity, perhaps due to its appropriations under the Energy and Water bill. All 16 members of the House Armed Services Committee Strategic Forces Subcommittee sent a letter on March 23, 2011, to Budget Committee Chairman Paul Ryan urging full funding of the NNSA programs as national security programs. In the end, P.L. 112-10 funded nuclear security programs at a greater level than was expected, although specific breakdowns of how the agencies will distribute the money at the program level are not yet available. FY2011 funding for NNSA's defense nuclear nonproliferation is approximately $2.3 billion, compared with the FY2011 request of nearly $2.7 billion, and the FY2010 appropriation of $2.1 billion. Anne Harrington, who directs the NNSA nonproliferation programs, has said that work has continued on schedule despite the uncertain funding levels. Nuclear security-related DOD programs were funded at request and have changed little in total funding in the past several years, although funding between subprograms has shifted. Several new efforts were proposed in the nuclear security area under the Cooperative Threat Reduction (CTR) program. In its FY2011 budget request, the DOD proposed $74 million for a new initiative under CTR to help fulfill the four-year goal. The Global Nuclear Lockdown (GNL) would include establishing regional centers of excellence for nuclear security around the world. They are meant to "assess equipment and manpower, provide material security training, and demonstrate enhanced security procedures and processes." Sections 1303 and 1304 of the FY2011 National Defense Authorization Act ( P.L. 111-383 ) require the DOD and DOE to report to Congress in advance of any disbursements of funds over $500,000 for a center of excellence outside the former Soviet Union. They also require a separate report detailing activities with China. The State Department faced budget cuts across the board, and it is not yet clear how the funding will be disbursed to specific nonproliferation programs, but nuclear security-related programs will likely continue as planned. The Obama Administration has increased funding to these programs. <9.3.2. The FY2012 Budget Request> The Obama Administration continued to increase its requests for funding for nuclear security-related programs in the FY2012 budget request. NNSA Administrator Thomas D'Agostino has described the FY2012 budget request as providing "the resources required to meet commitments secured during the 2010 Nuclear Security Summit, including removing all remaining highly enriched uranium (HEU) from Belarus, Ukraine, and Mexico and working with the Defense Department to implement nuclear security Centers of Excellence in China and India." Much of the budget debate for FY2012 appropriations continues to be driven by proposals from the House leadership. Budget Committee Chairman Ryan's "budget blueprint" did not address nonproliferation or nuclear security funding specifically, but did promise full funding for the U.S. nuclear weapons stockpile-related programs. <9.3.2.1. FY2012 Department of Defense Request> The Defense Threat Reduction Agency's (DTRA's) Cooperative Threat Reduction (CTR) program requested $121,143,000 for the Global Nuclear Security account for FY2012. The Global Nuclear Security account was reduced by $45,877,000 from the FY2011 request due to the phasing out of work in Kazakhstan and reduced efforts in Russia. The Nuclear Weapons Transportation Security program for Russia was zeroed out in the FY2012 proposal because work was completed on rail car procurement efforts in Russia. Other CTR programs also contribute to nuclear security, such as Proliferation Prevention, which addresses illicit trafficking, and Threat Reduction Engagement for work outside the former Soviet Union. Proliferation Prevention works to build the capacity of partner countries to detect and interdict illicit transfers of WMD-related materials or technology across land borders or at seaports. DTRA's work focuses on Ukraine's borders with Moldova and Russia. This program is coordinated with the DOE's Second Line of Defense program, State Department's EXBS program, and DOD's International Counterproliferation Program. <9.3.2.2. FY2012 Department of Energy Request> For NNSA's defense nuclear nonproliferation accounts, the Administration requested $2.5 billion in FY2012 and $14.2 billion over the next five years (compared with $2.3 billion in FY2011). Over the years, Congress has often added funds, both during the regular appropriations process and the supplemental appropriations process, to many of the programs funded in this budget. Generally, these additions indicate congressional support for the programs that are designed to enhance security at facilities that house nuclear weapons and materials, those that are designed to secure borders and ports against the transport of nuclear materials and weapons, and those that are part of the global effort to secure and remove vulnerable nuclear materials. The higher level of the FY2011 request may have partially been to encourage Congress to fund these programs through the regular budget process rather than through supplemental appropriations. The FY2012 request is more modest than in FY2011, most likely due to overall budget pressure. <9.3.2.3. FY2012 Department of State Request> State Department programs that address nuclear material security are part of programs that address all weapons of mass destruction proliferation or terrorism. The total level of funding for the Nonproliferation Programs under the State Department's Nonproliferation, Antiterrorism, Demining and Related Programs (NADR) account remains fairly constant in the FY2012 request at $293,829,000 (compared with $295 million in FY2010 and FY2011). There are changes at the subprogram level: a $45 million reduction in the Nonproliferation Disarmament Fund, and notable increases in the Export Control and Related Border Security (EXBS) assistance and in the Weapons of Mass Destruction Terrorism accounts. A new contribution of $1.5 million to the U.N. Security Council Resolution 1540 Trust Fund is aimed at helping foreign countries' capacity to prevent illicit nuclear (and other WMD) trafficking. <9.3.3. FY2012 Authorizations and Appropriations> Programs that address nuclear security around the world are based primarily in the Department of Energy's Defense Nuclear Nonproliferation account under the NNSA; the Department of Defense's Cooperative Threat Reduction Program; and the State Department's Nonproliferation, Antiterrorism and Demining and Related programs. The DOE's Defense Nuclear Nonproliferation account is authorized by the Armed Services Committees and funds are appropriated by the Energy and Water Appropriations Subcommittees. <9.3.3.1. FY2012 Defense Authorization> The House adopted its version of the FY2012 National Defense Authorization Act on May 26, 2011 ( H.R. 1540 ), fully funding both the requests for the Department of Defense CTR programs and the Department of Energy's Defense Nuclear Nonproliferation ( H.Rept. 112-78 ). An additional $20 million was added for GTRI work by an amendment introduced by Representative Loretta Sanchez, ranking Member of the HASC Strategic Forces Subcommittee. The House report raised concerns about the $26 million from DOE funds proposed for the Center for Excellence in China. The committee questioned the necessity of paying for best practices training in a country that is "economically advanced" and raised questions over proliferation from China. H.R. 1540 , Section 2112, requires that no more than $7 million may be obligated or expended until required reports are submitted to the House and Senate Armed Services Committees. The reports by the Department of Energy in consultation with the Department of Defense are a review of the "existing capacity of the People's Republic of China to develop and implement best practices training for nuclear security," and a report on "the extent to which the training and relationship-building activities planned for the United States-China Center of Excellence on Nuclear Security could contribute to improving China's historical patterns with respect to the proliferation of weapons of mass destruction and missiles." The Senate version of the Defense Authorization Act ( S. 1253 ) was approved by the Senate Armed Services Committee on June 17, 2011 ( S.Rept. 112-26 ). The committee recommended full funding (at request, or $508.2 million) of DOD's Cooperative Threat Reduction program. The committee recommended $2.5 billion for DOE/NNSA Defense Nuclear Nonproliferation, $2.8 million below the budget request. The committee's report emphasized the importance of coordination between the Departments of Energy and Defense on this work: The committee also supports the effort to secure the most vulnerable nuclear material in 4 years, but recognizes that this is a significant challenge that will require close interagency cooperation to be fully successful. The committee notes that the Department of Defense and the Department of Energy, National Nuclear Security Administration, have a long and productive history of cooperation in threat reduction programs, and urge them to continue this close collaboration in the accelerated program. <9.3.3.2. FY2012 Energy and Water Appropriations> The House passed the FY2012 Energy and Water Appropriations Act on July 15, 2011 ( H.R. 2354 ). The Department of Energy's Defense Nuclear Nonproliferation Account was funded at $2.091 billion, a reduction of $468 million below the Administration's FY2012 request and $182 million below FY2011 appropriations (see Appendix C ). House appropriators in committee reduced funding levels for several defense nuclear nonproliferation accounts the fissile material disposition account, Global Threat Reduction Initiative (research reactor conversion and domestic radiological program), Second Line of Defense, International Nuclear Materials Protection and Control (INMPC), and Nonproliferation and Verification Research and Development accounts ( H.Rept. 112-118 ). The committee's report says that "the recommendation fully supports the Administration's four year goal to secure vulnerable nuclear material worldwide as an urgent national security need and priority of the Committee." At the same time, the committee report says that some program cuts were made due to inefficiencies or "overly optimistic" estimates about what would be accomplished in the coming year. A successful amendment on the House floor by Representatives Fortenberry, Sanchez, Garamendi, and Larsen restored $35 million of the $70 million in proposed cuts to the GTRI research reactor conversion program. In a floor statement Representative Loretta Sanchez said that restoration of the funding would "prevent delays of at least one year to Highly Enriched Uranium reactor conversions in Poland, Kazakhstan, Uzbekistan, Ghana and Nigeria." That program is considered a key component of the effort to secure nuclear materials worldwide. The Senate Appropriations Committee on September 7 approved funding the DOE's Defense Nuclear Nonproliferation Account at $2.383 billion, a reduction of $167 million below the Administration's FY2012 request and $110 million above FY2011 appropriations. In report language ( S.Rept. 112-75 ), the committee praised NNSA's progress on nuclear security activities: The Committee commends NNSA for making significant progress in meeting the goal of securing all vulnerable nuclear materials within 4 years. In 2009, the Congressional Commission on the Strategic Posture of the United States found that ''the surest way to prevent nuclear terrorism is to deny terrorist acquisition of nuclear weapons or fissile materials ... An accelerated campaign to close or secure the world's most vulnerable nuclear sites as quickly as possible should be a top national priority.'' To that end, since April 2009, when President Obama announced the 4-year goal, NNSA has removed over 960 kilograms of highly enriched uranium enough material for 38 nuclear weapons. NNSA has also removed all highly enriched uranium from six countries. One of these countries was Libya. Given the recent unrest in Libya, the presence of this dangerous nuclear material in an unstable part of the world would have increased the risk of nuclear terrorism. Removing highly enriched uranium from six countries in 2 years is much faster than one country a year NNSA has averaged in the last 13 years. Further, NNSA has completed security upgrades at 32 additional buildings in Russia containing weapons usable materials. The Committee encourages NNSA to continue its accelerated efforts to secure vulnerable nuclear materials. <9.3.3.3. FY2012 Department of State Appropriations> The State Department request for Nonproliferation programs at $293,829,000 under the NADR account was fully funded. The Senate Committee on Appropriations ( S.Rept. 112-85 ) and House Committee on Appropriations ( H.Rept. 112-331 ) both recommended funding at the requested levels, specifying $30 million be available for the Nonproliferation and Disarmament Fund, and encouraging nonproliferation work in Libya as needed. <9.3.4. The FY2013 Budget Request> The Obama Administration submitted its FY2013 budget requests to Congress in early February. The requests related to the international nuclear material security programs are summarized below for the Departments of Defense, Energy, and State. Some non-governmental experts have issued statements critical of the DOE budget proposal in particular, saying that the reduced funding levels are contrary to the stated goals of the Nuclear Security Summit process. The Administration's budget requests and official statements appear to set out a case saying that the reduced funding is reflective of the accomplishment of many of the Administration's key nuclear security goals. Some reductions may also reflect overall pressure to reduce spending under the Budget Control Act. This debate is likely to be detailed in authorization and appropriations hearings this spring. <9.3.4.1. FY2013 Department of Defense Request> The Defense Threat Reduction Agency's (DTRA's) Cooperative Threat Reduction (CTR) program requested $99,789,000 for its Global Nuclear Security (GNS) account for FY2013. The GNS account was reduced from a $121,143,000 request and appropriation in FY2012. According to the FY2013 congressional budget justification, this decrease is due to the completion of fissile material security efforts in Kazakhstan and reduced efforts in Russia as responsibilities for security upgrades are transferred to the Russian Ministry of Defense. FY2013 efforts are to include continued support and training for the Russian Ministry of Defense to sustain warhead security upgrades, transportation of 48 trainloads of deactivated Russian warheads (1,000 to 1,500) to secure storage, support for the development of nuclear security centers of excellence, and assistance in the transportation of spent nuclear fuel as part of global clean-out efforts as needed. As detailed above and in Appendix B , other DOD CTR programs that address WMD proliferation also contribute to nuclear security goals. <9.3.4.2. FY2013 Department of Energy Request> The Administration requested $2.46 billion for NNSA's defense nuclear nonproliferation accounts in FY2013. This is an increase over the appropriated amount ($2.295 billion), but roughly equivalent to the Administration's FY2012 request. The budget request says that the amounts reflect "completion of accelerated efforts to secure vulnerable nuclear materials within four years, the President's stated timeframe." For details, see Table C -1 . Proposed budget increases are found in the Fissile Material Disposition funding line, for U.S. disposition of excess plutonium stocks through construction of a MOX facility in Savannah River. Another notable item was the addition of $150 million in RD&D funding for USEC's American Centrifuge enrichment technology in the Nonproliferation and Verification account. The inclusion of this "one-time" line item in the nonproliferation part of DOE's budget rather than in nuclear energy may indicate DOE will emphasize national security reasons for funding the program. However, national security justifications are a subject of debate. Some analysts worry that adding this item to the DNN account is causing unnecessary cuts to nuclear and radiological security efforts. The sharpest proposed budget decreases are found in the International Nuclear Materials Protection and Cooperation (INMP&C) program. The INMP&C program decreases reflect the conclusion of key nuclear security projects in Russia that will be administered by the Russian Ministry of Defense at the end of FY2012. The request also includes a major reduction for the Second Line of Defense program. According to the request, this reflects "the completion of installation of detection equipment at a cumulative 496 SLD sites, including 45 Megaports." House appropriators in FY2012 report language recommended that NNSA revisit the goals and measures of effectiveness for this program. The Global Threat Reduction Initiative (GTRI) justification shows that the nearly $32 million proposed overall decrease for GTRI activities is mainly due to a decrease in the Nuclear and Radiological Materials Removal account. While the Gap Nuclear Material Removal program projects an increase, reductions to the Russian-Origin and U.S.-Origin Nuclear Material Programs together would total a $49 million decrease. The budget request says this is "consistent with the four-year plan." Some activities may have long timelines for completion and were therefore funded in FY2012. According to the NNSA budget request, additional reactor conversions and HEU removals are being planned through 2017. Congress may wish to consider how funding for these programs impacts timelines for removal and conversion. <9.3.4.3. FY2013 Department of State Request> State Department programs that address nuclear material security are part of programs that address all weapons of mass destruction proliferation or terrorism. The total level of funding for the Nonproliferation Programs under the State Department's Nonproliferation, Antiterrorism, Demining and Related Programs (NADR) account decreased by almost $12.5 million. Decreases in funding are primarily for the Export Control and Related Border Security (EXBS) and Global Threat Reduction (GTR) accounts (although biosecurity funding within GTR was increased). A contribution of $1.35 million (compared to $1.5 million in FY2012) to the U.N. Security Council Resolution 1540 Trust Fund is aimed at helping foreign countries' capacity to prevent illicit nuclear (and other WMD) trafficking. <9.3.5. FY2013 Authorizations and Appropriations> Congress is currently considering the Administration's budget request through hearings and briefings. It also continues to conduct oversight of management issues as part of this process. A hearing on "Managing Interagency Nuclear Nonproliferation Efforts: Are We Effectively Securing Nuclear Materials Around the World?" will be held by Senate Homeland Security and Governmental Affairs Subcommittee on Oversight of Government Management, the Federal Workforce and the District of Columbia on March 14, 2012. <9.4. Considerations> It should be noted that looking simply at whether budget amounts are increased or decreased may not provide a full picture of the U.S. commitment to nuclear security. As more nuclear materials are secured or removed in countries open to cooperation, programs will spend more effort on securing agreement from countries resistant to such measures. The summit may have helped open some of these doors, but many countries may still see sensitive materials as a technological asset or may have a more lax attitude toward the threat of material diversion. In addition, in some cases, countries will be more comfortable working with a donor country other than the United States, or with a nongovernmental organization due to sensitivities in the bilateral relationship. Others may choose to address nuclear security programs quietly with the United States or others. This will require U.S. persuasion and diplomacy, which is more difficult to budget. In addition, as cooperative threat reduction work generally shifts from capital intensive projects such as building a material storage site to sustainability and training related work, the funding necessary will likely eventually decrease while the work could still provide significant benefits. Appendix A. Multilateral Nuclear Security-Related Instruments and Initiatives U.N. Security Council Resolutions In September 2009, President Obama chaired a U.N. Security Council Summit that focused on nuclear nonproliferation. The Security Council adopted Resolution 1887, which called on countries to improve their nuclear security and step up efforts to prevent nuclear trafficking. This resolution was unanimously adopted and endorsed President Obama's goal of securing all vulnerable nuclear material within four years. Previous efforts at the U.N. Security Council have also strengthened the international community's efforts to convince all countries that the threat of nuclear terrorism should be addressed in every country, whether it holds stocks of nuclear (or other WMD) material or not. Resolution 1540 was adopted in April 2004 and requires all states to "criminalize proliferation, enact strict export controls and secure all sensitive materials within their borders." UNSCR 1540 called on states to enforce effective domestic controls over WMD and WMD-related materials in production, use, storage, and transport; to maintain effective border controls; and to develop national export and trans-shipment controls over such items, all of which should help interdiction efforts. The resolution did not, however, provide any enforcement authority, nor did it specifically mention interdiction. U.N. Security Council Resolutions 1673 (2006), 1810 (2008) and 1977 (2011) extended the duration of the 1540 Committee. The committee is currently focused on identifying assistance projects for states in need and matching donors to improve these WMD controls. The Obama Administration has proposed extra-budgetary contributions to the U.N. for a Trust Fund to implement 1540-related projects, such as training. UNSCR 1540 carries the status of a mandatory legal obligation for all U.N. member states, as it was adopted under Chapter VII of the U.N. Charter. In addition, as mentioned above, the Convention's provisions calling for information sharing and cooperation establish a basis to rally international support for efforts such as the Global Initiative to Combat Nuclear Terrorism, the U.S.-led Global Threat Reduction Initiative, Proliferation Security Initiative (where intelligence sharing is key), and additional international nuclear security and counterproliferation efforts. Another relevant resolution, U.N. Security Council Resolution 1373, adopted in September 2001, calls on states to prevent and suppress the financing of terrorism, and to deny terrorists safe haven. Treaties A number of international treaties govern the security of nuclear material, but none are universal, and together they make up a patchwork approach to the problem to date. Convention on the Physical Protection of Nuclear Material and Amendment The Convention on the Physical Protection of Nuclear Material, adopted in 1987, sets international standards for securing nuclear material in trade and commerce. The Convention established security requirements for the protection of nuclear materials in international transit against terrorism. Parties to the treaty also agree to report shipments to the IAEA. In 2005, the States Parties extended the scope of the Convention to include nuclear material in domestic use, storage, and transport, as well as the protection of nuclear material and facilities from sabotage. The 2005 Amendment could potentially augment U.S. efforts to cooperate with other countries to prevent nuclear terrorism. Although the treaty itself does not have any enforcement mechanisms for compliance with its provisions, it raises standards for physical protection, defines criminal offenses, and provides a legal basis for cooperation that would bolster several existing international efforts. Criticism of the Amendment has primarily been limited to arguments that it does not go far enough to advance the nonproliferation agenda. Some analysts criticize the Amendment for not covering military stocks of nuclear materials, not including verification measures, and issuing "overly vague" guidelines for physical protection. They argue that the Amendment says only that nuclear facilities and materials should be protected, not specifically how they should be protected. The new rules will only come into effect once the Amendment has been ratified by two-thirds of the States Parties of the Convention, which could take several years. As of January 2011, only 46 states (out of 142 Convention parties) had ratified the amendment. On September 4, 2007, President Bush submitted the amendment to the Senate for its advice and consent on ratification. The Secretary of State's Letter of Submittal says that once the Amendment enters into force, it will "significantly strengthen" the worldwide physical protection of nuclear material and facilities used for peaceful purposes. In the Letter of Transmittal, President Bush called it "important in the campaign against international nuclear terrorism and nuclear proliferation." The Senate Committee on Foreign Relations recommended that the Senate give its advice and consent on September 11, 2008. The Senate must approve implementing legislation before the United States deposits its instrument of ratification to the Amendment. The Obama Administration submitted draft implementing legislation for consideration to the Judiciary Committee in April 2011. Nuclear Terrorism Convention The U.N. General Assembly adopted the International Convention for the Suppression of Acts of Nuclear Terrorism (also known as the Nuclear Terrorism Convention or NTC) in 2005 after eight years of debating a draft treaty proposed by Russia in 1997. Disputes over the definition of terrorism, omitted in the final version, and over the issue of nuclear weapons use by states, complicated the discussions for many years. After September 11, 2001, states revisited the draft treaty and the necessary compromises were made. The Convention entered into force in July 2007 and had 77 States Parties and 115 signatories as of April 2011. The United States has strongly supported the Convention, and President Bush was the second to sign it (after Russian President Putin) on September 14, 2005. The Senate Committee on Foreign Relations reported the treaty to the full Senate and recommended advice and consent on September 11, 2008. The Senate must approve implementing legislation before the United States deposits its instrument of ratification to the Convention. The Obama Administration submitted draft legislation was submitted to the Judiciary Committee in April 2011. The Convention defines offenses related to the unlawful possession and use of radioactive or nuclear material or devices, and the use or damage to nuclear facilities. The Convention commits each party to adopt measures in its national law to criminalize these offenses and make them punishable. It covers acts by individuals, not states, and does not govern the actions of armed forces during an armed conflict. The Convention also does not address "the issue of legality of the use or threat of use of nuclear weapons by States." It also commits States Parties to exchange information and cooperate to "detect, prevent, suppress and investigate" those suspected of committing nuclear terrorism, including extraditions. The NTC could potentially augment U.S. efforts to cooperate with other countries to combat nuclear terrorism. Although the treaty itself does not have any enforcement mechanisms for compliance with its provisions, it could provide a legal basis for cooperation and bolster several existing international efforts. The UNSCR 1540 could provide a vehicle to spur compliance with the NTC. Other International Initiatives Global Initiative to Combat Nuclear Terrorism In July 2006, Russia and the United States announced the creation of the Global Initiative to Combat Nuclear Terrorism before the G-8 Summit in St. Petersburg. This initiative is non-binding, but requires agreement on a statement of principles. Thirteen nations Australia, Canada, China, France, Germany, Italy, Japan, Kazakhstan, Morocco, Turkey, the United Kingdom, the United States, and Russia endorsed a Statement of Principles at the Initiative's first meeting in October 2006. The International Atomic Energy Agency (IAEA) and the European Union (EU) have observer status. As of April 2011, 82 states have agreed to the statement of principles and are Global Initiative partner nations. U.S. officials have described the Initiative as a "flexible framework" to prevent, detect, and respond to the threat of nuclear terrorism. It is meant to enhance information sharing and build capacity worldwide. The Statement of Principles pledges to improve each nation's ability to secure radioactive and nuclear material, prevent illicit trafficking by improving detection of such material, respond to a terrorist attack, prevent safe haven to potential nuclear terrorists and financial resources, and ensure liability for acts of nuclear terrorism. Participating states share a common goal to improve national capabilities to combat nuclear terrorism by sharing best practices through multinational exercises and expert level meetings. Without dues or a secretariat, actions under the Initiative will take legal guidance from the International Convention on the Suppression of Acts of Nuclear Terrorism, the Convention on the Physical Protection of Nuclear Materials, and U.N. Security Council Resolutions 1540 and 1373. President Obama in an April 2009 speech said that the Global Initiative should be turned into a "durable international institution," but how this would be implemented is not yet clear. G-8 Global Partnership The Global Partnership Against the Spread of Weapons and Materials of Mass Destruction was announced by the Group of Eight (G-8) Nations at their 2002 summit. The G-8 members agreed to raise $20 billion over 10 years for nonproliferation-related assistance beginning in Russia, of which the United States committed to providing $10 billion. Since 2002, 12 additional countries and the European Union have joined the G-8 as donors. The Global Partnership countries have recently agreed to extend the Global Partnership to recipients worldwide on a case-by-case basis. Nuclear security and fissile material disposition programs have played a prominent role in Global Partnership programs. Some countries, including the United States, would like the Global Partnership renewed for another 10 years, and would like to see nuclear material security as a key component of future assistance. Thus, the Global Partnership could be a key means for international coordination of funding nuclear security assistance programs. The G-8 decided to continue the Global Partnership past 2012 at their 2011 Summit in Deauville, France. They reaffirmed the goals set out at the 2010 Summit for future Global Partnership activities: nuclear and radiological security, bio-security, scientist engagement, and facilitation of the implementation of U.N. Security Council Resolution 1540. Proliferation Security Initiative The Proliferation Security Initiative (PSI) was formed to increase international cooperation in interdicting shipments of weapons of mass destruction (WMD), their delivery systems, and related materials. The initiative was announced by President Bush on May 31, 2003. PSI does not create a new legal framework but aims to use existing national authorities and international law to achieve its goals. Initially, 11 nations signed on to the "Statement of Interdiction Principles" that guides PSI cooperation. As of April 2011, 97 countries have committed formally to the PSI principles, although the extent of participation may vary by country. PSI has no secretariat, but an Operational Experts Group (OEG), made up of 21 PSI participants, coordinates activities. Although WMD interdiction efforts took place with international cooperation before PSI was formed, supporters argue that PSI training exercises and boarding agreements give a structure and expectation of cooperation that will improve interdiction efforts. Many observers believe that PSI's "strengthened political commitment of like-minded states" to cooperate on interdiction is a successful approach to counterproliferation policy. President Obama in an April 2009 speech said that PSI, like the Global Initiative, should be turned into a "durable international institution," but how this effort is on. Appendix B. U.S. Nuclear Security Assistance to Foreign Countries U.S. policy strategies have focused on material removal or conversion, consolidation, or improved protection at a site. Related assistance programs are spread through several federal agencies. Funding for these programs is discussed in the section " Funding for Nuclear Security Programs ." Department of Defense The first nuclear material security assistance programs were authorized through DOD's Cooperative Threat Reduction (CTR) program in 1991 when Congress passed the Soviet Nuclear Threat Reduction Act (the Nunn-Lugar Amendment). CTR, through the Defense Threat Reduction Agency (DTRA), helps foreign governments dismantle and destroy infrastructure associated with nuclear weapons and other weapons of mass destruction, and enhances the security and safety of fissile material storage and transportation, particularly in Russia. The CTR mission also expanded to include scientist redirection programs. CTR legislation also authorized similar activities by the DOE and the State Department. The CTR program has been undergoing a transformation, and has shifted focus from Russia and the former Soviet states to a more global mission, as authorized in the FY2008 Defense Authorization bill. It also reflects a shift in threat perception as the WMD terrorism threat has gained prominence. Through these programs, DOD will play a role in strengthening nuclear security with international partners. In the Obama Administration's FY2011 budget request, the DOD has proposed $74 million for a new initiative under the CTR program to help fulfill the four-year goal. The Global Nuclear Lockdown (GNL) would include establishing regional centers of excellence for nuclear security around the world. They are meant to "assess equipment and manpower, provide material security training, and demonstrate enhanced security procedures and processes." DOD also continues to work on warhead and weapons-grade material security including transportation security with foreign partners. Department of Energy, NNSA The DOE's National Nuclear Security Administration (NNSA) is charged with nuclear nonproliferation work overseas, including nuclear materials security upgrades, removal of sensitive material or conversion of research reactors from highly enriched uranium (HEU) to low enriched uranium (LEU) fuel. The main vehicles for this assistance are the Global Threat Reduction Initiative (GTRI) and the International Materials, Protection, Control & Accounting (MPC&A) programs. The Fissile Material Disposition program works to reduce HEU and plutonium excess to military needs in the United States and Russia. Various other NNSA programs also contribute to the mission of preventing nuclear terrorism. This report highlights only a few programs related to the security or removal of weapons-usable nuclear material. Security Upgrades on HEU Facilities Overseas The United States is working on a bilateral basis with a number of countries to improve their nuclear material security practices at research reactors. NNSA's Global Research Reactor Security (GRRS) program conducts this work. It has provided security upgrades at 18 out of 22 HEU-fueled civilian research reactors in the GRRS program worldwide. There are an estimated 165 research reactors globally that continue to use HEU fuel. NNSA is working with the IAEA to ensure sustainability of the security upgrades. A September 2009 GAO report examined security upgrades under this program and found that most foreign research reactors that have received upgrades meet international standards. However, GAO visited 5 of the 22 sites and found security weaknesses. In addition, because GRRS is a voluntary program, not all foreign governments move quickly to implement or sustain the security upgrades. The summit highlighted the importance of sustainability of security upgrades at nuclear sites. Research Reactor Conversion The Global Threat Reduction Initiative program within the National Nuclear Security Administration is charged with HEU return and conversion at home and abroad and aims to convert 129 HEU-fueled research reactors by 2018. According to an NNSA press release, NNSA has now converted or verified the shutdown of 67 HEU-fueled research reactors of the 129 targeted by the GTRI program. This would mean that 62 are left to convert. The remaining research reactors are either used for defense programs or cannot be converted with current technology. Nuclear Material Disposition The NNSA's Office of Fissile Material Disposition (NA-26) manages HEU disposition programs. According to the NNSA, it has monitored the down blending into nuclear fuel of more than 375 metric tons of Russian HEU, out of the agreed 500 MT by 2013. This provides 10% of U.S. electricity. NNSA has also converted 11.4 MT of Russian excess non-weapons program HEU into LEU. Two hundred seventeen MT of excess U.S. HEU is to be downblended by various means. So far, NNSA has downblended or delivered for downblending into nuclear reactor fuel more than 124 MT of surplus U.S. HEU. An additional 17.4 MT of HEU is being downblended for the Reliable Fuel Supply Initiative. Much of an approximately 56 MT of the 217 MT total excess HEU is not yet available for disposition due to weapons dismantlement schedules. Another portion, approximately 18 MT, are discard materials and will likely be stored at waste facilities. Second Line of Defense (SLD) program The SLD program, through international agreements, helps foreign countries establish detection capabilities for nuclear materials. Detection equipment is placed at ports of entry, border crossings, and other designated locations to detect illicit transport of nuclear materials at international borders. DOE has expanded the SLD effort through the Megaports Initiative, which deploys radiation detection equipment to increase detection of nuclear materials at ports of departure rather than at ports of entry. Department of State The State Department has a primarily facilitating and coordinating role in nuclear security and nuclear terrorism prevention efforts. The International Security and Nonproliferation (ISN) bureau manages the assistance programs that aim to help foreign governments and international organizations prevent weapons of mass destruction proliferation or terrorism. ISN does this through a variety of initiatives aimed at "denying access to WMD and related materials, expertise, and technologies" by boosting material and facility security, improving export and border controls, and strengthening inter-governmental coordination. This assistance is funded primarily through the Non-proliferation, Anti-terrorism, Demining Programs account (NADR). ISN's Export Control and Related Border Security (EXBS), Nonproliferation Disarmament Fund (NDF), and Global Threat Reduction programs are the most prominent nuclear security-related assistance programs. The NADR account also includes voluntary contributions to the International Atomic Energy Agency (IAEA). The State Department's International Security and Nonproliferation (ISN) Bureau coordinates diplomatic meetings and policy development for the Global Initiative to Combat Nuclear Terrorism, the Proliferation Security Initiative (PSI), and the G-8 Global Partnership. The Export Control and Related Border Security Assistance (EXBS) program helps the former Soviet states and other nations improve their ability to interdict nuclear smuggling and their ability to stop the illicit trafficking of all materials for weapons of mass destruction, along with dual-use goods and technologies. The EXBS program currently has projects under way in more than 30 nations. Since gaining agreement to secure sensitive material or improve export controls are often politically sensitive and directly related to the overall bilateral relationship with a country, the State Department also plays a key role in setting up agreements with foreign countries that may be implemented by other agencies. The State Department also has notwithstanding authority through its Nonproliferation and Disarmament Fund to work in countries where nuclear material or technologies need to be removed from a site on an emergency basis. Department of Homeland Security Two overarching DHS initiatives, the Container Security Initiative and the Secure Freight Initiative, work to increase the likelihood that nuclear material or a nuclear weapon would be identified and interdicted during shipping. The Domestic Nuclear Detection Office also has responsibilities to coordinate federal agencies activities on setting up a global nuclear detection system. Appendix C. Department of Energy, Defense Nuclear Nonproliferation Appropriations Below is a table showing appropriations for the Department of Energy's (DOE)'s National Nuclear Security Administration (NNSA) Defense Nuclear Nonproliferation (DNN) accounts from FY2007 to present. This data was compiled from DOE annual budget requests to Congress, H.Rept. 112-118 , and S.Rept. 112-75 . For FY2013, the DNN account includes the following programs: Nonproliferation and Verification Research and Development; Nonproliferation and International Security; International Nuclear Material Protection and Cooperation; Fissile Materials Disposition; and the Global Threat Reduction Initiative. The reader should note that subprograms are listed below the shaded program totals.

In an April 2009 speech in Prague, President Obama pledged that his Administration would launch "a new international effort to secure all vulnerable nuclear material around the world within four years." To motivate world leaders to achieve this goal, the President hosted a Nuclear Security Summit in Washington, DC, on April 12-13, 2010. Leaders of 47 countries attended the summit, including many heads of state. Attendees represented a wide geographic range of states and nuclear capabilities, and include China, India, Israel, and Pakistan. The summit resulted in a joint statement saying that international cooperative action is necessary to prevent an act of nuclear terrorism. Summit attendees also pledged to improve nuclear security standards, bring international agreements into force, and share best practices. A second summit will be held in South Korea in March 2012. Nuclear security measures refer to a wide range of actions to prevent theft or diversion of nuclear material or sabotage at an installation or in transit. They could include physical protection measures, material control and accounting, personnel reliability screening, and training. A broader understanding of nuclear security also includes measures to prevent and detect illicit trafficking—cargo inspections, border security, and interdiction measures. The U.S. government has worked for more than a decade both domestically and in partnership with other countries to address this problem through multiple programs at the Departments of Defense, Energy, Homeland Security, and State. The International Atomic Energy Agency has also played a lead role in these efforts, particularly since the 9/11 terrorist attacks. Congress will continue to decide on funding for the U.S. domestic and international programs focused on nuclear material security and nuclear terrorism prevention. Congress is also likely to assess implementation of the Administration's efforts to secure nuclear materials by the end of 2013. The Obama Administration's FY2011, FY2012, and FY2013 congressional budget requests proposed overall increases in funding for nuclear security-related accounts, with the stated purpose of ramping up programs to meet the President's four-year goal.

<1. Overview on Inspections> The United States now has a unified inspections operation at the borders; one inspector ischarged with examining people, animals, plants, goods, and cargo upon entry to the country. Thisreport delves into border inspections from the perspectives of the three major types of inspections: immigration, customs, and animal and plant health. The transfer of these functions to theDepartment of Homeland Security (DHS) marks a significant policy shift concerning all of thesefunctions, clarifying that -- although there are important commercial, economic, health,humanitarian, and immigration responsibilities -- ensuring the security of our borders is the toppriority. The decision by DHS officials to further integrate the inspection duties so that there is "oneface at the border" now means that Customs and Border Protection (CBP) inspectors are essentiallyinterchangeable and responsible for all primary inspections. <1.1. Background> Laws pertaining to border inspections date back to the earliest days of the United Statesfederal government, and border inspections historically were organized along functionalresponsibilities. The federal authority to assess and collect duties on goods, wares, and merchandiseimported into the country was established by the second act that the 1st Congress enacted in 1789,and later that year the administrative apparatus of the U.S. Customs Service was authorized as well. Although Congress' exclusive role over naturalization and immigration is found in Article 1 of theU.S. Constitution, the formal inspection of aliens entering the United States came later in our history. In 1882, Congress enacted a law providing for an examination of all aliens who arrive in the UnitedStates and in 1891 established the Bureau of Immigration, which later became the Immigration andNaturalization Service (INS). Laws regarding plant quarantine and inspection date back to 1912. For many years, the INS and Customs Service inspectors were "cross designated" so that theycould perform initial examinations in each other's functional responsibilities. In practice thisdivision of labor reportedly resulted in INS inspectors being the lead at land ports of entry andCustoms Service inspectors being the lead at air and sea ports of entry. The U.S. Department ofAgriculture (USDA) had always handled the inspection of plants and animals independently. Today, the Department of Homeland Security (DHS) is charged with overseeing most of theborder inspections functions. The Bureau of Customs and Border Protection (CBP) includescustoms inspectors, immigration inspectors, agricultural inspectors, and the border patrol. CBP islocated in the Directorate of Border and Transportation Security in DHS. (1) Some argue that this reorganization of border inspections has been long needed and willresult in a more streamlined and efficient set of procedures at the border with a clear, single, chainof command. Others warn that the different types of inspections are quite complex in their own rightand that the reorganization will serve to exacerbate competing priorities, ultimately resulting in manymore people and goods being sent to secondary inspections. This report opens with an overview of the parameters of the border, both physical and legal. It then presents the statutory basis for border inspections in the three major areas. At the crux of thereport is the third section that explains the policies and procedures for immigration, customs, andagricultural inspections. A section on trends by ports and modes of entry analyzes the volume andtypes of inspections in recent years leading up to the establishment of DHS. The fifth section of thisreport summarizes budget and staffing over the past five years for these three functions. The reportconcludes with a discussion of the issues and concerns that are emerging with the implementationof the unified border inspections policies and procedures. <1.2. Parameters of the Border> Ports of Entry. For the past several years, therehave been 317 official ports of entry (POE) into the United States. At a given port, inspectors maybe responsible for more than one mode of transportation, even processing all three conveyance typesof air, land, and sea. Buffalo and Detroit, for example, have air, sea, and land POEs, but thelikelihood of inspectors having multiple responsibilities are greater at the smaller POEs. CBPacknowledges that "the merging of agencies into one port of entry definition is currently a work inprogress," and the POE numbers do not neatly add up across categories. CBP currently reports thatthere 216 airports that are international POEs, 143 seaports, and 115 land POEs. Two locations areinland POEs. (2) Physical Boundaries. The land border withCanada spans 5,525 miles and is the longest non-militarized border in the world. There are 84 landPOEs along the northern border, which include but are not limited to three in Idaho, 13 in Maine,three in Michigan, five in Minnesota, 10 in Montana, 12 in New York, 18 in North Dakota, sevenin Vermont, and 12 in Washington. On a daily basis, reportedly over 250,000 people enter theUnited States from Canada. Canada is the single largest trading partner of the United States, withtotal merchandise trade (exports and imports) exceeding $372 billion in 2003. Indeed, the largesttrade link in the world is the Ambassador Bridge (connecting Detroit, Michigan and Windsor,Ontario) that has more than 7,000 trucks crossing daily transporting goods worth more than $120billion per year. The southern land border with Mexico is 1,933 miles across and has 25 land POEs, whichinclude but are not limited to six in California, six in Arizona, two in New Mexico, and 11 in Texas. Over 800,000 people arrive from Mexico daily. Mexico is our second largest trading partner, withtotal merchandise trade at $220.3 billion in 2003, down from $247.2 billion in 2000 . The POE atLaredo/Nuevo Laredo reportedly has the highest volume of trade on the southern border. The coast line of the United States is 12,479 miles long, and there are 143 sea POEs. Somesea and river POEs are principally commercial ports while others receive passengers. Legal Boundaries. From a legal perspective, theparameters of the border for inspection purposes are generally given a flexible reading by courts andoften vary from the geographical confines mentioned above. "Border searches" (3) may occur when entry is madeby land from the neighboring countries of Mexico or Canada, at the place where a ship docks in theUnited States after having been to a foreign port, and at any airport in the country where internationalflights first land. Courts have given the "border" a more flexible reading because of the significantdifficulties in detecting the increasingly mobile smuggler. Aside from searches at the actual physicalborder, the law recognizes two legal constructs that allow border searches to move beyond thegeographical confines of the actual port of entry. Functional Equivalent. Border searches may beconducted within the interior of the United States. The border search exception extends to thosesearches conducted at the "functional equivalent" of the border. The "functional equivalent" of aborder is generally the first practical detention point after a border crossing or the final port ofentry. (4) It is justifiedbecause in essence, it is no different than a search conducted at the border and occurs only becauseof the impossibility of requiring the subject searched to stop at the physical border. A search occursat the border's functional equivalent when: (1) a reasonable certainty exists that the person or thingcrossed the border; (2) a reasonable certainty exists that there was no change in the object of thesearch since it crossed the border; and (3) the search was conducted as soon as practicable after theborder crossing. (5) Placessuch as international airports within the country and ports within the country's territorial waters orstations at the intersection of two or more roads extending from the border exemplify such functionalequivalents. (6) Extended Border Search. The border search exceptionmay also be extended to allow warrantless searches beyond the border or its functional equivalent. Under the "extended border search" doctrine, government officials may conduct a warrantless searchbeyond the border or its functional equivalent if (1) the government officials have reasonablecertainty or a "high degree of probability" that a border was crossed; (2) they also have reasonablecertainty that no change in the object of the search has occurred between the time of the bordercrossing and the search; and (3) they have "reasonable suspicion" that criminal activity wasoccurring. (7) Thisthree-part test ensures that a suspect still has a significant nexus with a border crossing so that borderofficials can reasonably base their search on statutory and constitutional authority and to ensure thatthe search is reasonable. (8) <1.3. Authority for Border Inspections> While the Homeland Security Act (HSA, P.L. 107-296 ) transferred the inspection "functions"of INS and Customs Service to DHS, it did not revise the laws that authorize these inspections. HSAdid specify which laws DHS agricultural inspectors may utilize to conduct inspections, but it did notalter these underlying statutes. Consequently, understanding the legal authorities that guidedagricultural, customs and immigration inspections functions before and after their transfer to DHSbecomes increasingly important. At this point, it is unclear whether the "one face at the border"initiative promoted by DHS will also result in, or perhaps some could argue even require, the futureconsolidation of the authorities each legacy agency individually possessed. Immigration Inspections. The former INS,through the Attorney General (AG), was responsible for enforcing and administering theImmigration and Nationality Act of 1952 (INA) (codified as amended at 8 U.S.C. 1101 et seq .). The HSA, as modified by the President, transferred administrative authority over immigrationenforcement to the Directorate of Border and Transportation Security. The HSA effectuated thetransfer of immigration authority in statutory language that is separate and apart from the INAitself. (9) According to DHSregulations, all authorities and functions of the DHS to administer and enforce the immigration lawsare now vested in the Secretary of DHS or his delegate. (10) The Attorney General, however, retains concurrent authority inmany key areas of immigration law. Immigration officials possess a wide variety of enforcement mechanisms to carry out theirmission of enforcing the INA. Immigration enforcement activities generally include providingborder security and management; conducting inspections of persons at U.S. international ports;enforcing immigration law; detaining and removing aliens found in violation of immigration andrelated laws; and providing immigration intelligence. Under 8 U.S.C. 1225(a)(3), all aliens whoare applicants for admission or are seeking entrance or readmittance to or transit through the UnitedStates shall be inspected by "immigration officers." If the immigration officer is satisfied that theapplicant is entitled to enter, the officer admits the applicant, though his decision may not be finaland the applicant may be subject to other inspections. In the event an alien is "not clearly andbeyond a doubt" (11) entitled to be admitted or further inquiry is required, the applicant may be detained pending a finaldetermination of admissibility by an immigration judge. 8 U.S.C. 1225(d) allows immigrationofficers to board any vessel, aircraft, railway car, or other conveyance in which an immigrationofficer believes aliens are being brought into the United States. The term "immigration officer" is statutorily defined in the INA to mean any employee orclass of employees of the INS or of the United States designated by the Attorney General,individually or by regulation, to perform the functions of an immigration officer specified by theINA. (12) DHS, however,has implemented regulations clarifying the meaning of "immigration officer" with respect to DHSpersonnel. The regulation (8 C.F.R. 103.1(b)) designates various categories of CBP and ICEofficials as immigration officers authorized to exercise the powers and duties of such officers asspecified by the INA and applicable regulations. The regulation also allows the Secretary of DHSto designate other employees of DHS or of the United States as immigration officers. Section 1357 of Title 8 of the U.S. Code gives any officer or employee of the Service authorized under regulation prescribed by the AG the authority to, without a warrant, interrogatealiens, make arrests, conduct searches, board vessels, and administer oaths. For example, 8 U.S.C. 1357(a)(2) authorizes an officer or employee of the INS to arrest without a warrant any alien whoin his presence is entering or attempting to enter the United States in violation of U.S. law regulatingthe admission, exclusion, expulsion, or removal of aliens. Section 1357(a)(3), among other things,authorizes an officer or employee of the INS, without warrant and within a reasonable distance fromany external boundary of the United States, (13) to board and search for aliens any vessel within the territorialwaters of the United States and any railway car, aircraft, conveyance, or vehicle. Sections 1357(a)(4)and (5) authorize officers or employees of the INS to make certain felony arrests. Under 8 U.S.C. 1357(c), officers or employees of the INS are authorized to search without a warrant any person(and their effects) seeking entrance into the United States for evidence which may lead to theindividual's exclusion from the country if the officer possesses reasonable cause to suspect thatgrounds exist to deny admission to the United States under the INA. 8 C.F.R. 287.5 designates theDHS officers or employees who are authorized to carry out the various law enforcement activitieslisted in 1357. Customs Inspections. Formerly located in theDepartment of the Treasury, customs inspectors enforced a number of laws to: ensure all importsand exports comply with U.S. laws and regulations; collect and protect U.S. revenues; and guardagainst the smuggling of contraband. (14) The HSA transferred generally all customs functions (except forcertain revenue functions) to the DHS in 403. Customs border activities are now conductedthrough the CBP and interior enforcement activities are carried out by ICE officers. Congress has provided customs with a significant amount of authority to inspect people andmerchandise at ports of entry. Federal authority to assess and collect duties on goods, wares, andmerchandise imported into the country was established in 1789. Additional authority for customsinspections was passed in 1866 (15) but generally derives from the Tariff Act of 1930. (16) Courts haveinterpreted19 U.S.C. 1581(a) as granting customs inspectors broad authority to conduct border searches. (17) Section 1581(a) states: Any officer of the customs may at any time go on boardof any vessel or vehicle at any place in the United States or within the customs waters or ... at anyother authorized place ... and examine the manifest and other documents and papers and examine,inspect, and search the vessel or vehicle and every part thereof and any person, trunk, package, orcargo on board, and to this end may hail and stop such vessel or vehicle, and use all necessary forceto compel compliance. Under 19 U.S.C. 1461, customs officers may inspect all merchandise and baggage imported orbrought in from any contiguous country at the first port of entry the merchandise or baggage arrives. 19 U.S.C. 1467 provides customs officers with authority to inspect and search persons, baggage,and merchandise discharged or unloaded from a vessel that arrives in the United States or VirginIslands (whether directly or via another port or place in the United States or Virgin Islands) from aforeign port, place or Territory or possession of the United States. Congress has granted customsthe authority, under 19 U.S.C. 1496, to search the baggage of persons arriving in the United Statesin order to ascertain what articles are contained therein and whether such articles are subject to dutyor prohibited. Pursuant to 19 U.S.C. 482, Congress has empowered customs to "stop, search, andexamine" any "vehicle, beast, or person" upon which an officer suspects there is merchandise whichis subject to duty or introduced to the United States contrary to law. Moreover, a customs officermay search any trunk or envelope wherever found, in which the officer has a reasonable belief tosuspect there is merchandise imported contrary to law. Finally, under 482, a customs officer may seize and secure for trial any merchandise found on any inspected vehicle, beast, or person, or in anyinspected trunk or envelope, which the officer has reasonable cause to believe is subject to duty orwas introduced unlawfully. Additionally, an officer of customs is authorized to search and conduct document and safetyinspections of any vessel or vehicle inside the United States, within customs waters, (18) or in any other authorizedplace. Customs officials generally may not search on the high seas; (19) however, officers of theCoast Guard, according to 19 U.S.C. 1401(i), are deemed to be customs officers (20) and may conductinspections on the high seas. (21) In order to carry out the various inspection provisions, 19 U.S.C. 1582 allows the Secretary of the Treasury to prescribe regulations for the search of persons andbaggage. Title 19, Part 162 of the Code of Federal Regulations describes the inspection, search, andseizure procedures for customs and makes all persons coming into the United States from foreigncountries liable to detention and search by authorized officers of the government under suchregulations. The law, however, makes clear that a customs inspection is not required of every piece ofmerchandise, goods or cargo brought into the United States, though there are reporting requirements. In terms of the entry examination for imported merchandise, the statute states that the CustomsService "shall inspect a sufficient number of shipments, and shall examine a sufficient number ofentries, to ensure compliance with the laws enforced by the Customs Service." (22) Agriculture Inspections. Agriculture inspectorsplay an integral part in the Department of Agriculture's role in supplying a safe and affordable foodsupply. In part, the Department of Agriculture's Animal and Plant Health Inspection Service(APHIS) was responsible for enforcing the laws that protect and promote U.S. agricultural healthfrom agricultural pests and diseases by conducting inspections at various ports of entry. Under theHSA, the Secretary of Agriculture's import and entry inspection activities (which are conductedthrough APHIS) relating to the laws specified below have been transferred to the DHS. (23) The Under Secretary forBorder and Transportation Security is responsible for conducting agricultural inspections at ports ofentry in accordance with the regulations, policies, and procedures issued by the Secretary ofAgriculture for the following Acts: (24) The Virus-Serum-Toxin Act (21 U.S.C. 151 et seq .); The Honeybee Act (7 U.S.C. 281 et seq .); Title III of the Federal Seed Act (7 U.S.C. 1581 etseq .); The Plant Protection Act (7 U.S.C. 7701 et seq .); The Animal Health Protection Act (7 U.S.C. 8301 etseq .); The Lacey Act Amendments of 1981 (16 U.S.C. 3371 et seq .);and Section 11 of the Endangered Species Act of 1973 (16 U.S.C. 1540). As the previous list demonstrates, agriculture inspectors are responsible for enforcing variousanimal and plant protection laws. In some cases, agriculture inspectors have the authority to conductwarrantless searches of any person or conveyance entering the country in furtherance of those laws. For instance, under the Plant Protection Act and the Animal Health Protection Act, agricultureinspectors have the authority to conduct warrantless searches of any person or vehicle entering theUnited States to determine whether the person is carrying any plant or animal in violation of thestatute. (25) Agricultureinspectors also have the authority under the Lacey Act to detain for inspection any vessel, vehicle,aircraft, or any package, crate, or other container upon the arrival of such conveyance or containerin the United States from any point outside the United States. (26) The Endangered SpeciesAct also allows agriculture inspectors to detain for inspection any package, crate, or other containerand all accompanying documents, upon importation. (27) <2. Policies and Practices at the Border> Although the HSA reorganized the administration of border inspections, it did not makesignificant changes in the policies and practices at the border. Most of the statutory revisions of theinspection process that were aimed at antiterrorism and border security were in place prior to theestablishment of CBP. In part a response to the 1993 World Trade Center bombing, Congress hadalready strengthened the anti-terrorism provisions in the INA and enacted provisions that shiftedimmigration inspectors from the "services" role to the "enforcement" role. (28) In 1996, Congress firstrequired the entry-exit system that is now known as US-VISIT. (29) In 2000 and 2002,Congress revised the plant and animal health protection statutes into a more compactframework. (30) Afterthe September 11, 2001 terrorist attacks, Congress enacted further measures aimed at improvingimmigration inspectors' terrorist detection capabilities. (31) Congress also included antiterrorism provisions in legislationreauthorizing the U.S. Customs Service in 2002. (32) CBP inspectors now are tasked with more effectivelyaccomplishing the laws and policies of the legacy agencies. <2.1. Immigration Inspections> Primary Purpose. Having a visa or other formof travel document does not guarantee admission into the United States. The INA requires theinspection of all aliens who seek entry into the United States; (33) and in some cases allowsfor preinspection when departing a foreign country on route to the United States. (34) The purpose of theinspection is to determine the admissibility of a traveler to the United States. (35) Section 287 of the INAenumerates the following authorities for immigration officers, including immigration inspectors: to question, under oath any person seeking to enter the United States in orderto determine admissibility and, to search, without warrant, the person and belongings of any applicant seekingadmission. (36) In addition to conducting inspections, immigration inspectors enforce various criminal andadministrative statutes, apprehend violators, and adjudicate a variety of applications for variousimmigration benefits. Later in this report, Appendix A presents a sample of the immigrationinspector's workload. Primary Inspections. Primary inspection, the firstlevel of inspection, consists of a brief interview with an immigration inspector, a cursory check ofthe traveler's documents and a query of the Interagency Border Inspection System (IBIS). (37) Primary inspections arequick (usually lasting no longer than a minute); however, if the inspector is suspicious that thetraveler may be inadmissible under the INA or in violation of other U.S. laws, the traveler is referredto a secondary inspection. (38) At 115 airports and 14 seaports, many nonimmigrants areentered into the new US-VISIT system that uses biometric identification (finger scans) to checkidentity and track presence in the United States. (39) Secondary Inspections. During secondaryinspections, travelers are questioned extensively and travel documents are further examined. Severalimmigration databases are queried as well, including lookout databases. (40) The majority of travelers,however, are not subject to a secondary inspection. As Figure 2 later in this report depicts, onaverage less than one percent of all travelers were subjected to secondary inspections betweenFY1998 and FY2002. In addition to an inspector denying entry, an alien can withdraw his application for admissionin some cases. (41) Immigration inspectors take the following factors into consideration when determining if an alienshould be permitted to withdraw his admission application: "the seriousness of the immigration violation; previous findings of inadmissibility against the alien; intent on the part of the alien to violate the law; ability to easily overcome the ground of inadmissibility (i.e., lack ofdocuments); age or poor health of the alien; and other humanitarian or public interest considerations." (42) Although not as frequently used, allowing an alien to withdraw his application for admission permitsthe alien to apply for reentry at some later point without being penalized. Congressional ResearchService's (CRS) examination of INS' Performance Analysis System (PAS) data reveals that prior tothe terrorist attacks, immigration officials were allowing over 60% of inadmissible aliens towithdraw their application for admission. In the years following the terrorist attacks, however, thatfigure dropped to 37% in FY2001 and 34% in FY2002 (see Appendix B ). Expedited Removal. In 1996, Congress enactedthe expedited removal policy. (43) The goal of these provisions was to target the perceived abusesof the asylum process by restricting the hearing, review, and appeal process for aliens at the port ofentry. As a result, if an immigration inspector at the port of entry finds that an alien has arrivedwithout proper documentation, the officer can deny admission and order the alien summarilyremoved from the United States. Those in expedited removal who claim a legal right to reside inthe United States based on citizenship, legal permanent residence, asylee or refugee status are to beprovided with additional procedural protections, rather than being immediately returned. Alienswhose visas have been revoked by Department of State are subject to expedited removal. Theexpedited removal provisions provide very limited circumstances for administrative and judicialreview of those aliens who are summarily excluded or removed. (44) Deferred Inspections. In a small percentage ofcases, usually occurring in connection with arrivals by aircraft, the inspection process can be deferredand the individual referred to an immigration office in the area in which the individual will beresiding. Less than 20,000 travelers were referred to deferred inspections each year, from FY1998through FY2002. Deferred inspections occur when an immediate decision regarding admissibilitycannot be made at the port of entry and the alien does not appear to be in blatant violation ofadmissibility laws. Such cases may involve the review of incomplete documents. Departure Control. Departure control is aninspection of travelers departing Guam, Puerto Rico and the U.S. Virgin Islands who are en routeto the continental United States. It also applies to crew members en route to the United States. (45) Departure control providesan added level of security to the inspection process because for those cases where the nationalinterest may be at stake, immigration officials can prevent the departure of persons to the UnitedStates. Electronic Passenger Manifest. Severalprovisions in law enacted after the September 11, 2001 terrorist attacks sought to provide a greaterlevel of border security by requiring airline carriers to provide the Attorney General with electronicpassenger manifests before arriving in or departing from the United States. (46) Passenger manifests aretransmitted to immigration officials through the Advance Passenger Information System (APIS). APIS was created in 1988, cooperatively with the former U.S. Customs Service, the former INS, andthe airline industry, and it is integrated with IBIS. The submission of the passenger manifestselectronically prior to arrival allows immigration officials to perform inspections on travelers inadvance of their arrival. Additionally, necessitated by concerns with respect to security, theEnhanced Border Security and Visa Entry Reform Act of 2002 ( P.L. 107-173 ) repealed a provisionthat required airport inspections be completed within 45 minutes of arrival. (47) Automated Inspections. The former INS had aseries of programs collectively referred to as Passenger Accelerated Service System (PortPASS) thatwere transferred to the CBP. PortPASS programs ease commuter traffic at land ports of entry byproviding dedicated commuter lanes to facilitate the speedy passage of low-risk, frequent travelers. Although enrollees in PortPASS are precleared for inspection purposes (i.e., they do not need tointeract with immigration or customs' inspectors at the border), they are subject to random cursorysearches. Although more commonly seen at land ports of entry, (48) A PortPASS program, theINS Passenger Accelerated Service System (INSPASS), is also used at selected international airports. INSPASS applicants must enter the United States on certain nonimmigrant visas (49) or under the Visa WaiverProgram. (50) Thenumber of travelers who took advantage of automated inspections has risen over recent years,peaking at 2.6 million in FY2002. Differences Between the Northern and SouthernBorders. The principal difference between the Northern and Southern borders froman immigration inspections perspective is the documentary requirements. Mexicans are required tohave the proper immigration documents. A special Mexican "laser visa" (formerly known as theMexican Border Crossing Card) is used by citizens of Mexico to gain short-term entry (up to sixmonths) for business or tourism into the United States. It may be used for multiple entries and isgood for at least 10 years. Mexican citizens can get a laser visa from the Department of State (DOS)Bureau of Consular Affairs if they are otherwise admissible as B-1 (business) or B-2 (tourism)nonimmigrants. Canadians, on the other hand, are waived from the documentary requirements. (51) These waivers, includingthe passport requirement, may be made on the basis of unforeseen emergency in individual cases,on the basis of reciprocity with respect to nationals of foreign contiguous territory, and for otherreasons specified in the law. Canadian citizens, except after a visit outside the Western Hemisphere,and American Indians born in Canada having at least 50% American Indian blood, are among thosewho currently are waived from the documentary requirements for admission. (52) In the past, the southwest border received more resources than its northern border counterpartas a result of a multi-year border patrol strategy that was implemented in 1994. The border patrolstrategy was aimed at strengthening enforcement of United States immigration laws and placed anemphasis on decreasing the number of illegal immigrants coming into the United States byincreasing controls at the nation's borders. Although the resources were primarily directed atstrengthening the border patrol along the southwest border, southwest ports of entry also havereceived additional resources aimed at increasing the number of immigration inspectors. Theterrorist attacks, however, brought attention to the northern border, which has historically beenunderstaffed and lacked the necessary infrastructure to adequately screen individuals seeking entryinto the United States. Several pieces of legislation passed in the 107th Congress authorized andappropriated funding for additional staffing and resources along the northern border. (53) <2.2. Customs Inspections> Primary Purpose. Customs inspections aim atensuring the efficient flow of legitimate cross-border traffic while simultaneously preventing theentry of illegitimate goods or people into the United States (54) They play a major role infederal efforts to interdict terrorists and their weapons; illegal drugs; and other contraband beingsmuggled into the United States. Customs inspections monitor goods being imported into the UnitedStates, including collection of duties and tariffs. Customs inspections also involve U.S. export law,in part, by interdicting the export of unreported currency from narcotics trafficking and other illicitactivities; preventing international terrorist groups and rogue nations from obtaining sensitive andcontrolled commodities; and interdicting stolen vehicles and other stolen property. The challengefaced by CBP is to achieve a sufficient level of security while not jeopardizing the efficient flow ofcommercial trade at the border. Given this framework it is important to understand that customsinspections serve two different, yet intertwined purposes: border security; and commercial entry. Commercial Import Process. Generally, importedgoods may not legally enter the commerce of the United States until CBP has authorized deliveryof the goods. The commercial import process can be described as a series of steps: entry, inspection,appraisement, and classification and liquidation. For the purposes of this report only the entry andinspection steps will be discussed. Importers or their agents are required to file entry documentation with CBP for eachimportation, regardless of whether duty must be paid on the merchandise. To expedite clearance oftheir goods, importers often file entry documents electronically and pay surety bonds before themerchandise arrives at the port of entry. Most importers choose to hire customs brokers to transacttheir customs-related business. Entry documents include proper bills of lading, entry forms,invoices, and evidence of the right to make entry. Importers or their agents must file entrydocumentation within five working days of the arrival of a shipment at the port of entry. Importersmust then file an entry summary and deposit estimated duties within 10 working days of the time thegoods are entered and released by CBP. Upon arrival at a port of entry, the goods are considered 'imported' and are examined by CBPinspectors for admissibility before being released from CBP custody. CBP inspectors are requiredto examine a sufficient number of shipments and entries of merchandise to determine whether: the merchandise is properly marked to denote country of origin or other specialdesignations required by law; the merchandise or shipment contains prohibitedarticles; the merchandise or goods in the shipment are properly described on theinvoice; an excess or shortage of invoiced merchandise or goods exists;and duty is owed on the imported merchandise or goods. Following examination, CBP typically releases the goods to the importer, usually under bond tocover potentially unpaid duties, taxes and other charges. The amount of duty owed is determinedby tariff classification and valuation of the goods. In a process known as liquidation, CBP inspectorsmake a final calculation of the importer's liability (duties and charges owed). CBP inspectors rely on targeting mechanisms and random inspections to conduct theirinspection operations. CBP uses preclearance, (55) primary inspections, and secondary inspections in order to helpidentify those passengers and cargo considered high-risk from a customs perspective. Cargo Targeting and Inspection. Customs-relatedbusiness is increasingly conducted electronically. Entry documents are often filed electronicallythrough the Automated Broker Interface (ABI). ABI is a part of the Automated Commercial System(ACS) used by Customs to track, control, and process all commercial goods imported into the UnitedStates (56) ABI is avoluntary program available to brokers, importers, carriers, port authorities, and independent servicecenters, that allows qualified participants to file import data electronically with CBP. According toCBP, over 96% of all entries are filed through ABI. (57) The carrier or the shipper (airline, vessel operating company,trucking company, etc.) must also file manifest information with the director of the port where thecargo is entering the United States. The importer or broker uses ABI to file the entry documents, andthe carrier or shipper uses the Automated Manifest System (AMS) to file manifest information. There are several variations or components of AMS: Sea or Vessel AMS, Air AMS, and Rail AMS. There is a varying level of automation with each system. The most automated mode is the VesselAMS, the least automated being the truck system, which does not have a separate AMS module inACS. (58) Once themanifest and the entry documents are filed, they are matched up by ACS. (59) A risk assessment system is employed to focus customs inspections on high risk shipments. The Automated Targeting System (ATS) automatically flags the shipments deemed to be the highestrisks. ATS standardizes bill of lading and entry summary data received from ACS and createsintegrated records called "shipments." These shipments are then evaluated and scored by ATS usingweighted rules derived from the targeting methods of experienced personnel. The higher the score,the more attention the shipment requires, and the greater the chance it will be targeted for secondaryinspection. ATS sorts through records stored in a database containing detailed information on everyshipment that has entered the United States in the past 10 years. According to CBP, all nationalsecurity related targeting using ATS is done at CBP's National Targeting Center (NTC). When ahigh risk shipment is flagged by the NTC, this information (flag) is sent out to the field terminals sothat when an inspector at the border pulls up information on the shipment the flag is displayed andthe inspector will target the shipment for further inspection or review. Customs inspections are dependent on accurate manifest information arriving in a timelymanner in order to execute the risk assessment and targeting procedures before shipments reach theborder. To give inspectors adequate information and time to perform a risk assessment on cargoshipments, legacy Customs published a rule (known as the 24-hour rule) (60) requiring the submissionof certain manifest information to Customs 24-hours in advance of the vessel cargo being laden atthe foreign port. The Trade Act of 2002 ( P.L. 107-210 ), as amended by the Maritime TransportationSecurity Act of 2002 ( P.L. 107-295 ), required CBP to develop rules requiring the electronicsubmission of cargo manifest data. These new rules were published in their final version December5, 2003. (61) The newadvanced electronic manifest rules will require the electronic submission of cargo manifest dataaccording to the following time frames: Vessel -- 24 hours prior to lading in the foreign port; Air -- 'wheels up' or four hours prior to departure for the United States(depending upon where the flight originated); Rail -- two hours prior to arrival in the United States; Truck -- one hour prior to arrival for shipments entered through PAPS or ABI,and 30 minutes prior to arrival for shipments entered through FAST. While the enforcement of these regulations is currently rolling out in phases, the intent is that everyadvance manifest will be run through the ATS at the NTC before each shipment reaches a U.S. portof entry. Modal Differences. While the commercial importprocess is relatively uniform in terms of documentary requirements, differences in the level ofautomation in the AMS system lead to differences across the modes of transportation dependingupon whether the shipment is arriving by truck, railcar or by vessel. As mentioned above, the air,sea, and rail AMS modules are well automated, and thus targeting and commercial processing hasbeen conducted electronically through the process outlined above. Truck cargo entry is the least automated of all the modes and many truck drivers must presentCBP inspectors at the border with paper entry documents as they arrive at the inspection booths. TheCBP inspector reviews these documents, questions the driver, and decides whether or not to directthe truck to secondary inspection. The CBP inspector will collect any owed duties and release thecargo into the United States if he is satisfied with the documentation. ABI is functional at the land border for truck entry, and thus importers or customs brokerscan electronically pre-file entry documentation for truck shipments. Because there is no truck AMSmodule, however, most truck carriers do not file manifest information electronically. Automatedline release programs do exist at the northern and southern borders. For example, the Border ReleaseAdvanced Selectivity System (BRASS) allows drivers to present a pre-assigned bar code, along withthe invoice and manifest. The CBP inspector scans the bar code, verifies that the informationmatches the invoice data, enters the quantity and releases the cargo. The release data is thensubmitted to ACS which establishes an entry and the entry summary requirements, and notifies theABI participant of the release. As part of the Customs-Trade Partnership Against Terrorism (C-TPAT, which is discussedlater in this report) and Canada's Partners in Protection programs, the United States and Canadalaunched a bilateral initiative known as Free and Secure Trade (FAST) to establish complimentaryimport/export processes. Under FAST, both countries are working to harmonize their inspection andcommercial operations at the border. Expanding upon earlier initiatives that allow for the electronicsubmission of entry documents and, thus, result in expedited cargo releases, the FAST programallows major importers and their carriers to use dedicated inspection lanes. The electronic cargorelease system currently employed as part of FAST is the National Customs Automated Prototype(NCAP). As a module of the ACS, the Pre Arrival Processing System (PAPS) has been developedto replace NCAP and was brought online in FY2003. PAPS interacts with the Border CargoSelectivity program and the ATS to randomly select cargoes for examination to check forcompliance. The security of cargo containers loaded onto U.S.-bound vessels has been of significantconcern. (62) To beginaddressing this concern, the Container Security Initiative (CSI) was initiated by the former U.S.Customs Service in January of 2002 to "prevent global containerized cargo from being exploited byterrorists." CSI is one of a series of initiatives aimed at securing the supply chain. The rationalebehind CSI is that finding a nuclear weapon or a radiological "dirty bomb" at a U.S. port could betoo late. CSI is based around four core elements: developing criteria to identify high-risk containers; pre-screening high-risk containers at the earliest possible point in the supply chain; using technologyto pre-screen high risk containers quickly; and developing and using smart and secure containers. Under the CSI program, CBP officers are sent to participating ports where they collaborate with hostcountry customs officers to identify and pre-screen high-risk containers using non-intrusiveinspection technology before the containers are laden on U.S. bound ships. CBP has initiallytargeted CSI on the top 20 high-volume ports that account for nearly 70% of all containers shippedto U.S. seaports. As of September 2003, governments representing 19 of these 20 ports had signedagreements to implement CSI; and CSI had actually been implemented in 16. (63) Physical Inspection of Cargo. Cargo shipments maybe targeted or randomly selected for a secondary inspection for both security and trade compliancepurposes. This secondary inspection could involve: a more detailed document check; passing thecontainer through a radiation portal monitor; taking an x-ray or gamma ray image of the contents ofthe container; and/or the physical unloading and examination of the cargo itself. (64) CBP has deployed a number of non-intrusive inspection (NII) technologies at ports of entryto assist customs inspectors with the inspection of cargos. Large scale NII technologies include anumber of x-ray and gamma ray systems. The Vehicle and Cargo Inspection Systems (VACIS),which uses gamma rays to produce an image of the contents of a container for review by the CBPinspector, can be deployed in a mobile or stationary capacity depending upon the needs of the port. CBP has also deployed a rail VACIS system to screen railcars. Other large scale NII systems includetruck x-ray systems, which like the VACIS can be deployed in either a stationary or mobileconfiguration; the Mobile Sea Container Examinations Systems; and the Pallet Gamma Ray System. CBP is also continuing to deploy nuclear and radiological detection equipment including personalradiation detectors, radiation portal monitors, and radiation isotope identifiers to ports of entry. According to recent CBP figures, in FY2003, NII technology was used at ports of entry to conductmore than 4.8 million examinations, which resulted in 2,190 seizures totaling more than 1.1 millionpounds of narcotics. (65) Various canine teams are also deployed at ports of entry to assist in the inspection of cargoand passengers. CBP uses canine teams trained to detect several types of contraband includingnarcotics, explosives, chemicals, and currency. Passenger Targeting and Inspection. Customspassenger inspection is concerned with collecting duties on imported items brought into the countryalong with preventing the entry of contraband. A typical Customs primary inspection consists of aninterview in which individuals may be asked about their citizenship, their trip, and about any goodsthey may be bringing into the country that they did not have when they departed. Individualsentering the United States via land border crossing are required to make a verbal declaration. Individuals arriving in the United States by air or sea are required to fill out a Customs declarationform. These forms are usually provided by the airline or the cruise ship. The Customs declarationform requires individuals to provide certain personal information (e.g., name, date of birth, place andcountry of residence, passport information) and information about the nature of the trip (countriesvisited, airline or cruise ship information, nature of the trip: business or pleasure). The Customsdeclaration form also requires information concerning goods an individual is bringing into thecountry. Duty may be assessed on the value of goods exceeding personal exemption limits. Theprimary inspection for individuals arriving by air or sea will include a review of the Customsdeclaration as a part of the interview process. Based upon the results of the primary inspection, someindividuals may be referred to secondary inspection. Customs inspections are based upon a number of factors (e.g., behavioral analysis,observational techniques, inconsistencies, intelligence information, canine units, x-ray machines, andincidence of a seizure or arrest) to determine which individuals should be targeted for more intensivescrutiny. (66) Thesecondary inspection could involve a more thorough interview and review of identification and traveldocuments, baggage inspections, and under prescribed circumstances personal searches. Customs inspection currently relies on the Advance Passenger Information System (APIS)to screen passenger and crewmember lists prior to their arrival in or departure from the U.S, if theyare arriving by air or sea. At the land border, where Customs inspections do not have advancepassenger information, CBP has deployed license plate readers to assist them in targeting vehiclesand their passengers for additional inspection. (67) For example, when a passenger vehicle approaches a land borderport of entry, license plate readers automatically locate, read and communicate vehicle license platedata to the Treasury Enforcement Communication System (TECS) and the National CrimeInformation Center (NCIC) for possible record matches. (68) The primary inspectors at the port of entry receive instantaneousresponses from TECS. As of September 2003, CBP had installed 201 inbound and 50 outboundlicense plate readers on the southern border; and 104 inbound license plate readers on the northernborder. (69) Smuggling. The primary mission of CBP is toprevent terrorists and terrorist weapons from entering the country. However, other components ofCBP's mission include interdicting other prohibited items such as illegal drugs, ammunition,firearms, and counterfeit goods; and monitoring trade compliance. Theoretically, every person orconveyance crossing the border presents an opportunity for smuggling. The statistics in AppendixC illustrate the aggregate size of the so-called "smuggling window of opportunity." Appendix D provides data on Customs narcotics seizures from FY1997-FY2002. In addition, during FY2002Customs officers made 12,570 arrests, and seized 6.4 million rounds of ammunition, nearly 40thousand firearms, 7.5 million tablets of the drug "ecstasy," over $1.3 million worth of merchandise,and more than $60 million in counterfeit goods. Differences Between the Northern and SouthernBorder. Operational differences between Customs inspections on the northern andsouthern borders arise due to several factors. One is simply the nature of the cross-border traffic thatpredominates at ports of entry along each border. The ports of entry on the southern border mustdeal with a significantly greater amount of pedestrian and personal vehicle traffic than the northernborder; while the northern border contends with considerably more commercial traffic than does thesouthern border. Appendices E and F in this report illustrate these differences. For example, thetotal number of personally operated vehicles entering the United States crossing the southern andnorthern borders for Calendar Year (CY) 2002 was nearly 122.3 million. Of this total 89.8 million,or 73% entered across the southern border, while 32.5 million or 27% entered across the northernborder. Of the 11.3 million freight truck crossings in CY2002, 6.9 million or 61% entered acrossthe northern border, while 4.4 million, or 39% entered across the southern border. Of the 2.4 millionrail freight crossings, 1.8 million or 75% entered across the northern border. Operational differences at the northern and southern borders are also caused by differentlevels of progress that have been made on the bilateral agreements between the United States andCanada and the United States and Mexico. October 2, 2003, a progress report was issued on theUnited States-Canada Smart Border Declaration (signed December 12, 2001). FAST is a jointprogram for low-risk companies that allows for the expedited movement of shipments across thenorthern border in both directions. The United States-Canada Smart Border Declaration alsoincludes other efforts to harmonize commercial processing, conduct clearance operations away fromthe border, develop joint facilities, share customs data, improve container targeting at seaports,address infrastructure improvements, and develop intelligent transportation systems, among others. On March 22, 2002 President Bush and President Fox of Mexico met and endorsed theUnited States-Mexico Border Partnership accord that was signed by Santiago Creel, Secretary ofGovernance, and Colin Powell, Secretary of State. The accord was accompanied by a 22-pointaction plan that included several customs-related items similar to those contained in the UnitedStates-Canada Smart Border Declaration. On April 23, 2003, the Department of Homeland Securityissued a joint statement on progress achieved on the United States-Mexico Border Partnership. (70) Three working groupshave been created to develop and implement initiatives identified in the 22-point plan: the BorderWorking Group, the Enforcement Working Group, and the Technology and Customs ProceduresWorking Group. Another indicator of progress in cooperation is that as of September 2003, FASThas become operational at one commercial crossing along the southern border (El Paso). <2.3. Animal and Plant Health Inspections> Primary Purpose. Animal and plant healthinspection contributes to national security by preventing the entry of exotic plant and animal pestsand diseases. Such pests and diseases pose a potential threat to domestic agricultural production,particularly in the fruit, vegetable and livestock sectors. Traditionally, these inspections have dealtwith all possible threats, regardless of whether they are deliberately or accidentally introduced. SinceSeptember 11, 2001, and the anthrax incidents, more attention has been given to preventing entryof agricultural pests and diseases that might be used as bioterrorism or agroterrorism agents againstU.S. agricultural and natural resources. Agricultural inspection occurs at U.S. borders, ports of entry, inland sites, and off-shorelocations. Inspections cover passengers arriving by vehicle, airplane, and ship, cargo andinternational mail, and commercial aircraft, vessels, trucks, and railcars. Inspection methods includehuman sensory examination, X-ray, and detector dog inspection, along with examination ofdocuments accompanying incoming cargo to assure compliance with health and trade agreements. Some agricultural items may be allowed to enter from certain countries but not others. Thesedeterminations are based on scientific risk assessments which are updated regularly using currentlyavailable information. Forbidden fruits and vegetables may harbor a range of invasive plant diseases and pests. Forexample, oranges from certain foreign locations can introduce diseases like citrus canker or pests likethe Mediterranean fruit fly. Similarly, sausages and other meat products from many countries cancontain animal disease organisms that can live for many months and even survive processing. Meatscraps from meals on foreign ships and airplanes could contaminate domestic livestock feed sourcesif not properly disposed of. Foot and mouth disease (FMD), a debilitating livestock disease, can betransmitted on footwear or clothing if passengers passed through FMD-affected areas. Outbreaksof plant and animal diseases can cost millions of dollars to eradicate, jeopardize U.S. agriculturalexports, disrupt domestic food supplies and industries, and erode public confidence in both the safetyof food and the government's ability to safeguard it. The transfer of approximately 2,680 APHIS inspectors to CBP accounts for about two-thirdsof the Agricultural Quarantine Inspection (AQI) program's personnel, and one-third of APHIS' totalstaffing. DHS personnel inspect international arrivals of passengers and their baggage, importedcargo and international package mail, and international conveyances. While combining agriculturalinspections with other border security activities can increase the number of inspectors who canmonitor the border for prohibited agricultural products, it requires diligence to maintain adequateagricultural inspections in light of more general customs and immigration concerns. Inspection Procedures. As with other inspectionfunctions by former Customs and INS personnel, animal and plant health inspectors use a "smartborder" or risk assessment approach to identify which people or containers to inspect. Intelligencebased on documents and advance notice frequently can add security away from the United States andmake the actual border more fluid for legitimate trade and immigration. Passenger Inspection. The passenger inspectionprogram utilizes a uniform inspection process at land, sea, and air ports of entry. Passenger baggageis inspected on a random basis, and also from information that passengers provide on declarationforms. Inspectors also speak with travelers at primary inspection stations to ascertain where theyhave come from and what agricultural and food products they may be carrying. Based on the pointof departure, inspectors judge whether passengers are more likely to be carrying, for example,prohibited fruit, spices, cheese, or meat. All agricultural products are subject to inspection and areconfiscated if they are found to be infested or are prohibited entry due to known pest and diseaserisks. To focus attention on the highest risk passengers, agricultural inspections are coordinatedwith other inspection functions, either physically or through intelligence sharing. Before DHS wascreated, APHIS cooperated with other inspectors through the Border Passenger Processing Initiative. The majority of passengers cleared through the system without delay. APHIS, Customs, INS, andthe State Department examined passenger lists and checked them against past violators and otherdata to determine the most effective targets for inspection. Inspector dog teams (commonly knownas the "beagle brigade") roam the baggage arrival areas and can effectively determine the presenceof agricultural products without opening individual bags. APHIS also uses x-ray technology toquickly screen certain targeted baggage. Pre-clearance of passengers is sometimes more feasible than inspection at ports of entry. Passenger pre-clearance responsibilities were not transferred to DHS. Passengers departing Hawaiiand Puerto Rico for the mainland pass through an APHIS pre-departure inspection. Even though partof the United States with respect to immigration and customs, these offshore locations could presentagricultural threats to the mainland. APHIS also operates passenger pre-clearance programs inBermuda, the Bahamas, Aruba, and at four cities in Canada (Montreal, Toronto, Vancouver, andCalgary). U.S. inspectors pre-clear passengers passing through Canada on their way to the UnitedStates, since Canadian passengers typically would not face the same level of agricultural inspectionat U.S. ports of entry. A pre-clearance program for military passengers expedites the arrival ofsoldiers returning from countries that have pests that could harm domestic agriculture. Cargo Inspection. Cargo shipments are targetedfor efficient inspections based on manifest descriptions of the containers. This assessment occursat ports of entry and, more commonly, at departure ports. Notification while in transit, especiallyfor ships, allows inspectors to target certain shipments upon arrival at port. Inspectors board ships, planes, rail cars, and trucks in order to thoroughly inspect shipments. In some cases, products are off-loaded at secure warehouses for a more thorough "strip-out"inspection. In addition to inspecting agricultural products, inspectors also examine shipments of autoparts or other products arriving in crates or pallets containing solid wood packing material that couldcontain harmful wood-boring pests. USDA personnel also typically oversee, and sometimes carryout, any necessary fumigation of agricultural cargo at ports of entry. In addition to visual, x-ray, and detector dog inspection, APHIS is adapting new technologiesfor finding biological agents in cargo shipments. The Ruggedized Advanced Pathogen IdentificationDevice (RAPID) is a handheld instrument that can identify pathogens in the field within 30 minutesinstead of up to several days in the laboratory. RAPID is currently being tested for possible use atports of entry. Pre-clearance of cargo adds to the security of agricultural inspections and reduces the demandon inspectors at the borders. Commodity pre-clearance activities were not transferred to DHS. Oftenit is more practical and effective to check and monitor commodities for pests or diseases at thesource. The goal is to intercept destructive pests in their native lands before being transported to theUnited States. APHIS has special arrangements with a number of countries and has a corps ofexperts stationed overseas to supplement domestic inspectors. APHIS conducts 35 commoditypre-clearance programs overseas including, for example, mangoes from Mexico, blueberries fromArgentina, bulbs from the Netherlands, and grapes from Chile. Many of the programs are seasonal. Importers pay for pre-clearance through user fees. Some agricultural commodities require inspection only prior to departure for the UnitedStates. Pre-cleared commodities are less likely to require intensive inspections at the port of entry,although they may be subject to random inspection and/or checks to ensure compliance with anyother mitigating steps that were required to take place between the time of the pre-clearanceinspection and arrival at the port of entry. Other commodities, however, require treatment beforethey can be cleared for entry. The most common types of pre-clearance treatments include hot waterimmersion, cold treatment, and fumigation. In addition to traditional cargo, food and garbage from international flights and cruises cancarry pests and diseases that could harm U.S. agriculture. All international trash must be handledand disposed of according to APHIS regulations. Inspectors regularly examine international modesof conveyance and consult with airlines, cruise lines, ship and rail companies to ensure that trash isbeing properly handled and discarded. Problems identified during these inspections can lead tocitations for violations. Smuggling and Trade Compliance. A SmugglingInterdiction and Trade Compliance staff (about 120 people) is part of APHIS' port operationspresence. This team monitors pathways through which prohibited products can enter the UnitedStates and cooperates with law enforcement officials to conduct unannounced inspections "blitzes"at markets, warehouses, and ports of entry. They seize prohibited items and help prosecutesmugglers. In FY2002, the staff seized 6,000 kilograms of prohibited plant products and 9,000kilograms of prohibited animal products. Difference Between Northern and SouthernBorders. Agricultural inspections are generally uniform at the land border crossingswith Canada and Mexico. Many of the pests and diseases of concern to agriculture have potentialpathways into the United States through both the northern and southern borders. For example, whileCanada cannot grow citrus in its colder climate, it does allow imports of tropical fruit from countrieswith known fruit fly populations, and thus is of concern to U.S. agriculture. Other pests and diseases vary between Canada and Mexico and necessitate differentprocedures. For example, live cattle being imported from Mexico are dipped in an insecticide bathprior to entry into the United States to prevent entry of exotic ticks. At the northern border, importsof cattle and beef products currently are prohibited due to BSE (mad cow disease) restrictions. Thesedifferences, however, are based on risk assessments of pest and disease differentials rather than theinherent location of the border. Similar differences in inspections or prohibitions apply to cargo andpassengers arriving from various international locations. <2.4. Related Policies and Procedures> While the focus of this report is border inspections, there are a few related policies andprocedures that warrant discussion because they are integral to the CBP inspections process. TheTransportation Security Administration (TSA) has responsibility for aviation security. The USDAretains a key policy role in plant and animal inspections. The Department of State's (DOS) Bureauof Consular Affairs issues the visas that enable foreign nationals to enter the United States. TheDepartment of Health and Human Services (HHS) sets the policies on screening travelers forcommunicable diseases. There are important Customs initiatives that aim to streamline inspectionsby securing the cargo and supply chain. These related policies and procedures are briefly discussedbelow. (71) Aviation Security. Among its many homelandsecurity responsibilities, TSA is the lead agency for airport security, air cargo security, baggagescreening and passenger pre-screening -- duties that extend well beyond the international air portsof entry. Established by legislation passed two months after the September 11, 2001 terrorist attacks,TSA is now located in BTS alongside CBP. TSA officials state that their first priority is to protectair travelers, and to do so they have set into place a system of reinforcing rings of security to mitigatethe risk of future terrorist or criminal acts. These security measures cover air traffic from curbsideto cockpit, supported overall by intelligence and threat analysis. (72) TSA relies on the Computer Aided Passenger Pre-Screening (CAPPS) system as a threatassessment tool for airline passengers. Since 1996, CAPPS analyzes data on ticket purchasingbehavior to identify air travelers who may pose a threat. The implementation of the secondgeneration, CAPPS II, is caught up in privacy protection and civil liberty concerns. In terms of aircargo, TSA reportedly is designing a random, threat-based, risk-managed freight screening processand continues to develop an automated and enhanced "known" shipper program. TSA estimates that2.8 million tons of cargo transported per year is now secured on passenger planes and 9.7 milliontons on cargo planes. (73) Agencies Conducting Agricultural Inspections. The Agricultural Quarantine Inspection (AQI) program of the USDA Animal and Plant HealthInspection Service (APHIS) is considered the most significant and prominent of agricultural and foodinspections. Because of this prominence, AQI was one of the many programs selected for inclusionwhen the Department of Homeland Security was created. A legislative compromise duringdeliberations on the legislation creating the new department transferred only the border inspectionfunction of APHIS, leaving other activities at USDA as described below. Even though the border inspection function of APHIS has moved to DHS, USDA-APHISretains a significant presence in border inspection activities. The nearly 1,300 AQI employees whowere not transferred continue to conduct certain domestic inspection functions, such as monitoringentry to the mainland from Hawaii and Puerto Rico. They continue to set agricultural inspectionpolicies to be carried out by DHS border inspectors, including determining what agriculturalproducts are allowed to enter the United States and what items are to be denied entry. APHISprovides training to DHS inspectors regarding agricultural inspections, manages the data collectedduring the inspections process, and monitors smuggling and trade compliance. APHIS alsocontinues to pre-clear certain commodities, inspect all imported propagative material, monitoranimals in quarantine, and conduct certain other port activities such as fumigations. To assure thatnecessary agricultural inspections are conducted, APHIS negotiates memoranda of understanding(MOUs) with DHS. Separating duties this way is intended to allow a consolidated border inspection function withcustoms and immigration personnel for intelligence and security goals, but preserves USDA'sexpertise and historical mission to set agricultural import policies to protect American agriculture. While APHIS is responsible for protecting the health of U.S. agriculture, other agencies suchas the USDA Food Safety and Inspection Service (FSIS) and HHS' Food and Drug Administration(FDA) focus on protecting public health. At ports of entry, FSIS and FDA personnel inspectshipments of food and food products imported into the United States from abroad to ensure that thefood and related products meet U.S. standards and do not present any risk to public health. As anexample, AQI personnel may inspect a shipment of sausage casings to ensure that the shipment doesnot pose any animal health risk, while FSIS personnel may inspect the same shipment to ensure thatthe product was prepared in an approved processing facility. The Department of Interior Fish andWildlife Service (FWS) inspects international cargo, baggage, passengers, and mail to enforce U.S.and international laws regarding trade in endangered and protected species. This report is limited,however, to agricultural inspections conducted by DHS and the continuing role of USDA-APHIS. Visa Procedures. Foreign nationals not alreadylegally residing in the United States who wish to come to the United States generally must obtaina visa to be admitted. (74) There are two broad classes of aliens that are issued visas: immigrants and nonimmigrants. (75) The Department of State'sBureau of Consular Affairs (Consular Affairs) is the agency responsible for issuing visas. DHS isresponsible for formulating regulations on visa issuances and may assign staff to consular postsabroad to advise, review, and conduct investigations. (76) DHS's United States Bureau of Citizenship and ImmigrationServices (USCIS) is charged with approving immigrant petitions, a prerequisite for obtaining a visato become a legal permanent resident. (77) The documentary requirements for visas are stated in 222 ofthe INA, with some discretion for further specifications or exceptions by regulation, most notablythe Visa Waiver Program. (78) All aliens seeking visas -- prospective immigrants and nonimmigrants -- must undergoadmissibility reviews performed by DOS consular officers abroad. (79) These reviews areintended to ensure that they are not ineligible for visas or admission under the grounds forinadmissibility, which include criminal, national security, health, and indigence grounds as well aspast violations of immigration law. As a result, all aliens arriving with visas have had backgroundchecks. For the past several years, moreover, Consular Affairs has been issuing machine-readablevisas. By October 2004, all visas issued by the United States must use biometric identifiers (e.g.,finger scans) in addition to the photograph that has been collected for some time. (80) Protection Against Communicable Diseases. TheCenters for Disease Control (CDC) in HHS take the lead in protection against communicablediseases at the border. (81) A medical examination is required of all aliens seeking to come as legal permanent residents (LPRs)and refugees, and may be required of any alien seeking a nonimmigrant visa or admission at the portof entry. As noted earlier, an immigration inspection includes a determination of whether the alienis inadmissible due to a health-related condition. The diseases that trigger inadmissibility in the INAare acquired immune deficiency syndrome (AIDS) and those communicable diseases of public healthsignificance as determined by the Secretary of HHS. Those diseases currently barred by regulationare: cholera, diphtheria, infectious tuberculosis, plague, smallpox, yellow fever, viral hemorrhagicfevers (Lassa, Marburg, Ebola, Crimean-congo, South American, and others not yet isolated ornamed), and severe acute respiratory syndrome (SARS). Aliens are also required to havevaccinations against vaccine-preventable diseases, including mumps, measles, rubella, polio, tetanus,diphtheria, pertussis, influenza type B and hepatitis B. (82) CDC officials are not present at the border on a day-to-day basis, but there are quarantinestations located in the international airports in New York, Chicago, Miami, Atlanta, Los Angeles,San Francisco, Seattle, and Honolulu. The CDC, through their Division of Global Migration andQuarantine, train CBP inspectors to watch for ill persons and items of public health concern, andthey work with state and local health officials in jurisdictions that may be affected under particularcircumstances. They have been available at the border during immigration emergencies and otherperiods when public health may be threatened. (83) Cargo and Supply Chain Security. In order tomaximize its inspection resources, CBP has launched several initiatives focusing on enhancing thetargeting of high-risk shipments, and securing the entire supply chain from point of origin to finaldestination. One of these initiatives is the Customs-Trade Partnership Against Terrorism (C-TPAT). Initiated in April 2002, C-TPAT offers importers expedited processing of cargo if theycomply with CBP requirements for securing their entire supply chain. In order to participate in theC-TPAT, businesses must sign an agreement that commits them to the following actions: conducta comprehensive self-assessment of supply chain security using the C-TPAT security guidelinesjointly developed by CBP and the trade community; submit a supply chain security profilequestionnaire to CBP; develop and implement a program to enhance security throughout the supplychain in accordance with C-TPAT guidelines; communicate C-TPAT guidelines to other companiesin the supply chain; and work toward building the guidelines into relationships with these companies. <3. Border Inspection Trends by Ports and Modes of Entry> Border inspections conducted each year number in the hundreds of millions. As Figure 1 depicts, the number of passenger inspections peaked in FY2000. Since immigration and customsinspectors were cross-designated, it appears that an unknown number of passengers were enumeratedin the data of both INS and Customs. Prior to the establishment of CBP, immigration inspectors didmost passenger inspections, followed by customs inspectors. Agricultural inspections were a distantthird, but APHIS still completed 44 million animal and plant inspections of passengers in FY2002. Unlike customs and immigration inspections data, APHIS data enumerate only those passengersreferred to secondary inspections for the purpose of an agricultural inspection. In FY2003, CBPreported that they inspected 412.8 million passengers. Analyses of workload trends prior to the establishment of DHS follow for each major typeof inspection -- immigration, customs, and agricultural inspections. Unless otherwise noted, the dataanalyses are based on data provided by the "legacy" agencies of the U.S. Immigration andNaturalization Service (INS), U.S. Customs Service and U.S. Department of Agriculture (USDA). Figure 1. Passenger Inspections, FY1998-FY2002 <3.1. Immigration Inspections Data> In FY2000, 534 million travelers were inspected at U.S. ports of entry, a peak year forimmigration inspections. The number declined following the September 11, 2001 terrorist attacks,reducing the FY2001 total to 511 million and the FY2002 total to 448 million ( Figure 1 ). Thenumber of travelers referred to secondary inspections began to rise in FY2000, peaking at over 10million in FY2002 ( Figure 2 ). As Figure 2 indicates, however, the number of persons denied entryhas held steady from FY1998 to FY2002, during which an average of less than 1% of all travelers(and about 10% of all people referred to secondary) were denied entry. Figure 2. Immigration Inspections: Secondary Referrals and Denials Although the primary mode of travel into the United States is through land ports of entry, airand sea ports of entry have their share of travelers seeking entry into the country. Collectively, landports of entry in Texas and California led all other states with respect to the number of travelersinspected ( Figure 3 ). With respect to air ports of entry, New York, Miami and Los AngelesInternational Airports accounted for 32% of all inspections in FY2002 ( Figure 4 ). Sea ports of entryaccount for the smallest percentage of travelers seeking entry into the United States. Land Ports of Entry. The majority of travelers(approximately 80%) enter the United States at a land port of entry. Land ports of entry are oftenreferred to based on their geographic proximity to the northern or southwest border. Over the years,the southwest border has seen the highest volume of travelers seeking entry into the United States,as Figure 3 illustrates. Three southwest ports of entry made up five of the busiest ports of entrybetween FY1998 and FY2002. Those southwest ports of entry -- located in Texas, California andArizona -- accounted for over 70% of all inspections at the five busiest land ports of entry inFY2002. Figure 3. Top Five Busiest Land Ports of Entry by State CBP inspectors at land ports of entry must be cognizant of individuals attempting to smuggleillegal aliens into the country. (84) In FY2002, a little over 68,000 illegal aliens were caught beingsmuggled into the United States at land ports of entry, primarily along the southwest border. (85) Air Ports of Entry. In FY2002 air ports of entryaccounted for 15% of travelers who sought entry to the United States. Although the number ofpersons seeking entry at air ports of entry is relatively small in comparison to land ports of entry, theinspection process can be more complicated due to the diverse population seeking admission to theUnited States. As Figure 4 illustrates, California's airports had the largest volume of immigrationinspections, from FY1998 to FY2002, followed closely by Florida and New York. Texas held steadyat fourth place with Illinois and New Jersey competing for fifth place. Figure 4. Top Five Busiest Immigration Airports of Entry by State Prior to passage of IIRIRA, which mandated the DOJ to develop an automated entry and exitdata system to replace the manual system, (86) immigration inspectors at air ports of entry have long collectedthe I-94 form from aliens. The I-94 form is usually given to aliens while in transit to the UnitedStates and contains information such as the alien's identification and an address where the alien willbe staying while in the United States. After reviewing the alien's travel document and interviewingthe alien, the immigration inspector determines how long the alien can stay in the United States. Thelength of stay and immigration classification, both determined by the immigration inspector, isevident on a completed I-94 form. The information on the I-94 form is later put into theNon-Immigrant Information System (NIIS). (87) Although the I-94 form is routinely collected at air ports of entry,reportedly it is rarely collected upon exit. At this point it is not clear how the implementation ofUS-VISIT will affect NIIS and the use of the I-94 forms. Sea Ports of Entry. Immigration statistics for seaports of entry are separated into two categories: seaports and cruise ships. The two categories arefurther divided to reflect the number of U.S. citizens, aliens and crew personnel that were inspected. The majority of vessels are passenger cruise ships, mainly consisting of U.S. citizens. Similar toaliens entering the United States at an air port of entry, aliens who seek entry at a seaport mustsubmit an I-94 form prior to arrival at a sea port of entry. In FY2002, inspections at seaports and oncruise ships accounted for less than 1% of all travelers seeking entry into the United States. Floridaconsistently ranks as the state with the largest volume of immigration inspections at seaports. Figure 5. Top Five Busiest Sea Ports of Entry by State Inspection of Alien Crew Members. Alien crewmembers are inspected at air ports of entry usually at a separate location from the general public. According to INS Inspector's Field Manual, "at air ports of entry it is the general practice to expeditethe admission of arriving crewmen." With respect to sea ports of entry, alien crew members arrivingon vessels, like alien passengers, must submit an I-94 form prior to arrival at a sea port of entry. <3.2. Cargo Inspections Data> In FY2002, customs inspectors processed the importation of cargo valued at $1,183 billion,with most of the cargo (11.2 million conveyances) arriving by truck. Railcars (2.4 millionconveyances in FY2002) were the second most used conveyance, followed by vessels (0.2 millionconveyances in FY2002). Those vessels, however, include multiple cargo containers (7.3 millionin FY2002). Figure 6 illustrates the volume of cargo processed by the U.S. Customs Service forFY1998-FY2002. Appendix D provides more detail on the data presented in Figure 6 . Data on the number of cargo containers physically inspected by CBP were not available forinclusion in this report. The Commissioner of CBP, Robert Bonner, testified that two years ago that9% of rail containers, 2% of sea containers, and 10.3% of trucks entering the United States wereinspected either intrusively or non-intrusively. According to his testimony these numbers currentlystand at 22.6% of rail containers, 5.2% of sea containers, and 15.1% of trucks entering the UnitedStates. Commissioner Bonner testified that across all modes of transportation CBP is currentlyinspecting approximately 12.1% of all cargo containers entering the United States; up fromapproximately 7.6% two years ago. (88) Figure 6. Customs Cargo Processed by Type of Conveyance Cargo Inspections at Airports. Customsprocessed approximately 770,000 commercial aircraft, and approximately 210,000 private aircraftin FY2002, as noted in Appendix D . According to data from the Airports Council International, thetop ten United State airports by volume of international cargo for FY2002 were: Memphis (MEM),Los Angeles (LAX), Anchorage (ANC), Miami (MIA), New York (JFK), Louisville (SDF), Chicago(ORD), Indianapolis (IND), Newark (EWR), and Atlanta (ATL). Cargo Inspections at Seaports. In FY2002,Customs processed 7.3 million vessel cargo containers. Appendix C provides port level data forthe top 10 U.S. Container Ports from 1995-2002. In FY2002, the top 10 U.S. Container Portsaccounted for 84% of the total volume of 20-foot equivalent units (TEU's) moving through all U.S.seaports. Los Angeles handled the highest volume of TEU's, accounting for 21% of the total. Cargo Inspections at Land Ports. As discussedearlier, over 11 million trucks carrying cargo were processed by customs inspectors. In FY2002, thebusiest land port was Detroit, Michigan, with 1.7 million trucks crossing accounting for 24% of thetruck crossings at the northern border. Laredo, Texas, was the busiest POE for truck crossing alongthe southern border, with 1.4 million truck crossings. Northern POEs overall handled more truckcrossing than southern POEs, and Figure 7 illustrates the number of truck crossings at the northernand southern border for FY2000-FY2002. Appendices F and G include data on the total numberof trucks processed by Customs for FY1997-2002. Figure 7. Trucks Conveying Cargo, 2000-2002 In FY2002 Customs processed 2.4 million railcars. As indicated by Figure 8 , which depictsrailcar crossings at the northern and southern border for FY2000-FY2002, most of the railcarcrossing were with Canada. The data, tabulated by Bureau of Transportation Statistics, include bothloaded and unloaded railcars. For FY2002 the top five ports accounted for 72% of total railcarcrossings along the northern border. At the southern border, the top five ports accounted for 98%of the total crossings. Appendices F and G include data on the total number of railcars processedby Customs for FY1997-FY2002. Figure 8. Railcars Conveying Cargo, 2000-2002 <3.3. Animal and Plant Health Data> Inspection Statistics. APHIS collects data on theinspections process through its Work Accomplishment Data System (WADS). Three types ofstatistics are particularly important for assessing the inspections process. (1) An inspection is asecondary level interview of a person or examination of his/her baggage based on entrancedocuments, detector dog identification, or random selection at a primary inspection station. X-rayor visual examination of baggage contents may occur. For cargo and international mail, aninspection occurs when the shipment is opened or x-rayed. (2) An interception is the identificationof items having quarantine significance that may be confiscated or transferred to another APHISfacility for subsequent evaluation or treatment, depending on the cargo. (3) A violation is countedwhen goods are found to be misrepresented on documents, import rules were violated, or items wereotherwise attempted to be smuggled. Ships or aircraft can incur violations for not following certainarrival procedures or for improper handling of garbage. Since APHIS uses a targeted inspection approach, it may be somewhat misleading to presenta ratio of goods or people inspected from the entire pool of international arrivals. The actualpercentage of all entries inspected would appear unusually small since only higher-risk entrants areinspected. By using intelligence and risk assessment models, the subset of passengers or goodstargeted for inspection should have notably higher rates of interceptions and violations than the entirepool of arrivals. Also, preclearance of certain cargo shipments removes another subset of importsfrom the same need for inspection at ports of entry. Finally, because APHIS tabulates cargoinspection statistics by bill of lading rather than by weight or value, an overall ratio of goodsinspected is infeasible to compute and would lack meaning. Thus, the percentages presented beloware interceptions or violations among the subset chosen for inspection. In general, about 2%-3% of passengers who are targeted for inspection are found carryingitems of quarantine significance (counted as interceptions). Only 1%-2% of inspected cargoshipments are found with such items, but the figure is higher for international mail (3%-8%). Theseresults are in line with APHIS' goals for the inspection program. Interception figures are higher forcertain modes of conveyance, especially for aircraft. Nearly half of inspected aircraft haveintercepted items, while 15% of inspected ships and 12% of inspected vehicles contain intercepteditems. Appendices H and I contain inspection statistics compiled by APHIS upon request for thisreport. Figure 9. Agricultural Inspections, FY1998-FY2002 Passengers. In FY2002, APHIS reported that 69million maritime, land border, and airline passengers entering the United States were subject toinspection. Of this number, APHIS actually inspected 33.8 million passengers and made 890,000interceptions of quarantine significance. The interception rate of 2.6% is fairly low, because of thetargeted nature of the inspections process. Nearly 13,000 inspections resulted in violations. Boththe interception rate and the violation rate have been declining slightly since 1998. Pre-clearance of passengers prior to departure supplements inspections at the border. InFY2002, APHIS conducted pre-clearance inspections of over 10.5 million passengers, including 1.5million passengers departing Hawaii and Puerto Rico for the mainland. The rate of interceptions inthe pre-clearance program (about 2%) is less than that for passenger inspections at ports of entry. This is likely due to the selected number of departure points having pre-departure programs andtheir below-average risk profile (such as Hawaii, Puerto Rico and Canada). Cargo and International Mail. Working withCustoms to target shipments for more efficient inspection, APHIS inspected 953,000 cargoshipments (bills of lading) in FY2002. The number of inspections has risen by nearly a third since1998, although the ratio of interceptions has remained fairly constant and generally under 3%. Violations doubled between 1998 and 2002, although the ratio is very small at one-twentieth of 1%percent. Figure 10. Agricultural Inspections by Type of Conveyance Inspections of international mail for agricultural pests and diseases has remained nearly levelsince 1998, with about 420,000 inspections in FY2002. The interception and violation rates arehigher than those for cargo, with 8.2% of inspected mail packages containing items of quarantinesignificance in 2002. This figure, however, is noticeably higher than in previous years and may notnecessarily reflect a trend. Ships, Aircraft, Vehicles, and Railcars. Inaddition to inspections of passengers and cargo, the mode of conveyance is also subject toagricultural inspection. In FY2002, APHIS inspected 64,000 ships, a similar number to previousyears. Fifteen percent resulted in interceptions, up from 9% in 1998, sometimes for improperhandling of garbage and waste within U.S. boundaries. The number of aircraft inspected in FY2002 was 423,000, up by 12% since 1998. The rateof agricultural pest interceptions for aircraft is very high compared to other types of agriculturalinspection. In FY2002, nearly half of inspected aircraft were found with items of quarantinesignificance, although this incidence has fallen steadily from 91% in 1998. As with the statistics forships, improper handling of garbage originating from a foreign source that could harbor forbiddenagricultural products or pests frequently contributes to the high rate positive findings. Inspections of vehicles, buses and rail cars entering the United States from Canada andMexico increased 60% from 1998 to 2002. In FY2002, APHIS conducted 2.9 million suchinspections and made 341,000 interceptions. The interception rate has fallen slightly from 15% in1998 to 12% in 2002. <4. Budget and Staffing for Inspections> Border inspections are funded through a combination of federal discretionary appropriationsand user fees. For FY2004, CBP was given budget authority of $2,496 million for border security,inspections, and trade facilitation at POEs. CBP has requested $2,724 million for FY2005. TheHouse passed H.R. 4567 , the FY2005 DHS Appropriations Act, would provide $5.1billion for CBP. The Senate bill, S. 2537 as reported, would provide $5.0 billion forCBP. (89) This sectionof the report analyzes funding trends and staffing for the three functions prior to their merger intoCBP. These historic funding data are not comparable across agencies and, as noted below, mayinclude activities in addition to the inspection functions. As a result, the funding and staff datapresented below cannot be summed into total spending for inspections. Table 1. Inspections Staff for All Locations,FY2001-FY2004 Source: CRS presentation of CBP Field Operations data as of Jan. 10, 2004. Comparable data onagriculture inspections staff were not provided for FY2001 and FY2002. CBP's Office of Field Operations, however, has provided data on inspections staff that aredistinct from full-time equivalent (FTE) staffing used in budget and appropriations documents. As Table 1 presents, the overall number of inspectors grew from FY2001 through FY2003. As Table1 and the subsequent analysis reveals, there have been more customs inspectors than immigrationand agricultural inspectors combined over the period analyzed in this report. <4.1. Immigration Functions> Prior to the transfer of the former INS to DHS, Congress funded the agency from severalsources. Funding for salaries and expenses was appropriated from general revenues, off-setting feereceipts, and the Violent Crime Trust Fund (VCTF). (90) Specific funding for the agency's construction projects wasappropriated from a construction account. The former INS' immigration appropriations account wasdivided between the agency's two main functions, immigration adjudications and services and enforcement and border affairs . The budget authority column in Table 2 represents the inspectionactivity of the former INS, but comparisons over time are limited due to the inclusion of funding forthe border patrol in the FY2001 and FY2002 budget figures. Nonetheless, funding for immigrationinspections had risen in the late 1990s. Table 2. Immigration Inspections Budget Source: Table prepared by CRS based on data from INS FY1999-FY2002 Congressional Budgetsand various Appropriations Acts (see below). a. The figure includes funding for the border patrol and inspections activities. b. The figure reflects what was enacted and the Counterterrorism Supplemental funding. The user fee account, which provided most of the funding for immigration inspections,includes a levy on aliens seeking entry into the United States on an international flight. (91) The user fee account alsoincludes the Land Border Inspection Fee, which levies a user fee for inspection services at land portsof entry and dedicated commuter lanes that are used by prescreened U.S. citizens and certain aliens(see discussion on Automated Inspections above). Fees are also generated through fines leviedagainst airlines and other carriers for not complying with immigration regulations. Immigrationinspections also drew on monies generated by the Examinations Fee Account, which is collected tocover the processing and adjudication of immigrant, nonimmigrant, refugee, asylum, and citizenshipbenefits. (92) Theconstruction account included appropriations for construction projects for the entire agency. <4.2. Customs Functions> As with immigration inspections, Customs activities are funded by direct appropriations andby fee revenue. Prior to the transfer of the U.S. Customs Service to DHS, Congress funded Customsactivities from several sources and into several different accounts. Most Customs funding wasappropriated into the Salaries and Expenses account, which in turn was allocated into two budgetactivities: commercial activities, and drug and other enforcement activities. The Customs inspectionfunction falls into commercial activities, and Table 3 reports Customs budget and staffing resourcesdevoted to the commercial activities from FY1998 to FY2002. Table 3. Budget Authority for Customs CommercialActivities Source: U.S. Customs Service, Budget Justifications, FY1999-FY2003 . a. FY2002 Commercial Activity Appropriation and FTEs are estimates contained within theFY2003 justification material. Final published FY2002 numbers were not available due tothe changes to the FY2004 budget justification materials reflecting the realignment of thelegacy Customs, INS, and APHIS in CBP. The off-setting receipt revenue generated from user fees is an important source of fundingfor customs inspections. (93) The Consolidated Omnibus Budget Reconciliation Act of 1985(COBRA '85; P.L. 99-272 ) established fees for inspection-related service. The COBRA fees arecomprised of eight separate user fees levied on passengers, conveyances, and brokers. (94) COBRA fee receipts arenot appropriated for obligation by Congress, but they are available to CBP for expenditure each year. COBRA fee receipts amounted to $271 million in FY2002, and are estimated to amount to $288million in FY2003. (95) The authorization to charge COBRA fees expires March 1, 2005. (96) CBP also collects merchandise processing fees (MPF) to offset the cost of processingformally entered imported merchandise. MPF collections were authorized by the Omnibus BudgetReconciliation Act of 1986 (COBRA '86; P.L. 99-509 ), and unlike COBRA fee receipts, MPF feesare appropriated for obligation by Congress. MPF receipts amounted to $955 million in FY2002,and are estimated to amount to $1,022 million in FY2003. (97) Authorization to chargeMPF also expires March 1, 2005. <4.3. Animal and Plant Health Functions> Agricultural animal and plant health inspections are funded through a combination of federalappropriations and user fees. Primary funding comes from user fees levied on international airpassengers and aircraft, as well as commercial aircraft, vessels, trucks and railcars. User fees havebeen authorized since 1990. These user fees support more than the border inspection functionstransferred to DHS and continue to be collected by USDA to carry out inspection-related activitiesin general. USDA will transfer funds periodically from the user fee account to cover DHS-relatedcosts. User fees are not collected, however, for any passengers or cargo entering from Canada. Pedestrians and vehicles entering from Mexico are also exempt from paying the user fees. Appropriated funding supports these activities, due in part to the logistics of collecting user fees atthese high-volume ports of entry. Appropriations also fund pre-departure inspections of passengersand cargo from Hawaii and Puerto Rico to the mainland. Table 4 indicates that 80%-85% of the funding for AQI has come from user fees. Fundinglevels grew by nearly 90% in nominal dollars from FY1998 to FY2002, and staffing levels grew bynearly 43%. The number of canine inspection teams more than doubled between 1998 and 2002,and has since increased to 110 in March 2003. Table 4. APHIS Agricultural Quarantine Inspection: Budget andStaffing Source: USDA-APHIS. The breadth of the AQI inspection and monitoring function is reflected by the dispersion ofstaff. In FY2002, 48 states had AQI personnel, although 19 states had fewer than 10 peopleassigned. The top five states in terms of the number of agricultural inspectors during FY2002included Florida (658), California (430), Hawaii (411), Texas (340), and New York (196). Thesefive states accounted for two-thirds of the AQI staffing total and have retained this ranking since atleast 1998. These states also accounted for two-thirds of the number of canine inspection teams. The top ten local offices of agricultural inspectors included Miami (325), Honolulu (230),Los Angeles (163), the Citrus Canker Project (150), New York City/JFK Airport (149), SanFrancisco (107), Chicago/O'Hare Airport (84), Elizabeth, NJ (80), Kahului-Maui (80), and Houston(70). These 10 offices accounted for nearly half of the FY2002 staffing level, and just over half ofthe canine inspection teams. <5. Issues and Concerns> As discussed above, CBP inspectors are charged with enforcing a host of laws andconducting hundreds of millions of inspections annually. When Congress enacted HSA, it kept theU.S. Customs Service intact and created the Bureau of Border Security to oversee immigrationinspections, the border patrol, and interior immigration enforcement activities. As provided for inHSA, the Administration opted to reorganize the major border inspections functions into CBP. Overthe past year since CBP was established, a variety of issues and concerns have emerged. This reportconcludes with discussions of selected policy, administrative, and constitutional considerations, anda few overarching questions. <5.1. Policy Considerations> Competing Mandates. Tension exists betweenthe need to conduct thorough inspections searching for terrorists, weapons of mass destruction,illegal drugs and weapons, unauthorized aliens and improperly entered commercial goods, and theneed to process passenger and cargo inspections efficiently so as not to impede the flow of travel,trade, and tourism. One dramatic illustration of the effect that increased inspections can have on theflow of trade at the border occurred in the immediate aftermath of the September 11, 2001 terroristattacks. The wait time for trucks crossing the border was nearly 12 hours at some ports of entry. Theland border between United States and Canada was nearly closed, and as a result, some U.S. autoplants began to shut down due to lack of parts. (98) While most observers acknowledge that inspectors should strike a balance of their competinggoals, some warn that CBP inspectors are too concerned about facilitating trade and travel toscrutinize passengers and goods thoroughly. Critics cite the percentages of cargo inspected (22.6%of rail containers, 5.2% of sea containers, and 15.1% of trucks) and the brevity of the averageprimary immigration inspection (reportedly 45 seconds) as indications that the current inspectionsprocess is inadequate. Others maintain that CBP inspections are now conducted with much more sophistication,drawing on the combined knowledge and experience of the agriculture, customs and immigrationinspections processes. They assert that the development of analytical targeting units, whichemphasize high-risk passengers, conveyances, and cargo, is protecting border security while enablingthe smooth flow of goods and people. Targeting High-Risk Shipments. CBP's abilityto successfully target high-risk containers (a cornerstone of the CSI program) is dependent uponinformation regarding which containers are most likely to contain contraband. The rationale behindthe advance cargo manifest rules is to provide CBP with the necessary information it needs toconduct its targeting operations. While many observers note the importance of the development ofsophisticated targeting mechanisms and the significant progress CBP has made in collecting advancemanifest information, others have raised concerns. One issue is the use of the cargo manifest as the primary document by which CBP gathersinformation and conducts risk assessments on cargo shipments destined for the United States. Thecargo manifest has traditionally been used for commercial compliance purposes and has beencharacterized by some as error prone. Some have expressed concern that it may not contain thenecessary information (such as transshipment information) to conduct the security screeningcurrently being carried out by CBP. (99) Also, recent GAO testimony has raised concerns regarding CBP's targeting operations. GAOcredits CBP with establishing the National Targeting Center, promulgating regulations to improvethe quality and timeliness of cargo data, refining its targeting system, and instituting a nationaltraining program for personnel conducting targeting operations. However, GAO noted that whileCBP's targeting strategy incorporated some elements of risk management, it lacked a comprehensiveset of criticality, vulnerability, and risk assessments and does not follow certain recognized modelingpractices. (100) Screening Aliens at the Border. Since theSeptember 11, 2001 terrorist attacks, considerable concern has been raised because the 19 terroristswere aliens who apparently entered the United States legally on temporary visas. Although the INAbars terrorists, consular officers issuing the visas and immigration inspectors working at the bordersdid not have access to all the law enforcement and intelligence data that might identify potentialterrorists. Congress has enacted major laws requiring information sharing and interoperabledatabases to screen potential terrorists and criminal aliens, the most recent being the EnhancedBorder Security and Visa Reform Act of 2002. Whether these provisions are being successfullyimplemented remains an important policy question. (101) Last fall, the Administration announced the creation of the Terrorist Screening Center (TSC)to consolidate the various watchlists into a single terrorist screening database. (102) Recently, the directorof TSC, Donna Bucella, testified about the progress made in developing an unclassified lawenforcement sensitive database, containing identifying information of known or suspected terrorists.Some observers point out that no government-wide standards on how individuals get placed on orremoved from watchlists have been established, fueling civil liberty concerns. Some have alsowarned that the lack of clearly designated roles and responsibilities for TSC, Foreign TerroristTracking Task Force (FTTTF), the Terrorist Threat Integration Center (TTIC), the CounterterrorismCenter and other antiterrorist- related entities continue to foster turf battles and plague efforts to haveeffective information sharing. (103) While US-VISIT, the automated entry and exit data system, has been much heralded as a toolto enhance border security, critics question how many terrorists it will identify and whether it willeffectively track the entry-exit of suspicious foreign nationals. (104) Some have expressedconcern that most Canadians, the 6.4 million Mexicans with border crossing cards, and the 13-18million foreign nationals who enter through the Visa Waiver Program (VWP) have not been part ofUS-VISIT, thus establishing a variety of avenues for potential terrorists and criminals to eludedetection through US-VISIT's biometric background checks. The recent announcement to addforeign nationals who enter through VWP to US-VISIT may assuage some of these concerns aboutthe inclusiveness of US-VISIT, but does not resolve the issue that the nations participating in VWPare not expected to meet the program's October 1, 2004 deadline for biometric machine-readablepassports. (105) While almost all observers agree that the implementation of US-VISIT has proven to bechallenging, especially at land ports of entry, many express confidence that it will ultimately besuccessful. Administration officials cite the number of aliens apprehended or denied entry as theresult of the National Security Entry Exit Registration System (NSEERS) and the ConsolidatedConsular Data systems (CCD), (106) two systems that US-VISIT builds on, as evidence thatUS-VISIT can achieve its objectives. Recently the Administration reported that 100 aliens had "hits"on the biometrics in US-VISIT. (107) 9/11 Commission Recommendations. TheNational Commission on Terrorist Attacks Upon the United States (also known as the 9/11Commission) issued several recommendations that directly pertain to inspection policies at theborder. (108) Theserecommendations underscore the urgency of implementing legislative provisions Congress enactedseveral years ago, as well as suggest areas in which Congress may wish to take further action. Thespecific recommendations are: Targeting travel is at least as powerful a weapon against terrorists as targetingtheir money. The United States should combine terrorist travel intelligence, operations, and lawenforcement in a strategy to intercept terrorists, find terrorist travel facilitators, and constrain terroristmobility. The U.S. border security system should be integrated into a larger network ofscreening points that includes our transportation system and access to vital facilities, such as nuclearreactors. The Department of Homeland Security, properly supported by the Congress,should complete, as quickly as possible, a biometric entry-exit screening system, including a singlesystem for speeding qualified travelers. (109) Other 9/11 Commission recommendations, notably those related to intelligence policy and structures,have been the focus thus far of congressional consideration and media attention. The 9/11Commission prepared a subsequent report that deals expressly with immigration issues. (110) Legislation implementing the 9/11 Commission recommendations ( S. 2845 , H.R. 10 , S. 2774 / H.R. 5040 and H.R. 5024 ) hadvarious provisions affecting border inspections. (111) H.R. 10, the 9/11 RecommendationsImplementation Act, as amended and passed by the House on October 8, 2004, and S.2845, the National Intelligence Reform Act of 2004, as amended and passed by the Senateon October 8, 2004 were the competing bills as the 108th Congress drew to a close. H.R. 10 as passed, S. 2845 as passed, S. 2774 / H.R. 5040 and H.R. 5024 all would hasten the development andinstallation of a biometric entry and exit data system that is integrated with various databases anddata systems that process or contain information on aliens, and would apply a system of biometricidentifiers uniformly across agencies and governments. H.R. 10 as passed, S.2845 as passed, S. 2774/H.R. 5040 and H.R. 5024 wouldrequire the Secretary of Homeland Security (Secretary) to develop and implement a plan to expeditethe processing of registered travelers through a single program (current registered traveler programsinclude NEXUS and the Secure Electronic Network for Travelers' Rapid Inspection (SENTRI)). Thebills would further require the Secretary to review and evaluate existing programs that expeditetravel and increase research and development efforts to accelerate the development andimplementation of a single program. The bills would also require the registered travelers programto be integrated into the entry and exit data system and would authorize DHS to improve the securityof passports and other travel documents, including through the strengthening of securityrequirements for documents that may be used to attain passports or other travel documents. In addition, H.R. 10 as passed would expand pre-inspection programs in foreigncountries and assistance to air carriers at selected foreign airports in the detection of fraudulentdocuments; would limit the President's ability to waive general statutory requirements for U.S.citizens traveling abroad or attempting to enter the United States to bear a valid U.S. passport, so thatsuch a waiver can only be exercised with respect to U.S. citizens traveling to or from foreigncontiguous territories who are bearing identification documents designated by DHS as (1) reliableproof of U.S. citizenship, and (2) of a type that may not be issued to an unlawfully present alienwithin the United States; and would amend the present waiver authority concerning documentrequirements for arriving nationals from foreign contiguous countries or adjacent islands, so thatsuch waivers may only be granted (in non-emergency situations) through a joint determination bythe Secretary of DHS and Secretary of State on the basis of reciprocity, and then only if the arrivingforeign national is in possession of identification documents deemed secure by the Secretary of DHS. The National Intelligence Reform Act of 2004 (P.L.108-458). The compromise version of S. 2845 that ultimately wasenacted into law, included some -- but not all -- of the border inspections provisions in both theHouse and Senate versions of S. 2845 . Foremost, P.L. 108-458 requires accelerated deployment of the biometric entry and exitsystem to process or contain certain data on aliens and their physical characteristics. The Act alsoexpands the pre-inspection program that places U.S. immigration inspectors at foreign airports,increasing the number of foreign airports where travelers would be pre-inspected before departureto the United States. Moreover, it requires individuals entering into the United States (including U.S.citizens and visitors from Canada and other Western Hemisphere countries) to bear a passport orother documents sufficient to denote citizenship and identity. The Act requires improvements in technology and training to assist consular and immigrationofficers in detecting and combating terrorist travel. It (1) establishes the Human Smuggling andTrafficking Center, which includes an interagency program devoted to countering terrorist travel;(2) requires the Secretary of Homeland Security, in consultation with the Director of the NationalCounter Terrorism Center, to establish a program to oversee DHS's responsibilities with respect toterrorist travel; and (3) establishes a Visa and Passport Security Program within the Bureau ofDiplomatic Security at the Department of State. <5.2. Administrative Considerations> Adequacy of Infrastructure. The FY2000Treasury-Postal Appropriations Act ( P.L. 106-58 ) required Customs, in consultation with theGeneral Service Administration (GSA) and the federal inspection service agencies, to assessinfrastructure needs on the northern and southwestern borders of the United States This studyidentified 822 projects at a projected cost of approximately $784 million. (112) Meanwhile, theTransportation Equity Act for the 21st Century ( P.L. 105-178 ) established the Coordinated BorderInfrastructure (CBI) program to "improve the safe movement of people and goods" across theborders with Canada and Mexico. Although CBI allows for funding of non-transportation projects,financing projects aimed at customs and immigration enforcement functions at the borders hasproven controversial because many supporters of CBI assert it should be used for transportationprojects. (113) The current infrastructure at most U.S. ports of entry, many warn, is not sufficient toaccommodate the demands of the automated entry and exit data system, US-VISIT. Thoseconcerned about infrastructure point out that in order to record the departure of every alien leavingthe United States through a land port, there need to be sufficient lanes, staff, and resources. According to some observers, additional lanes may be necessary at many land ports of entry toaccommodate the large number of individuals seeking entry into the United States. Some alsoexpress concern that the current infrastructure at air ports of entry may not be sufficient toaccommodate US-VISIT when it is fully operational. Although federal immigration inspectors havea presence at selected airports, the space that is occupied by them is not federally owned. Airportshave limited space and may not have additional resources to fund new construction. Some contendthat this could lead to significant delays as travelers try to make their way through ports of entry.Others maintain that as the technologies used at the border become more sophisticated and efficient,concerns about long lines and delays will abate. Infrastructure limitations, they assert, will beresolved by the time US-VISIT is fully implemented. (114) Inter-Agency and Inter-Department Coordination. Cooperation between CBP and other agencies is critical to the success of CBP's mission. Thisnecessity is highlighted by the recent spate of new regulations that have been promulgated by severalagencies charged with border security related activities. One example concerns advance notificationrequirements. While CBP is completing its rulemaking regarding electronic advanced manifestsubmissions, the FDA has promulgated advance notification regulations pertaining to certain foodimports. (115) TheFDA advance notice rules have different time frames from those being considered by CBP. TheFDA rules require electronically filed and complete notice before the shipment arrives at the firstU.S. port: no more than five days, and no less than eight hours for food arriving bywater; four hours for food arriving by air or by rail; and two hours for food arriving by truck. At this time, it is unclear as to how the two sets (FDA and CBP) of advanced notice requirementswill be integrated. The FDA rules indicate that importers or their agents must submit their advancenotice using CBP's ABI or ACS systems. Those food importers without ABI or ACS access will useFDA's Prior Notice (PN) System Interface. According to the FDA rule, the Commissioners of FDAand CBP will publish a plan detailing the integration and partial harmonization of these rules. Another example of the importance of inter-agency cooperation is evidenced in the variousfederal entities that have the responsibilities for aliens who seek asylum in the United States. Dutiesare spread across DHS's Coast Guard (interdiction), Customs and Border Protection (apprehensionsand inspections), Immigration and Customs Enforcement (detention), Citizenship and ImmigrationServices (determination of credible fear) and DOJ's Executive Office for Immigration Review(asylum and removal hearings). While the lead agencies for setting asylum standards and policy areUSCIS and EOIR, CBP inspectors are quite often the first point of contact with arriving asylumseekers. Training of Personnel. As is evident from thediscussions of the agricultural, customs, and immigration inspections, the CBP inspector must learna set of complex laws and procedures as well as develop a keen eye for violators and violations ofthe law. Some argue that it is too much to expect that those working in primary inspections areknowledgeable of the various types of travel documents, (116) as well as when a foreign national is required to have a traveldocument. (117) Someexpress concern that the ability to recognize these documents and differentiate fraudulent documentsfrom legitimate ones is learned only from experience and training. The customs inspector is attunedto targeting travelers and goods from a cargo perspective, a skill some argue, that is quite distinctfrom an immigration inspection. That the inspector must also be facile in accessing numerous datasystems and databases has raised further questions about the adequacy of training. (118) Specific concerns are being raised that primary inspectors in CBP from customs andimmigrations backgrounds may not have sufficient agricultural training. Some argue that currentCBP training in agriculture for new inspectors may be inadequate. Former APHIS inspectors hadrequired science and biology backgrounds, combined with extensive pest and disease training. Manystakeholders in the agricultural community are asking whether CBP administrators and front lineinspectors will pay enough attention to agricultural inspections. Others assert that these concerns about training needs are exaggerated and observe that CBPhas a new 14-week training course for inspectors. They point out that the immigration and customsinspectors have been cross-designated for years and are already familiar with the laws, procedures,and databases. They also observe that agricultural inspections will remain specialized for the timebeing and will occur during secondary inspections. Database Technology. Critics of the currenttechnological infrastructure contend that it poses a security risk. The Enhanced Border Security andVisa Entry Reform Act of 2002 ( P.L. 107-173 ) mandated the integration of immigration databases. In addition to integrating data systems that contain federal law enforcement and intelligenceinformation relevant to making decisions on visa admissibility and the removal of aliens, P.L.107-173 also mandated that immigration databases be integrated with other relevant data systems. The integration of law enforcement and intelligence data systems and databases with immigrationdata systems and databases continues to be a concern and is considered critical for the CBP inspectorto adequately screen individuals seeking entry to the United States. Many assert that the need for all agencies involved in admitting aliens to share intelligenceand coordinate activities is essential for U.S. immigration policy to be effective in guardinghomeland security. Some maintain that the reforms Congress made in the mid-1990s requiring allvisa applicants to be checked in the "look out" databases were inadequate because the databasesacross the relevant agencies were not interoperable and the various agencies were territorial withtheir data. They maintain that, in the long run, the most efficient and effective guard against theentry of aliens who would do us harm is an interagency and inter-departmental database that isaccessible in "real time" to consular officers, CBP inspectors, and key law enforcement andintelligence officials. Others point to the cost, time, and complexity of developing interoperable databases. Theycite the difficulty thus far in determining what biometric identifiers are most appropriate forscreening aliens. (119) They point out competing technologies of the existing databases in which various key agencies havealready heavily invested. Some maintain that success of the interoperable database technologydepends on 100% inclusion of aliens applying for visas and seeking admission, but that the sheerscope of such a system poses "real time" implementation issues. They also warn that if intelligencedata become too accessible across agencies, national security may actually be breached becausesensitive information may be more likely to fall into the wrong hands. Privacy concerns arise as wellas the data sharing and interoperability broadens. Meanwhile, CBP has been engaged in a long-term effort to acquire a new comprehensivedatabase system that dates back to the U.S. Customs Service. The Automated CommercialEnvironment (ACE) will replace ACS which has been characterized as outmoded andinefficient. (120) Difficulties with ACS are evident in the different levels of automation available for different modesof transportation. The most recent evidence of the difficulties raised by uneven automation can beseen in the different rollout deadlines for the new mandatory advance electronic manifest ruleproposed by CBP. The lack of consistent automation, particularly for commercial trucks, means thatseveral different programs will have to be utilized (FAST, PAPS, BRASS etc.) until ACE becomesfunctional. The ACE strategy is developing commercial automation protocols and procedures so thatexpeditious tracking and more effective screening and monitoring can develop over time. CBP is also working with other government agencies on developing the Integrated TradeData System (ITDS). ITDS will be an interconnected database of all government agencies involvedin the trade process, allowing users to submit data to one agency database available to other agencies. Questions remain however, because ACE and ITDS were envisioned prior to the merging of primaryborder agencies in DHS. Issues such as how ACE and ITDS will be incorporated into the largerDHS strategy, and how they will interact with other existing databases, remain a concern. <5.3. Constitutional Considerations> Fourth Amendment. Through the laws of thelegacy agencies, inspectors have unique statutory authorizations to inspect and search individualsand merchandise at the border, as discussed above. Beyond these specific authorities, however,inspections at the border must still adhere to the protections afforded by the Constitution. The scopeof these protections may be more limited at borders and ports of entry than in the interior of theUnited States. The scope of protections also might vary with the particular laws being enforced. A related constitutional matter that arises in this realm is "racial profiling." Racial profilingis the practice of targeting individuals for law enforcement purposes based on their race or ethnicityin the belief that specific minority groups are more likely to engage in certain unlawful behaviors. Several courts have considered constitutional ramifications of the practice, as an "unreasonablesearch and seizure," and more recently, as a denial of equal protection of the laws. (121) In the past, some haveaccused Customs inspectors of racial profiling. (122) Others maintain that it is difficult to discern where legitimatetargeting based on risk management principles crosses the line into racial profiling. In theimmigration context, the constitutionality of making distinctions on grounds of race or nationalityis unsettled. (123) Withrespect to immigration inspections conducted near, but otherwise beyond the actual physical border,however, the case law seems to suggest that race alone cannot justify a stop by a roving patrol, (124) but can be moredeterminative when questioned at fixed immigration checkpoints. (125) Fifth Amendment. For purposes of proceduraldue process under the Fifth Amendment, immigration law has long made a distinction between thosealiens who have come to our shores seeking admission and those who are within the United Statesafter an entry, irrespective of its legality. In the latter instance, the Supreme Court has recognizedadditional rights and privileges not extended to those in the former category, who are merely "on thethreshold of initial entry." (126) Indeed, Supreme Court jurisprudence still questions whetherthe Constitution applies at all to aliens seeking entry at the border or a port of entry, particularly indetermining an alien's right to be here. With respect to due process in the immigration context,therefore, aliens seeking admission to the United States must generally accept whatever statutoryrights and privileges they are granted by Congress. (127) In cases where the arriving alien is suspected of being aterrorist, the alien may be summarily excluded by the regional director with no further administrativeright to appeal. This policy is especially controversial if a suspected terrorist is returned to a countryin which the person is "more likely than not to be tortured." (128) <5.4. Overarching Questions> As Congress views border inspections through the lens of homeland security, a series ofquestions emerge. While not an exhaustive set, the selected questions below express a few of thecross-cutting concerns. Are the inspections reforms aimed at enhanced border security that Congressenacted being implemented with sufficient urgency? When the new technologies are fully implemented, such as US-VISIT at landports of entry, will people and goods move expeditiously? If additional resources and infrastructure are needed to secure and facilitateborder inspections, should fees be raised or funds appropriated, or should it be a combination ofboth? Is an inspections system geared up to protect against terrorism still versatileenough to also protect the nation against travelers with contagious diseases such as Severe AcuteRespiratory Syndrome (SARS) or flexible enough to recognize bona fide asylumseekers? Should any of the underlying laws be amended to further tighten or expand theinspections process (e.g., mandating physical inspections of a greater percentage of cargo orrequiring inspections of certain types of shipments)? Should the underlying laws be amended to reflect the reorganization offunctions? Striking the balance of facilitating legitimate travel and trade with protecting against foreignterrorism and other phenomena that would do us harm will remain a daunting challenge. Appendix A: Immigration Inspection Workload,FY2002 Source: CRS analysis of INS workload data. Note: Detail may not add to 100% due to rounding. Appendix B. Selected Immigration InspectionsData Source: CRS analysis of INS workload data. Appendix C. Top 10 U.S. Container PortsCY1998-CY2002 (thousands of TEUs) a Source: CY1995-CY2001 from Bureau of Transportation Statistics U.S. International Trade andFreight Transportation Trends, Table 11, p. 32 (Washington: Bureau of Transportation Statistics,2003), CY2002 CRS analysis of Maritime Administration (MARAD) published data. Note: Data includes imports, exports, and transshipments (transshipments do not originate and arenot destined for the United States, but merely pass through it from one foreign country to another). a. TEUs are 20-foot equivalent units, one 20-foot container equals one TEU, while one 40-footcontainer equals two TEUs. Appendix D. Customs Workload DataFY1998-FY2002 Source: U.S. Customs Service, Congressional Budget Justifications , FY2001-FY2003. Appendix E. Customs Narcotics SeizuresFY1998-FY2002 Source: U.S. Customs Service, Congressional Budget Justifications , FY2001-FY2004. Appendix F. U.S.-Canada Land Border: Number of Truck or Railcar Crossings(CY2000-CY2002) Source: U.S. Department of Transportation, Bureau of Transportation Statistics, special tabulation, July 2003. Based on the following primary datasource: U.S. Department of Treasury, U.S. Customs Service, Office of Field Operations, Operations Management Database (Washington, DC), 2002,published in U.S. Department of Transportation, Bureau of Transportation Statistics, National Transportation Statistics 2002, BTS02-08 (U.S. GPO:Washington, DC), Dec. 2002. Note: Truck data represent the number of truck crossings, not the number of unique vehicles. Data are for both loaded and empty trucks. Rail dataincludes both loaded and unloaded railcars. Appendix G. U.S.-Mexico Land Border: Number of Truck or Railcar CrossingsCY2000-CY2002 Source: U.S. Department of Transportation, Bureau of Transportation Statistics, special tabulation, July 2003. Based on the following primary datasource: U.S. Department of Treasury, U.S. Customs Service, Office of Field Operations, Operations Management Database (Washington, DC), 2002,published in U.S. Department of Transportation, Bureau of Transportation Statistics, National Transportation Statistics 2002, BTS02-08 (GPO:Washington, DC), Dec. 2002. Note: Truck data represent the number of truck crossings, not the number of unique vehicles. Data are for both loaded and empty trucks. Rail dataincludes both loaded and unloaded railcars. Appendix H. Agricultural Inspections ofInternational Passengers, Cargo, and Mail Source: USDA-APHIS, special tabulations of work accomplishment data. na = not applicable. Appendix I. Agricultural Inspections ofInternational Modes of Conveyance Source: USDA-APHIS, special tabulations of work accomplishment data.

The United States now has a unified inspections operation at the borders; a single inspectoris charged with examining people, animals, plants, goods, and cargo upon entry to the country. Thetransfer of these functions to the Department of Homeland Security (DHS) marks a significant policyshift for all of these functions, clarifying that -- although there are important commercial, economic,health, humanitarian, and immigration responsibilities -- ensuring the security of our borders is thetop priority. The decision by DHS officials to further integrate the inspection duties so that there is"one face at the border" now means that Customs and Border Protection (CBP) inspectors areessentially interchangeable and responsible for all primary inspections. A range of legal,administrative, and policy issues have emerged with unified border inspections. Legislationimplementing the 9/11 Commission recommendations -- the National Intelligence Reform Act of2004 ( P.L. 108-458 ) -- had various provisions affecting border inspections. CBP inspectors are charged with enforcing a host of laws. Immigration law requires theinspection of all aliens who seek entry into the United States, and every person is inspected todetermine citizenship status and admissibility. All goods being imported into the United States aresubject to a customs inspection, but an actual physical inspection of all goods is not required. Therealso are laws that subject animals and plants to border inspections. This report provides a discussionof these various laws and the procedural differences in what constitutes an "inspection." Border inspections conducted each year number in the hundreds of millions. Prior to thecreation of CBP, the Department of Justice's immigration inspectors did most passenger inspections-- peaking at 534 million in FY2000 -- since all foreign nationals seeking entry into the United Statesmust be inspected. In terms of customs inspections, approximately 22.6% of rail containers; 5.2%of sea containers; and 15.1% of trucks entering the United States were physically inspected. Unlikecustoms and immigration inspections data, animal and plant health inspections data enumerate onlythose passengers referred to secondary inspections for the purpose of an agricultural inspection. There were 44 million animal and plant inspections in FY2002. Border inspections are funded through a combination of federal discretionary appropriationsand user fees. In FY2004, CBP was given budget authority of $2,496 million for border security,inspections, and trade facilitation at ports of entry. Historic funding data for inspections are notcomparable across the "legacy" agencies as the budget data often included activities in addition tothe inspection functions. Some argue that this reorganization of border inspections has been long needed and isresulting in a more streamlined and efficient set of procedures at the border with a clear, single, chainof command. Others warn that the different types of inspections are quite complex in their own rightand that the reorganization is exacerbating the conflicting priorities at the border, ultimately resultingin many more people and goods being sent to secondary inspections. Key Policy Staff: Border Inspections